<PAGE> 1
As filed with the Securities and Exchange Commission on April 15, 1999
1933 Act Registration No. 2-27334
1940 Act Registration No. 811-1540
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---
Pre-Effective Amendment No.
--- ---
Post-Effective Amendment No. 76 X
---- ---
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
---
Amendment No. 76 X
---- ---
(Check appropriate box or boxes.)
AIM FUNDS GROUP
--------------------------------------------------
(Exact name of Registrant as Specified in Charter)
11 Greenway Plaza, Suite 100, Houston, TX 77046
---------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (713) 626-1919
Charles T. Bauer
11 Greenway Plaza, Suite 100, Houston, TX 77046
---------------------------------------------------
(Name and Address of Agent for Service)
<TABLE>
<S> <C>
Copy to:
Samuel D. Sirko, Esquire Martha J. Hays, Esquire
A I M Advisors, Inc. Ballard Spahr Andrews & Ingersoll, LLP
11 Greenway Plaza, Suite 100 1735 Market Street, 51st Floor
Houston, Texas 77046 Philadelphia, Pennsylvania 19103-7599
Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this
Amendment
</TABLE>
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
---
X on May 3, 1999, pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a)(1)
---
on (date), pursuant to paragraph (a)(1)
---
75 days after filing pursuant to paragraph (a)(2)
---
on (date) pursuant to paragraph (a)(2) of rule 485.
---
If appropriate, check the following box:
--- this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest
<PAGE> 2
AIM BALANCED FUND
-----------------------------------------------------------------------
AIM Balanced Fund seeks 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.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 3
-----------------
AIM BALANCED FUND
-----------------
Table of Contents
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- ----------------------------------------------
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- ----------------------------------------------
PERFORMANCE INFORMATION 2
- ----------------------------------------------
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- ----------------------------------------------
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- ----------------------------------------------
The Advisor 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- ----------------------------------------------
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- ----------------------------------------------
SHAREHOLDER INFORMATION A-1
- ----------------------------------------------
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-7
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- ----------------------------------------------
</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, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 4
-----------------
AIM BALANCED FUND
-----------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is 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.
The fund seeks to meet this objective by investing, normally, a minimum of 30%
and a maximum of 70% of its total assets in equity securities and a minimum of
30% and a maximum of 70% of its total assets in non-convertible debt securities.
The fund may also invest up to 25% of its total assets in convertible
securities. The fund may invest up to 10% of its total assets in lower-quality
debt securities, i.e., "junk bonds," and debt securities deemed by the portfolio
managers to be of comparable quality. The fund may also invest up to 20% of its
total assets in foreign securities.
In selecting the percentages of assets to be invested in equity or debt
securities, the portfolio managers consider such factors as general market and
economic conditions, as well as trends, yields, interest rates and changes in
fiscal and monetary policies. The portfolio managers will primarily purchase
equity securities for growth of capital and debt securities for income purposes.
However, the portfolio managers will focus on companies whose securities have
the potential for both growth of capital and income generation. The portfolio
managers consider whether to sell a particular security when they believe that
security no longer has that potential.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash,
money market instruments, bonds or other debt securities. As a result, the fund
may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from the fund may vary. The value of
your investment in the fund will go up and down with the prices of the
securities in which the fund invests. The prices of equity securities change in
response to many factors, including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions and market liquidity. Interest rate increases may
cause the price of a debt security to decrease; the longer a debt security's
duration, the more sensitive it is to this risk. The issuer of a security may
default or otherwise be unable to honor a financial obligation.
The values of convertible securities in which the fund invests may also be
affected by market interest rates, the risk that the issuer may default on
interest or principal payments and the value of the underlying stock into which
these securities may be converted. Specifically, since these types of
convertible securities pay fixed interest or dividends, their values may fall if
interest rates rise. Additionally, an issuer may have the right to buy back
certain of the convertible securities at a time and at a price that is
unfavorable to the fund.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 5
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AIM BALANCED FUND
-----------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
Total
Year Ended Annual
December 31 Return
- ----------- ------
<S> <C>
1989 ...................................... 14.84%
1990 ...................................... -4.00%
1991 ...................................... 42.95%
1992 ...................................... 9.64%
1993 ...................................... 15.54%
1994 ...................................... -5.44%
1995 ...................................... 34.97%
1996 ...................................... 19.25%
1997 ...................................... 24.41%
1998 ...................................... 12.46%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
16.88% (quarter ended March 31, 1991) and the lowest quarterly return was
- -16.57% (quarter ended September 30, 1990).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- ---------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 7.10% 15.20% 15.01% 11.92% 03/30/78
Class B 6.53% 15.15% -- 13.90% 10/18/93
Class C 10.60% -- -- 11.67% 08/04/97
S&P 500(1) 28.60% 24.08% 19.20% 17.70%(2) 03/31/78(2)
- ---------------------------------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
2
<PAGE> 6
-----------------
AIM BALANCED FUND
-----------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- ------------------------------------------------------------
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- ------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 4.75% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- ------------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- ------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.52% 0.52% 0.52%
Distribution and/or
Service (12b-1) Fees 0.25 1.00 1.00
Other Expenses 0.18 0.24 0.21
Total Annual Fund
Operating Expenses 0.95 1.76 1.73
- ------------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $567 $763 $ 976 $1,586
Class B 679 854 1,154 1,859
Class C 276 545 939 2,041
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $567 $763 $976 $1,586
Class B 179 554 954 1,859
Class C 176 545 939 2,041
- ----------------------------------------------
</TABLE>
3
<PAGE> 7
-----------------
AIM BALANCED FUND
-----------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises
all aspects of the fund's operations and provides investment advisory services
to the fund, including obtaining and evaluating economic, statistical and
financial information to formulate and implement investment programs for the
fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 110
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of 0.53% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are
- - Claude C. Cody IV, Senior Portfolio Manager, who has been responsible for the
fund since 1993 and has been associated with the advisor and/or its affiliates
since 1992.
- - Robert G. Alley, Senior Portfolio Manager, who has been responsible for the
fund since 1993 and has been associated with the advisor and/or its affiliates
since 1992.
- - Craig A. Smith, Senior Portfolio Manager, who has been responsible for the
fund since 1996 and has been associated with the advisor and/or its affiliates
since 1989.
- - Carolyn L. Gibbs, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its affiliates
since 1992.
- - Meggan M. Walsh, Portfolio Manager, who has been responsible for the fund
since 1998 and has been associated with the advisor and/or its affiliates
since 1991.
- - Jan H. Friedli, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1999. From 1997 to 1999, he was global fixed-income portfolio manager for
Nicholas-Applegate Capital Management. From 1994 to 1997, he was international
fixed-income trader and analyst for Strong Capital Management.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Balanced Fund are subject to the maximum
4.75% initial sales charge as listed under the heading "CATEGORY II Initial
Sales Charges" in the "Shareholder Information--Choosing a Share Class" section
of this prospectus. Purchases of Class B and Class C shares are subject to the
contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares and pays dividends, if any, quarterly.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
4
<PAGE> 8
-----------------
AIM BALANCED FUND
-----------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 25.78 $ 21.84 $ 19.22 $ 14.62 $ 16.10
Income from investment operations:
Net investment income 0.71(a) 0.60 0.66 0.49 0.44
Net gains (losses) on securities (both
realized and unrealized) 2.45 4.66 2.99 4.57 (1.31)
Total from investment operations 3.16 5.26 3.65 5.06 (0.87)
Less distributions:
Dividends from net investment income (0.65) (0.55) (0.55) (0.46) (0.39)
Distributions from net realized gains (0.06) (0.77) (0.48) -- (0.22)
Total distributions (0.71) (1.32) (1.03) (0.46) (0.61)
Net asset value, end of period $ 28.23 $ 25.78 $ 21.84 $ 19.22 $ 14.62
Total return(b) 12.46% 24.41% 19.25% 34.97% (5.44)%
- ---------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $1,318,230 $683,633 $334,189 $92,241 $37,572
Ratio of expenses to average net assets 0.95%(c) 0.98% 1.15% 1.43%(d) 1.25%(d)
Ratio of net investment income to average net
assets 2.81%(c) 2.48% 2.97% 2.81%(e) 3.07%(e)
Portfolio turnover rate 43% 66% 72% 77% 76%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) Ratios are based on average net assets of $976,072,030.
(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
reimbursement were 2.78% and 2.64% for 1995 and 1994, respectively.
<TABLE>
<CAPTION>
CLASS B
---------------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 25.75 $ 21.83 $ 19.22 $ 14.62 $ 16.11
Income from investment operations:
Net investment income 0.42(a) 0.38 0.48 0.31 0.31
Net gains (losses) on securities (both
realized and unrealized) 2.51 4.68 2.99 4.61 (1.31)
Total from investment operations 2.93 5.06 3.47 4.92 (1.00)
Less distributions:
Dividends from net investment income (0.44) (0.37) (0.38) (0.32) (0.27)
Distributions from net realized gains (0.06) (0.77) (0.48) -- (0.22)
Total distributions (0.50) (1.14) (0.86) (0.32) (0.49)
Net asset value, end of period $ 28.18 $ 25.75 $ 21.83 $ 19.22 $ 14.62
Total return(b) 11.53% 23.42% 18.28% 33.93% (6.23)%
- -----------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $894,165 $486,506 $237,082 $72,634 $20,245
Ratio of expenses to average net assets 1.76%(c) 1.79% 1.97% 2.21%(d) 1.98%(d)
Ratio of net investment income to average net
assets 2.00%(c) 1.67% 2.15% 2.03%(e) 2.34%(e)
Portfolio turnover rate 43% 66% 72% 77% 76%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average net assets of $694,890,554.
(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.
5
<PAGE> 9
-----------------
AIM BALANCED FUND
-----------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
--------------------------------
YEAR FOR THE PERIOD
ENDED AUGUST 4, THROUGH
DECEMBER 31, DECEMBER 31,
1998 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 25.76 $25.55
Income from investment operations:
Net investment income 0.42(a) 0.16
Net gains on securities (both realized and unrealized) 2.53 1.01
Total from investment operations 2.95 1.17
Less distributions:
Dividends from net investment income (0.44) (0.19)
Distributions from net realized gains (0.06) (0.77)
Total distributions (0.50) (0.96)
Net asset value, end of period $ 28.21 $25.76
Total return(b) 11.60% 4.67%
- ---------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ---------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $114,163 $9,394
Ratio of expenses to average net assets 1.73%(c) 1.78%(d)
Ratio of net investment income to average net assets 2.03%(c) 1.68%(d)
Portfolio turnover rate 43% 66%
- ---------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average net assets of $62,701,487.
(d) Annualized.
6
<PAGE> 10
-------------------
THE AIM FUNDS
-------------------
Shareholder Information
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
A- 1 MCF--05/99
<PAGE> 11
-------------------
THE AIM FUNDS
-------------------
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- ----------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a
MCF--05/99 A- 2
<PAGE> 12
-------------------
THE AIM FUNDS
-------------------
13-month period. The amount you agree to purchase determines the initial sales
charge you pay. If the full face amount of the LOI is not invested by the end of
the 13-month period, your account will be adjusted to the higher initial sales
charge level for the amount actually invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 25 50
All other accounts 50 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A- 3 MCF--05/99
<PAGE> 13
-------------------
THE AIM FUNDS
-------------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. We may modify, suspend or terminate the
Program at any time on 60 days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through
tax-sheltered retirement plans made available to corporations, individuals and
employees of non-profit organizations and public schools. A plan document must
be adopted to establish a retirement plan. You may use AIM Funds-sponsored
retirement plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans,
401(k) plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit
Sharing plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ACQUIRED
BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--05/99 A- 4
<PAGE> 14
-------------------
THE AIM FUNDS
-------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last 30 days; (3)
you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not redeem by telephone. The transfer agent must
receive your call during the hours the NYSE is open for
business in order to effect the redemption at that day's
closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of trading
on the New York Stock Exchange (NYSE), we generally will transmit payment on the
next business day.
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
A- 5 MCF--05/99
<PAGE> 15
-------------------
THE AIM FUNDS
-------------------
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, at its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You also may exchange AIM Cash Reserve Shares of
AIM Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
may be required to pay an initial sales charge when exchanging from a Fund with
a lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
You also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for
Advisor Class shares, but only if you acquired the AIM Cash Reserve Shares
through an exchange from Advisor Class shares.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
MCF--05/99 A- 6
<PAGE> 16
-------------------
THE AIM FUNDS
-------------------
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
EACH AIM FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET-TIMING ACTIVITY.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. 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.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the New
York Stock Exchange (NYSE), events occur that materially affect the value of the
security, the AIM Funds may value the security at its fair value as determined
in good faith by or under the supervision of the Board of Directors or Trustees
of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's
net asset value will be subject to the judgment of the Board of Directors or
Trustees or its designee instead of being determined by the market. Because some
of the AIM Funds may invest in securities that are primarily listed on foreign
exchanges, the value of those funds' shares may change on days when you will not
be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each day the
NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange and redemption orders at
the net asset value calculated after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
A- 7 MCF--05/99
<PAGE> 17
-------------------
THE AIM FUNDS
-------------------
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--05/99 A- 8
<PAGE> 18
-----------------
AIM BALANCED FUND
-----------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, on the SEC's website
(http://www.sec.gov) or by sending a letter, including a duplicating fee, to the
SEC's Public Reference Section, Washington, DC 20549-6009. Please call the SEC
at 1-800-SEC-0330 for information about the Public Reference Room.
- -----------------------------------
AIM Balanced Fund
SEC 1940 Act file number: 811-1540
- -----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com BAL-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 19
AIM GLOBAL UTILITIES FUND
------------------------------------------------------------------------
AIM Global Utilities Fund seeks to achieve a high level of current
income and secondarily, growth of capital, by investing primarily in the
common and preferred stocks of public utility companies.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 20
-------------------------
AIM GLOBAL UTILITIES FUND
-------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-7
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</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, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representation other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 21
-------------------------
AIM GLOBAL UTILITIES FUND
-------------------------
INVESTMENT OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objectives are to achieve a high level of current income
and secondarily, growth of capital, by investing primarily in the common and
preferred stocks of public utility companies.
The fund seeks to meet these objectives by investing, normally, at least 65%
of its total assets in securities of domestic and foreign public utility
companies. Public utility companies include companies that provide electricity,
natural gas, water and sanitary services to the public, 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.
The fund may invest up to 80% of its total assets in foreign securities,
including securities of issuers located in developing countries, i.e., those
that are in the initial stages of their industrial cycles. The fund will
normally invest in the securities of companies located in at least four
different countries, including the United States. The fund may invest up to 25%
of its total assets in convertible securities. The fund may also invest up to
25% of its total assets in non-convertible bonds issued by public utility
companies and holding companies which derive at least 40% of their revenues from
utility related activities. The fund may invest up to 10% of its total assets in
lower-quality debt securities, i.e., "junk bonds," and debt securities deemed by
the portfolio managers to be of comparable quality.
The portfolio managers focus on securities that have favorable prospects for
high current income and growth of capital. The portfolio managers consider
whether to sell a particular security when any of those factors materially
changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may invest up to 100% of its total assets in
securities of U.S. issuers. During these periods the fund may also hold all or a
portion of its assets in cash, money market instruments, bonds or other debt
securities. As a result, the fund may not achieve its investment objectives.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from the fund may vary. The value of
your investment in the fund will go up and down with the prices of the
securities in which the fund invests. The prices of equity securities change in
response to many factors, including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions and market liquidity. Interest rate increases may
cause the price of a debt security to decrease; the longer a debt security's
duration, the more sensitive it is to this risk. The issuer of a security may
default or otherwise be unable to honor a financial obligation.
The value of the fund's shares is particularly vulnerable to factors affecting
the utility company industry, such as substantial economic, operational, or
regulatory changes. Such changes may, among other things, increase compliance
costs or the costs of doing business. In addition, increases in fuel, energy and
other prices have historically limited the growth potential of utility
companies. Because the fund focuses its investments in the public utility
industry, the value of your shares may rise and fall more than the value of
shares of a fund that invests more broadly.
The prices of foreign securities may be further affected by other factors
including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are valued.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in other
countries and by changes in economic or taxation policies in those countries.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, among other things, there generally is less publicly
available information about foreign companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devalued their currencies against the U.S.
dollar, thereby causing the value of investments in companies located in those
countries to decline. Transaction costs are often higher in developing countries
and there may be delays in settlement procedures.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 22
-------------------------
AIM GLOBAL UTILITIES FUND
-------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
Total
Year Ended Annual
December 31 Return
- ----------- ------
<S> <C>
1989 ................................ 36.11%
1990 ................................ -2.99%
1991 ................................ 23.65%
1992 ................................ 7.92%
1993 ................................ 12.32%
1994 ................................ -11.57%
1995 ................................ 28.07%
1996 ................................ 13.88%
1997 ................................ 23.70%
1998 ................................ 16.01%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
12.84% (quarter ended December 31, 1998) and the lowest quarterly return was
- -8.95% (quarter ended September 30, 1990).
PERFORMANCE TABLE
The following performance table compares the fund's average performance to that
of a broad-based securities market index. The fund's performance reflects
payment of sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 9.63% 11.83% 13.22% 13.60% 01/19/88
Class B 10.14% 11.97% -- 10.16% 09/01/93
Class C 14.09% -- -- 18.04% 08/04/97
Lipper Utility Fund Index(1) 18.40% 13.41% 13.49% 13.49%(2) 12/31/88(2)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Lipper Utility Fund Index measures the performance of the 30 largest
utilities funds charted by Lipper Analytical Services, Inc., an independent
mutual funds performance monitor.
(2) The average annual total return given is since the date closest to the
earliest date the index became available.
2
<PAGE> 23
-------------------------
AIM GLOBAL UTILITIES FUND
-------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge
(Load) Imposed on
Purchases(as a
percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is
less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.57% 0.57% 0.57%
Distribution and/or
Service (12b-1) Fees 0.25 1.00 1.00
Other Expenses 0.24 0.24 0.24
Total Annual Fund
Operating Expenses 1.06 1.81 1.81
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $652 $869 $1,103 $1,773
Class B 684 869 1,180 1,930
Class C 284 569 980 2,127
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $652 $869 $1,103 $1,773
Class B 184 569 980 1,930
Class C 184 569 980 2,127
- ----------------------------------------------
</TABLE>
3
<PAGE> 24
-------------------------
AIM GLOBAL UTILITIES FUND
-------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all
aspects of the fund's operations and provides investment advisory services to
the fund, including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 110
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of 0.60% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are
- - Claude C. Cody IV, Senior Portfolio Manager, who has been responsible for the
fund since 1992 and has been associated with the advisor and/or its affiliates
since 1992.
- - Robert G. Alley, Senior Portfolio Manager, who has been responsible for the
fund since 1992 and has been associated with the advisor and/or its affiliates
since 1992.
- - Craig A. Smith, Senior Portfolio Manager, who has been responsible for the
fund since 1996 and has been associated with the advisor and/or its affiliates
since 1989.
- - Carolyn L. Gibbs, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its affiliates
since 1992.
- - Meggan M. Walsh, Portfolio Manager, who has been responsible for the fund
since 1998 and has been associated with the advisor and/or its affiliates
since 1991.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Global Utilities Fund are subject to the
maximum 5.50% initial sales charge as listed under the heading "CATEGORY I
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares dividends daily and pays dividends, if any, monthly.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
4
<PAGE> 25
-------------------------
AIM GLOBAL UTILITIES FUND
-------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.26 $ 16.01 $ 14.59 $ 11.85 $ 14.09
Income from investment operations:
Net investment income 0.48 0.47 0.55 0.55 0.59
Net gains (losses) on securities (both
realized and unrealized) 2.53 3.26 1.43 2.71 (2.20)
Total from investment operations 3.01 3.73 1.98 3.26 (1.61)
Less distributions:
Dividends from net investment income (0.46) (0.47) (0.56) (0.52) (0.60)
Distributions from net realized gains (0.80) (0.01) -- -- --
Return of capital -- -- -- -- (0.03)
Total distributions (1.26) (0.48) (0.56) (0.52) (0.63)
Net asset value, end of period $ 21.01 $ 19.26 $ 16.01 $ 14.59 $ 11.85
Total return(a) 16.01% 23.70% 13.88% 28.07% (11.57)%
- ------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $196,665 $179,456 $164,001 $170,624 $150,515
Ratio of expenses to average net assets 1.06%(b) 1.13% 1.17% 1.21% 1.18%
Ratio of net investment income to average net
assets 2.39%(b) 2.79% 3.62% 4.20% 4.67%
Portfolio turnover rate 38% 26% 48% 88% 101%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $187,100,175.
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.24 $ 16.01 $ 14.60 $ 11.84 $ 14.08
Income from investment operations:
Net investment income 0.33 0.34 0.42 0.44 0.47
Net gains (losses) on securities (both
realized and unrealized) 2.53 3.25 1.44 2.73 (2.19)
Total from investment operations 2.86 3.59 1.86 3.17 (1.72)
Less distributions:
Dividends from net investment income (0.32) (0.35) (0.45) (0.41) (0.49)
Distributions from net realized gains (0.80) (0.01) -- -- --
Return of capital -- -- -- -- (0.03)
Total distributions (1.12) (0.36) (0.45) (0.41) (0.52)
Net asset value, end of period $ 20.98 $ 19.24 $ 16.01 $ 14.60 $ 11.84
Total return(a) 15.14% 22.74% 12.98% 27.16% (12.35)%
- --------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $111,866 $94,227 $79,530 $70,693 $42,568
Ratio of expenses to average net assets 1.81%(b) 1.91% 1.96% 1.97% 2.07%
Ratio of net investment income to average net
assets 1.64%(b) 2.01% 2.83% 3.44% 3.78%
Portfolio turnover rate 38% 26% 48% 88% 101%
- --------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct contingent deferred sales charges.
(b) Ratios are based on average net assets of $101,900,371.
5
<PAGE> 26
-------------------------
AIM GLOBAL UTILITIES FUND
-------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------
FOR THE PERIOD
YEAR ENDED AUGUST 4, THROUGH
DECEMBER 31, DECEMBER 31,
1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $19.24 $17.67
Income from investment operations:
Net investment income 0.33 0.13
Net gains on securities (both realized and unrealized) 2.52 1.58
Total from investment operations 2.85 1.71
Less distributions:
Dividends from net investment income (0.32) (0.13)
Distributions from net realized gains (0.80) (0.01)
Total distributions (1.12) (0.14)
Net asset value, end of period $20.97 $19.24
Total return(a) 15.09% 9.74%
- -------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $2,994 $1,183
Ratio of expenses to average net assets 1.81%(b) 1.90%(c)
Ratio of net investment income to average net assets 1.64%(b) 2.02%(c)
Portfolio turnover rate 38% 26%
- -------------------------------------------------------------------------------------------------------------------
</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 $1,531,963.
(c) Annualized.
6
<PAGE> 27
-------------------
THE AIM FUNDS
-------------------
Shareholder Information
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
A- 1 MCF--05/99
<PAGE> 28
-------------------
THE AIM FUNDS
-------------------
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- ----------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a
MCF--05/99 A- 2
<PAGE> 29
-------------------
THE AIM FUNDS
-------------------
13-month period. The amount you agree to purchase determines the initial sales
charge you pay. If the full face amount of the LOI is not invested by the end of
the 13-month period, your account will be adjusted to the higher initial sales
charge level for the amount actually invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 25 50
All other accounts 50 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A- 3 MCF--05/99
<PAGE> 30
-------------------
THE AIM FUNDS
-------------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. We may modify, suspend or terminate the
Program at any time on 60 days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through
tax-sheltered retirement plans made available to corporations, individuals and
employees of non-profit organizations and public schools. A plan document must
be adopted to establish a retirement plan. You may use AIM Funds-sponsored
retirement plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans,
401(k) plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit
Sharing plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ACQUIRED
BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--05/99 A- 4
<PAGE> 31
-------------------
THE AIM FUNDS
-------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last 30 days; (3)
you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not redeem by telephone. The transfer agent must
receive your call during the hours the NYSE is open for
business in order to effect the redemption at that day's
closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of trading
on the New York Stock Exchange (NYSE), we generally will transmit payment on the
next business day.
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
A- 5 MCF--05/99
<PAGE> 32
-------------------
THE AIM FUNDS
-------------------
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, at its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You also may exchange AIM Cash Reserve Shares of
AIM Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
may be required to pay an initial sales charge when exchanging from a Fund with
a lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
You also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for
Advisor Class shares, but only if you acquired the AIM Cash Reserve Shares
through an exchange from Advisor Class shares.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
MCF--05/99 A- 6
<PAGE> 33
-------------------
THE AIM FUNDS
-------------------
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
EACH AIM FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET-TIMING ACTIVITY.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. 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.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the New
York Stock Exchange (NYSE), events occur that materially affect the value of the
security, the AIM Funds may value the security at its fair value as determined
in good faith by or under the supervision of the Board of Directors or Trustees
of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's
net asset value will be subject to the judgment of the Board of Directors or
Trustees or its designee instead of being determined by the market. Because some
of the AIM Funds may invest in securities that are primarily listed on foreign
exchanges, the value of those funds' shares may change on days when you will not
be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each day the
NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange and redemption orders at
the net asset value calculated after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
A- 7 MCF--05/99
<PAGE> 34
-------------------
THE AIM FUNDS
-------------------
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--05/99 A- 8
<PAGE> 35
-------------------------
AIM GLOBAL UTILITIES FUND
-------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies
of the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
- -----------------------------------------------------
</TABLE>
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, on the SEC's website
(http://www.sec.gov) or by sending a letter, including a duplicating fee, to the
SEC's Public Reference Section, Washington, DC 20549-6009. Please call the SEC
at 1-800-SEC-0330 for information about the Public Reference Room.
----------------------------------
AIM Global Utilities Fund
SEC 1940 Act file number: 811-1540
----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com GLU-PRO-1 INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 36
AIM HIGH YIELD FUND
------------------------------------------------------------------------
AIM High Yield Fund seeks to achieve a high level of current income by
investing primarily in publicly traded non-investment grade debt
securities.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 37
-------------------
AIM HIGH YIELD FUND
-------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE
FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-7
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</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, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 38
-------------------
AIM HIGH YIELD FUND
-------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to achieve a high level of current income by
investing primarily in publicly traded, non-investment grade debt securities.
The fund's investment objective may be changed by the fund's Board of Trustees
without shareholder approval.
The fund seeks to meet this objective by investing at least 65% of the value
of its assets in lower-quality debt securities, i.e., "junk bonds." The fund
will primarily invest in junk bonds rated B or above by Moody's Investors
Service, Inc. or Standard & Poor's Ratings Services or deemed by the portfolio
managers to be of comparable quality. The fund will invest at least 80% of its
total assets in debt securities, including convertible debt securities and/or
cash or cash equivalents. The fund may also invest in preferred stock. The fund
may invest up to 25% of its total assets in foreign securities.
Although the portfolio managers focus on debt securities that they believe
have favorable prospects for high current income, they also consider the
possibility of growth of capital of the security. The portfolio managers
consider whether to sell a particular security when any of those factors
materially changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash,
money market instruments, bonds or other debt securities. As a result, the fund
may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. The prices of equity securities change in
response to many factors, including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions and market liquidity. Debt securities are
particularly vulnerable to credit risk and interest rate fluctuations. Interest
rate increases can cause the price of a debt security to decrease; junk bonds
are less sensitive to this risk than are higher quality bonds.
Compared to higher-quality debt securities, junk bonds involve greater risk of
default or price changes due to changes in the credit quality of the issuer
because they are generally unsecured and may be subordinated to other creditors'
claims. The value of junk bonds often fluctuates in response to company,
political or economic developments and can decline significantly over short
periods of time or during periods of general or regional economic difficulty.
During those times, the bonds could be difficult to value or to sell at a fair
price. Credit ratings on junk bonds do not necessarily reflect their actual
market risk.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about issuers,
relatively low market liquidity and the potential lack of strict financial and
accounting controls and standards.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 39
-------------------
AIM HIGH YIELD FUND
-------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
Total
Year Ended Annual
December 31 Return
- ----------- ------
<S> <C>
1989 ............................................. 1.18%
1990 ............................................. -9.04%
1991 ............................................. 42.50%
1992 ............................................. 18.34%
1993 ............................................. 18.40%
1994 ............................................. -1.67%
1995 ............................................. 16.86%
1996 ............................................. 15.44%
1997 ............................................. 12.52%
1998 ............................................. -5.10%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
14.35% (quarter ended March 31, 1991) and the lowest quarterly return was -9.71%
(quarter ended September 30, 1990).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended
December 31, 1998) 1 YEAR 5 YEARS
- ------------------------------------------------------------------
<S> <C> <C>
Class A -9.63% 6.17%
Class B -10.22% 6.11%
Class C -6.78% --
Lehman High Yield Index(1) 1.87% 8.57%
- ------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1998) 10 YEARS INCEPTION DATE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A 9.50% 10.65% 07/11/78
Class B -- 6.63% 09/01/93
Class C -- -1.21% 08/04/97
Lehman High Yield Index(1) 10.55% 11.45%(2) 06/30/83(2)
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) The Lehman High Yield Index is a rules-based index that includes all
fixed-income securities having a maximum quality rating of Ba1 (including
defaulted issues), a minimum amount outstanding of $100mm, and at least one
year to maturity.
(2) The average annual total return given is since the earliest date the index
became available.
2
<PAGE> 40
-------------------
AIM HIGH YIELD FUND
-------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- ------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales
Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 4.75% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less) None(1) 5.00% 1.00%
- ------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.47% 0.47% 0.47%
Distribution and/or
Service (12b-1) Fees 0.25 1.00 1.00
Other Expenses 0.13 0.14 0.14
Total Annual Fund
Operating Expenses 0.85 1.61 1.61
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $558 $733 $ 924 $1,474
Class B 664 808 1,076 1,708
Class C 264 508 876 1,911
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $558 $733 $924 $1,474
Class B 164 508 876 1,708
Class C 164 508 876 1,911
- ----------------------------------------------
</TABLE>
3
<PAGE> 41
-------------------
AIM HIGH YIELD FUND
-------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all
aspects of the fund's operations and provides investment advisory services to
the fund, including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 110
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of 0.48% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are
- - John L. Pessarra, Senior Portfolio Manager, who has been responsible for the
fund since 1992 and has been associated with the advisor and/or its affiliates
since 1990.
- - Kevin E. Rogers, Senior Portfolio Manager, who has been responsible for the
fund since 1995 and has been associated with the advisor and/or its affiliates
since 1991.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM High Yield Fund are subject to the maximum
4.75% initial sales charge as listed under the heading "CATEGORY II Initial
Sales Charges" in the "Shareholder Information--Choosing a Share Class" section
of this prospectus. Purchases of Class B and Class C shares are subject to the
contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares any dividends daily and pays dividends monthly.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
4
<PAGE> 42
-------------------
AIM HIGH YIELD FUND
-------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.16 $ 9.88 $ 9.43 $ 8.93 $ 10.05
Income from investment operations:
Net investment income 0.92 0.90 0.92 0.93 0.96
Net gains (losses) on securities (both
realized and unrealized) (1.40) 0.28 0.46 0.52 (1.12)
Total from investment operations (0.48) 1.18 1.38 1.45 (0.16)
Less distributions:
Dividends from net investment income (0.91) (0.90) (0.93) (0.95) (0.96)
Net asset value, end of period $ 8.77 $ 10.16 $ 9.88 $ 9.43 $ 8.93
Total return(a) (5.10)% 12.52% 15.44% 16.86% (1.67)%
- -------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $1,670,863 $1,786,352 $1,272,974 $886,106 $578,959
Ratio of expenses to average net assets 0.85%(b) 0.90% 0.97% 0.96% 1.00%
Ratio of net investment income to average net
assets 9.45%(b) 9.08% 9.67% 9.95% 10.07%
Portfolio turnover rate 76% 80% 77% 61% 53%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $1,808,645,166.
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.16 $ 9.88 $ 9.42 $ 8.92 $ 10.04
Income from investment operations:
Net investment income 0.84 0.83 0.85 0.85 0.87
Net gains (losses) on securities (both
realized and unrealized) (1.40) 0.28 0.47 0.52 (1.10)
Total from investment operations (0.56) 1.11 1.32 1.37 (0.23)
Less distributions:
Dividends from net investment income (0.84) (0.83) (0.86) (0.87) (0.89)
Net asset value, end of period $ 8.76 $ 10.16 $ 9.88 $ 9.42 $ 8.92
Total return(a) (5.90)% 11.71% 14.68% 15.91% (2.48)%
- ------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $1,820,899 $1,647,801 $1,068,060 $557,926 $191,338
Ratio of expenses to average net assets 1.61%(b) 1.65% 1.68% 1.73% 1.80%
Ratio of net investment income to average net
assets 8.69%(b) 8.33% 8.95% 9.18% 9.27%
Portfolio turnover rate 76% 80% 77% 61% 53%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct contingent deferred sales charges.
(b) Ratios are based on average net assets of $1,826,458,676.
5
<PAGE> 43
-------------------
AIM HIGH YIELD FUND
-------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
- ------------------------------------------------------------------------------------------------------
FOR THE PERIOD
AUGUST 4,
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1998 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 10.14 $ 10.04
Income from investment operations:
Net investment income 0.82(a) 0.35
Net gains (losses) on securities (both realized and
unrealized) (1.38) 0.10
Total from investment operations (0.56) 0.45
Less distributions:
Dividends from net investment income (0.84) (0.35)
Net asset value, end of period $ 8.74 $ 10.14
Total return(b) (5.92)% 4.49%
- ------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $113,246 $ 26,117
Ratio of expenses to average net assets(b) 1.61%(c) 1.68%(d)
Ratio of net investment income (loss) to average net
assets(e) 8.69%(c) 8.30%(d)
Portfolio turnover rate 76% 80%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and for periods less than
one year is not annualized .
(c) Ratios are based on average net assets of $76,076,559.
(d) Annualized.
6
<PAGE> 44
-------------------
THE AIM FUNDS
-------------------
Shareholder Information
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
A- 1 MCF--05/99
<PAGE> 45
-------------------
THE AIM FUNDS
-------------------
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- ----------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a
MCF--05/99 A- 2
<PAGE> 46
-------------------
THE AIM FUNDS
-------------------
13-month period. The amount you agree to purchase determines the initial sales
charge you pay. If the full face amount of the LOI is not invested by the end of
the 13-month period, your account will be adjusted to the higher initial sales
charge level for the amount actually invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 25 50
All other accounts 50 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A- 3 MCF--05/99
<PAGE> 47
-------------------
THE AIM FUNDS
-------------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. We may modify, suspend or terminate the
Program at any time on 60 days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through
tax-sheltered retirement plans made available to corporations, individuals and
employees of non-profit organizations and public schools. A plan document must
be adopted to establish a retirement plan. You may use AIM Funds-sponsored
retirement plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans,
401(k) plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit
Sharing plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ACQUIRED
BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--05/99 A- 4
<PAGE> 48
-------------------
THE AIM FUNDS
-------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last 30 days; (3)
you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not redeem by telephone. The transfer agent must
receive your call during the hours the NYSE is open for
business in order to effect the redemption at that day's
closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of trading
on the New York Stock Exchange (NYSE), we generally will transmit payment on the
next business day.
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
A- 5 MCF--05/99
<PAGE> 49
-------------------
THE AIM FUNDS
-------------------
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, at its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You also may exchange AIM Cash Reserve Shares of
AIM Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
may be required to pay an initial sales charge when exchanging from a Fund with
a lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
You also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for
Advisor Class shares, but only if you acquired the AIM Cash Reserve Shares
through an exchange from Advisor Class shares.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
MCF--05/99 A- 6
<PAGE> 50
-------------------
THE AIM FUNDS
-------------------
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
EACH AIM FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET-TIMING ACTIVITY.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. 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.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the New
York Stock Exchange (NYSE), events occur that materially affect the value of the
security, the AIM Funds may value the security at its fair value as determined
in good faith by or under the supervision of the Board of Directors or Trustees
of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's
net asset value will be subject to the judgment of the Board of Directors or
Trustees or its designee instead of being determined by the market. Because some
of the AIM Funds may invest in securities that are primarily listed on foreign
exchanges, the value of those funds' shares may change on days when you will not
be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each day the
NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange and redemption orders at
the net asset value calculated after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
A- 7 MCF--05/99
<PAGE> 51
-------------------
THE AIM FUNDS
-------------------
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--05/99 A- 8
<PAGE> 52
-------------------
AIM HIGH YIELD FUND
-------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Distributors, Inc
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, on the SEC's website
(http://www.sec.gov) or by sending a letter, including a duplicating fee, to the
SEC's Public Reference Section, Washington, DC 20549-6009. Please call the SEC
at 1-800-SEC-0330 for information about the Public Reference Room.
- -----------------------------------
AIM High Yield Fund
SEC 1940 Act file number: 811-1540
- -----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com HYI-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 53
AIM INCOME FUND
------------------------------------------------------------------------
AIM Income Fund seeks to achieve high 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.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 54
---------------
AIM INCOME FUND
---------------
Table of Contents
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-7
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</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, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, sales person or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 55
---------------
AIM INCOME FUND
---------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to achieve high current income consistent
with reasonable concern for safety of principal by investing primarily in
fixed-rate corporate debt and U.S. Government obligations.
The fund may invest up to 40% of its total assets in foreign securities. The
fund may invest up to 35% of its net assets in lower-quality debt securities,
i.e., "junk bonds," and unrated debt securities deemed by the portfolio managers
to be of comparable quality. The fund may also invest in preferred stock issues
and convertible corporate debt.
The portfolio managers focus on securities that they believe have favorable
prospects for current income, consistent with their concerns for safety of
principal. The portfolio managers consider whether to sell a particular security
when any of those factors materially changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash,
money market instruments, bonds or other debt securities. As a result, the fund
may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. Debt securities are particularly
vulnerable to credit risk and interest rate fluctuations. Interest rate
increases can cause the price of a debt security to decrease. The longer a debt
security's duration, the more sensitive it is to this risk. Junk bonds are less
sensitive to this risk than are higher-quality bonds. The issuer of a security
may default or otherwise be unable to honor a financial obligation.
The prices of foreign securities may be further affected by other factors,
including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are valued.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
Compared to higher-quality debt securities, junk bonds involve a greater risk
of default or price changes due to changes in the credit quality of the issuer
because they are generally unsecured and may be subordinated to other creditors'
claims. The value of junk bonds debt securities often fluctuates in response to
company, political or economic developments and can decline significantly over
short periods of time or during periods of general or regional economic
difficulty. During those times the bonds could be difficult to value or sell at
a fair price. Credit ratings on junk bonds do not necessarily reflect their
actual market risk.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances from other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 56
---------------
AIM INCOME FUND
---------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
- -
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
Total
Year Ended Annual
December 31 Return
- ----------- -------
<S> <C>
1989 .................................................. 13.56%
1990 .................................................. 3.65%
1991 .................................................. 18.01%
1992 .................................................. 7.28%
1993 .................................................. 15.38%
1994 .................................................. -7.65%
1995 .................................................. 22.77%
1996 .................................................. 8.58%
1997 .................................................. 11.92%
1998 .................................................. 4.94%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
8.10% (quarter ended June 30, 1989) and the lowest quarterly return was -5.88%
(quarter ended March 31, 1994).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------------------------------------------------------------------------
(for the periods ended
December 31, 1998) 1 YEAR 5 YEARS
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Class A -0.07% 6.62%
Class B -0.69% 6.48%
Class C 3.23% --
Lehman Aggregate Bond Index(1) 8.69% 7.27%
- ----------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1998) 10 YEARS INCEPTION DATE
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A 9.00% 7.81% 11/21/68
Class B -- 6.07% 09/07/93
Class C -- 6.57% 08/04/97
Lehman Aggregate Bond Index(1) 9.26% 9.70%(2) 12/31/75(2)
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) The Lehman Aggregate Bond Index is an unmanaged index generally considered
representative of treasury issues, agency issues, corporate bond issues and
mortgage-backed securities.
(2) The average annual total return given is since the date closest to the
earliest date the index became available.
2
<PAGE> 57
---------------
AIM INCOME FUND
---------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- --------------------------------------------------------------------------------
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales
Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 4.75% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is
less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.43% 0.43% 0.43%
Distribution and/or
Service (12b-1) Fees 0.25 1.00 1.00
Other Expenses 0.23 0.23 0.23
Total Annual Fund
Operating Expenses 0.91 1.66 1.66
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $563 $751 $ 955 $1,541
Class B 669 823 1,102 1,766
Class C 269 523 902 1,965
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $563 $751 $955 $1,541
Class B 169 523 902 1,766
Class C 169 523 902 1,965
- ----------------------------------------------
</TABLE>
3
<PAGE> 58
---------------
AIM INCOME FUND
---------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all
aspects of the fund's operations and provides investment advisory services to
the fund, including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 110
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of 0.45% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are
- - Robert G. Alley, Senior Portfolio Manager, who has been responsible for the
fund since 1992 and has been associated with the advisor and/or its affiliates
since 1992.
- - John L. Pessarra, Senior Portfolio Manager, who has been responsible for the
fund since 1992 and has been associated with the advisor and/or its affiliates
since 1990.
- - Carolyn L. Gibbs, Senior Portfolio Manager, who has been responsible for the
fund since 1995 and has been associated with the advisor and/or its affiliates
since 1992.
- - Jan H. Friedli, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1999. From 1997 to 1999, he was global fixed-income portfolio manager for
Nicholas-Applegate Capital Management. From 1994 to 1997, he was international
fixed-income trader and analyst for Strong Capital Management.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Income Fund are subject to the maximum 4.75%
initial sales charge as listed under the heading "CATEGORY II Initial Sales
Charges" in the "Shareholder Information--Choosing a Share Class" section of
this prospectus. Purchases of Class B and Class C shares are subject to the
contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares dividends daily and pays dividends, if any, monthly.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
4
<PAGE> 59
---------------
AIM INCOME FUND
---------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.57 $ 8.24 $ 8.17 $ 7.20 $ 8.45
Income from investment operations:
Net investment income 0.57 0.55 0.57 0.58 0.58
Net gains (losses) on securities (both
realized and unrealized) (0.16) 0.39 0.09 1.00 (1.22)
Total from investment operations 0.41 0.94 0.66 1.58 (0.64)
Less distributions:
Dividends from net investment income (0.55) (0.52) (0.59) (0.61) (0.49)
Distributions from net realized gains (0.05) (0.09) -- -- (0.01)
Return of capital -- -- -- -- (0.11)
Total distributions (0.60) (0.61) (0.59) (0.61) (0.61)
Net asset value, end of period $ 8.38 $ 8.57 $ 8.24 $ 8.17 $ 7.20
Total return(a) 4.94% 11.92% 8.58% 22.77% (7.65)%
- ------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $399,701 $340,608 $286,183 $251,280 $201,677
Ratio of expenses to average net assets 0.91%(b) 0.94% 0.98% 0.98% 0.98%
Ratio of net investment income to average net
assets 6.69%(b) 6.55% 7.13% 7.52% 7.53%
Portfolio turnover rate 41% 54% 80% 227% 185%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $373,145,874.
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.55 $ 8.23 $ 8.15 $ 7.18 $ 8.43
Income from investment operations:
Net investment income 0.50 0.48 0.50 0.53 0.52
Net gains (losses) on securities (both
realized and unrealized) (0.15) 0.38 0.11 0.98 (1.23)
Total from investment operations 0.35 0.86 0.61 1.51 (0.71)
Less distributions:
Dividends from net investment income (0.48) (0.45) (0.53) (0.54) (0.42)
Distributions from net realized gains (0.05) (0.09) -- -- (0.01)
Return of capital -- -- -- -- (0.11)
Total distributions (0.53) (0.54) (0.53) (0.54) (0.54)
Net asset value, end of period $ 8.37 $ 8.55 $ 8.23 $ 8.15 $ 7.18
Total return(a) 4.20% 10.89% 7.87% 21.72% (8.46)%
- ---------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ---------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $219,033 $125,871 $85,343 $44,304 $12,321
Ratio of expenses to average net assets 1.66%(b) 1.69% 1.80% 1.79% 1.83%(c)
Ratio of net investment income to average net
assets 5.94%(b) 5.80% 6.30% 6.71% 6.69%(d)
Portfolio turnover rate 41% 54% 80% 227% 185%
- ---------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(b) Ratios are based on average net assets of $167,031,738.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
2.04% for 1994.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursement was 6.48% for 1994.
5
<PAGE> 60
---------------
AIM INCOME FUND
---------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------
FOR THE PERIOD
YEAR ENDED AUGUST 4, THROUGH
DECEMBER 31, DECEMBER 31,
1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 8.54 $ 8.38
Income from investment operations:
Net investment income .50 0.19
Net gains (losses) on securities (both realized and
unrealized) (0.15) 0.22
Total from investment operations 0.35 0.41
Less distributions:
Dividends from net investment income (0.48) (0.16)
Distributions from net realized gains (0.05) (0.09)
Return of capital -- --
Total distributions (0.53) (0.25)
Net asset value, end of period $ 8.36 $ 8.54
Total return(a) 4.21% 4.96%
- ---------------------------------------------------------------------------------
Ratios/supplemental data:
- ---------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $19,332 $2,552
Ratio of expenses to average net assets 1.66%(b) 1.69%(c)
Ratio of net investment income (loss) to average net assets 5.94%(b) 5.80%(c)
Portfolio turnover rate 41% 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 $9,961,552.
(c) Annualized.
6
<PAGE> 61
-------------------
THE AIM FUNDS
-------------------
Shareholder Information
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
A- 1 MCF--05/99
<PAGE> 62
-------------------
THE AIM FUNDS
-------------------
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- ----------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a
MCF--05/99 A- 2
<PAGE> 63
-------------------
THE AIM FUNDS
-------------------
13-month period. The amount you agree to purchase determines the initial sales
charge you pay. If the full face amount of the LOI is not invested by the end of
the 13-month period, your account will be adjusted to the higher initial sales
charge level for the amount actually invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 25 50
All other accounts 50 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A- 3 MCF--05/99
<PAGE> 64
-------------------
THE AIM FUNDS
-------------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. We may modify, suspend or terminate the
Program at any time on 60 days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through
tax-sheltered retirement plans made available to corporations, individuals and
employees of non-profit organizations and public schools. A plan document must
be adopted to establish a retirement plan. You may use AIM Funds-sponsored
retirement plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans,
401(k) plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit
Sharing plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ACQUIRED
BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--05/99 A- 4
<PAGE> 65
-------------------
THE AIM FUNDS
-------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last 30 days; (3)
you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not redeem by telephone. The transfer agent must
receive your call during the hours the NYSE is open for
business in order to effect the redemption at that day's
closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of trading
on the New York Stock Exchange (NYSE), we generally will transmit payment on the
next business day.
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
A- 5 MCF--05/99
<PAGE> 66
-------------------
THE AIM FUNDS
-------------------
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, at its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You also may exchange AIM Cash Reserve Shares of
AIM Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
may be required to pay an initial sales charge when exchanging from a Fund with
a lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
You also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for
Advisor Class shares, but only if you acquired the AIM Cash Reserve Shares
through an exchange from Advisor Class shares.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
MCF--05/99 A- 6
<PAGE> 67
-------------------
THE AIM FUNDS
-------------------
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
EACH AIM FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET-TIMING ACTIVITY.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. 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.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the New
York Stock Exchange (NYSE), events occur that materially affect the value of the
security, the AIM Funds may value the security at its fair value as determined
in good faith by or under the supervision of the Board of Directors or Trustees
of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's
net asset value will be subject to the judgment of the Board of Directors or
Trustees or its designee instead of being determined by the market. Because some
of the AIM Funds may invest in securities that are primarily listed on foreign
exchanges, the value of those funds' shares may change on days when you will not
be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each day the
NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange and redemption orders at
the net asset value calculated after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
A- 7 MCF--05/99
<PAGE> 68
-------------------
THE AIM FUNDS
-------------------
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--05/99 A- 8
<PAGE> 69
---------------
AIM INCOME FUND
---------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite
100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, on the SEC's website
(http://www.sec.gov) or by sending a letter, including a duplicating fee, to the
SEC's Public Reference Section, Washington, DC 20549-6009. Please call the SEC
at 1-800-SEC-0330 for information about the Public Reference Room.
- -----------------------------------
AIM Income Fund
SEC 1940 Act file number: 811-1540
- -----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com INC-PRO-1E INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 70
AIM INTERMEDIATE GOVERNMENT FUND
------------------------------------------------------------------------
AIM Intermediate Government Fund seeks to achieve high current income
consistent with reasonable concern for safety of principal by investing,
normally, at least 65% of its total assets in debt securities issued,
guaranteed or otherwise backed by U.S. Government.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information about Class A, B and C
shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 71
--------------------------------
AIM INTERMEDIATE GOVERNMENT FUND
--------------------------------
Table of Contents
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE
FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-7
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</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, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representation other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 72
--------------------------------
AIM INTERMEDIATE GOVERNMENT FUND
--------------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to achieve high current income consistent
with reasonable concern for safety of principal by investing in debt securities
issued, guaranteed or otherwise backed by the U.S. Government.
The fund seeks to meet this objective by investing, normally, at least 65% of
its total assets in debt securities issued, guaranteed or otherwise backed by
the U.S. Government. The fund may invest in securities of all maturities issued
or guaranteed by the U.S. Government or its agencies and instrumentalities,
including: (1) U.S. Treasury obligations, and (2) obligations issued or
guaranteed by U.S. Government agencies and instrumentalities and supported by
(a) the full faith and credit of the U.S. Treasury, (b) the right of the issuer
to borrow from the U.S. Treasury, or (c) the credit of the agency or
instrumentality. The fund will maintain a dollar-weighted average portfolio
maturity of between three and ten years. The fund invests primarily in
fixed-rate securities such as high-coupon U.S. Government agency mortgage-backed
securities, which consist of interests in underlying mortgages with maturities
of up to thirty years.
The portfolio managers focus on securities that they believe have favorable
prospects for current income, consistent with their reasonable concern for
safety of principal. The portfolio managers consider whether to sell a
particular security when any of those factors materially changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash,
money market instruments, bonds or other debt securities. As a result, the fund
may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. Debt securities are particularly
vulnerable to credit risk and interest rate fluctuations. Interest rate
increases can cause the price of a debt security to decrease. The longer a debt
security's duration, the more sensitive it is to this risk. The prices of
high-coupon U.S. Government agency mortgage-backed securities fall more slowly
when interest rates rise than do prices of traditional fixed-rate securities.
Some of the securities purchased by the fund are not guaranteed by the U.S.
Government. The agency or instrumentality issuing a security may default or
otherwise be unable to honor a financial obligation.
If the seller of a repurchase agreement in which the fund invests defaults on
its obligation or declares bankruptcy, the fund may experience delays in selling
the securities underlying the repurchase agreement. As a result, the fund may
incur losses arising from decline in the value of those securities, reduced
levels of income and expenses of enforcing its rights.
High-coupon U.S. Government agency mortgage-backed securities provide a higher
coupon at the time of purchase than current prevailing market interest rates.
The fund may purchase such securities at a premium. If these securities
experience a faster principal prepayment rate than expected, both the market
value of and income from such securities will decrease.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 73
--------------------------------
AIM INTERMEDIATE GOVERNMENT FUND
--------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
Total
Year Ended Annual
December 31 Return
- ----------- ------
<S> <C>
1989 ................................ 11.28%
1990 ................................ 9.39%
1991 ................................ 12.98%
1992 ................................ 6.26%
1993 ................................ 7.07%
1994 ................................ -3.44%
1995 ................................ 16.28%
1996 ................................ 2.35%
1997 ................................ 9.07%
1998 ................................ 8.17%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
5.49% (quarter ended June 30, 1995) and the lowest quarterly return was -2.92%
(quarter ended March 31, 1994).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 3.05% 5.25% 7.29% 7.15% 04/28/87
Class B 2.40% 5.14% -- 4.96% 09/07/93
Class C 6.31% -- -- 7.84% 08/04/97
Lehman Intermediate Government Bond Index(1) 8.49% 6.45% 8.34% 8.06%(2) 04/30/87(2)
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) The Lehman Intermediate Government Bond Index is an unmanaged composite
generally considered representative of intermediate publicly issued debt of
U.S. Government agencies and quasi-federal corporations, and corporate debt
guaranteed by the U.S. Government.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
2
<PAGE> 74
--------------------------------
AIM INTERMEDIATE GOVERNMENT FUND
--------------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge
(Load) Imposed on
Purchases(as a
percentage of
offering price) 4.750% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.46% 0.46% 0.46%
Distribution and/or
Service (12b-1) Fees 0.25 1.00 1.00
Other Expenses 0.25 0.26 0.26
Total Annual Fund
Operating Expenses 0.96 1.72 1.72
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $568 $766 $ 981 $1,597
Class B 675 842 1,133 1,829
Class C 275 542 933 2,030
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $568 $766 $981 $1,597
Class B 175 542 933 1,829
Class C 175 542 933 2,030
- ----------------------------------------------
</TABLE>
3
<PAGE> 75
--------------------------------
AIM INTERMEDIATE GOVERNMENT FUND
--------------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment and is
responsible for its day-to-day management. The advisor is located at 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects
of the fund's operations and provides investment advisory services to the fund,
including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment since its organization in 1976. Today,
the advisor, together with its subsidiaries, advises or manages over 110
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of 0.48% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are
- - Scot W. Johnson, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its affiliates
since 1994.
- - Karen Dunn Kelley, Senior Portfolio Manager, who has been responsible for the
fund since 1992 and has been associated with the advisor and/or its affiliates
since 1989.
- - Marcel S. Theriot, Portfolio Manager, who has been responsible for the fund
since 1998 and has been associated with the advisor and/or its affiliates
since 1994.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Intermediate Government Fund are subject to
the maximum 4.75% initial sales charge as listed under the heading "CATEGORY II
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares dividends daily and pays dividends, if any, monthly.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
4
<PAGE> 76
--------------------------------
AIM INTERMEDIATE GOVERNMENT FUND
--------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.46 $ 9.28 $ 9.70 $ 8.99 $ 10.05
Income from investment operations:
Net investment income 0.62 0.63 0.63 0.69 0.68
Net gains (losses) securities (both realized
and unrealized) 0.13 0.18 (0.42) 0.73 (1.02)
Total from investment operations 0.75 0.81 0.21 1.42 (0.34)
Less distributions:
Dividends from net investment income (0.63) (0.61) (0.59) (0.67) (0.58)
Distributions from net realized gains -- -- -- -- (0.04)
Return of capital -- (0.02) (0.04) (0.04) (0.10)
Total distributions (0.63) (0.63) (0.63) (0.71) (0.72)
Net asset value, end of period $ 9.58 $ 9.46 $ 9.28 $ 9.70 $ 8.99
Total return(a) 8.17% 9.07% 2.35% 16.28% (3.44)%
- ------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $245,613 $167,427 $174,344 $176,318 $158,341
Ratio of expenses to average net assets
(exclusive of interest expense) 0.96%(b) 1.00% 1.00% 1.08% 1.04%(c)
Ratio of net investment income to average net
assets 6.43%(b) 6.77% 6.76% 7.36% 7.34%(d)
Portfolio turnover rate 147% 99% 134% 140% 109%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $191,512,442.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
1.05% for 1994.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursement was 7.32% for 1994.
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.46 $ 9.28 $ 9.69 $ 8.99 $ 10.04
Income from investment operations:
Net investment income 0.55 0.56 0.55 0.63 0.61
Net gains (losses) on securities (both
realized and unrealized) 0.13 0.17 (0.41) 0.70 (1.02)
Total from investment operations 0.68 0.73 0.14 1.33 (0.41)
Less distributions:
Dividends from net investment income (0.55) (0.53) (0.51) (0.59) (0.50)
Distributions from net realized gains -- -- -- -- (0.04)
Return of capital -- (0.02) (0.04) (0.04) (0.10)
Total distributions (0.55) (0.55) (0.55) (0.63) (0.64)
Net asset value, end of period $ 9.59 $ 9.46 $ 9.28 $ 9.69 $ 8.99
Total return(a) 7.40% 8.16% 1.61% 15.22% (4.13)%
- --------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $237,919 $89,265 $79,443 $61,300 $23,415
Ratio of expenses to average net assets
(exclusive of interest expense) 1.72%(b) 1.76% 1.76% 1.86% 1.82%(c)
Ratio of net investment income to average net
assets(d) 5.68% 6.01% 6.00% 6.58% 6.56%(d)
Portfolio turnover rate 147% 99% 134% 140% 109%
- --------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct contingent deferred sales charges.
(b) Ratios are based on average net assets of $136,546,632.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
1.87% for 1994.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursement was 6.50% for 1994.
5
<PAGE> 77
--------------------------------
AIM INTERMEDIATE GOVERNMENT FUND
--------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------
YEAR FOR THE PERIOD
ENDED AUGUST 4, THROUGH
DECEMBER 31, DECEMBER 31,
1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.44 $ 9.33
Income from investment operations:
Net investment income 0.56 0.24
Net gains on securities (both realized and unrealized) 0.11 0.10
Total from investment operations 0.67 0.34
Less distributions:
Dividends from net investment income (0.55) (0.22)
Return of capital -- (0.01)
Total distributions (0.55) (0.23)
Net asset value, end of period $ 9.56 $ 9.44
Total return(a) 7.31% 3.64%
- -------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $38,026 $1,851
Ratio of expenses to average net assets (exclusive of interest
expense) 1.72%(b) 1.76%(c)
Ratio of net investment income to average net assets 5.68%(b) 6.01%(c)
Portfolio turnover rate 147% 99%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(b) Ratios are based on average net assets of $24,819,682.
(c) Annualized.
6
<PAGE> 78
-------------------
THE AIM FUNDS
-------------------
Shareholder Information
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
A- 1 MCF--05/99
<PAGE> 79
-------------------
THE AIM FUNDS
-------------------
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- ----------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a
MCF--05/99 A- 2
<PAGE> 80
-------------------
THE AIM FUNDS
-------------------
13-month period. The amount you agree to purchase determines the initial sales
charge you pay. If the full face amount of the LOI is not invested by the end of
the 13-month period, your account will be adjusted to the higher initial sales
charge level for the amount actually invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 25 50
All other accounts 50 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A- 3 MCF--05/99
<PAGE> 81
-------------------
THE AIM FUNDS
-------------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. We may modify, suspend or terminate the
Program at any time on 60 days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through
tax-sheltered retirement plans made available to corporations, individuals and
employees of non-profit organizations and public schools. A plan document must
be adopted to establish a retirement plan. You may use AIM Funds-sponsored
retirement plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans,
401(k) plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit
Sharing plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ACQUIRED
BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--05/99 A- 4
<PAGE> 82
-------------------
THE AIM FUNDS
-------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last 30 days; (3)
you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not redeem by telephone. The transfer agent must
receive your call during the hours the NYSE is open for
business in order to effect the redemption at that day's
closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of trading
on the New York Stock Exchange (NYSE), we generally will transmit payment on the
next business day.
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
A- 5 MCF--05/99
<PAGE> 83
-------------------
THE AIM FUNDS
-------------------
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, at its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You also may exchange AIM Cash Reserve Shares of
AIM Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
may be required to pay an initial sales charge when exchanging from a Fund with
a lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
You also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for
Advisor Class shares, but only if you acquired the AIM Cash Reserve Shares
through an exchange from Advisor Class shares.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
MCF--05/99 A- 6
<PAGE> 84
-------------------
THE AIM FUNDS
-------------------
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
EACH AIM FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET-TIMING ACTIVITY.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. 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.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the New
York Stock Exchange (NYSE), events occur that materially affect the value of the
security, the AIM Funds may value the security at its fair value as determined
in good faith by or under the supervision of the Board of Directors or Trustees
of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's
net asset value will be subject to the judgment of the Board of Directors or
Trustees or its designee instead of being determined by the market. Because some
of the AIM Funds may invest in securities that are primarily listed on foreign
exchanges, the value of those funds' shares may change on days when you will not
be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each day the
NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange and redemption orders at
the net asset value calculated after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
A- 7 MCF--05/99
<PAGE> 85
-------------------
THE AIM FUNDS
-------------------
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--05/99 A- 8
<PAGE> 86
--------------------------------
AIM INTERMEDIATE GOVERNMENT FUND
--------------------------------
Obtaining Additional Information
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, on the SEC's website
(http://www.sec.gov) or by sending a letter, including a duplicating fee, to the
SEC's Public Reference Section, Washington, DC 20549-6009. Please call the SEC
at 1-800-SEC-0330 for information about the Public Reference Room.
- -----------------------------------
AIM Intermediate Government Fund
SEC 1940 Act file number: 811-1540
- -----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com GOV-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 87
AIM MONEY MARKET FUND
------------------------------------------------------------------------
AIM Money Market Fund seeks to provide as high a level of current income
as is consistent with the preservation of capital and liquidity.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information about the Class B and C
shares and AIM Cash Reserve Shares
of the fund. Please read it before
investing and keep it for future
reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
There can be no assurance that the
fund will be able to maintain a
stable net asset value of $1.00 per
share.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 88
---------------------
AIM MONEY MARKET FUND
---------------------
Table of Contents
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- ----------------------------------------------
PRINCIPAL RISKS OF INVESTING IN THE
FUND 1
- ----------------------------------------------
PERFORMANCE INFORMATION 2
- ----------------------------------------------
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- ----------------------------------------------
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- ----------------------------------------------
The Advisor 4
Advisor Compensation 4
OTHER INFORMATION 4
- ----------------------------------------------
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- ----------------------------------------------
SHAREHOLDER INFORMATION A-1
- ----------------------------------------------
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-7
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- ----------------------------------------------
</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, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 89
---------------------
AIM MONEY MARKET FUND
---------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to provide as high a level of current income
as is consistent with the preservation of capital and liquidity.
The fund attempts to meet this objective by investing only in high-quality
U.S. dollar-denominated short-term obligations, including
- - securities issued by the U.S. Government or its agencies
- - bankers' acceptances, certificates of deposit, and time deposits from U.S. or
foreign banks
- - repurchase agreements
- - commercial paper
- - taxable municipal securities
- - master notes
The fund may invest up to 50% of its assets in U.S. dollar-denominated foreign
securities.
The portfolio managers focus on securities that they believe have favorable
prospects for current income, consistent with their concerns for preservation of
capital and liquidity. The portfolio managers usually hold portfolio securities
to maturity, but may sell a particular security when they deem it advisable,
such as when any of the factors above materially changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash.
As a result, the fund may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the fund.
Additionally, the fund's yield will vary as the short-term securities in its
portfolio mature and the proceeds are reinvested in securities with different
interest rates.
The following factors could reduce the fund's income and/or share price:
- - interest rates could rise sharply, causing the value of the fund's securities,
and share price, to drop
- - any of the fund's holdings could have its credit rating downgraded or could
default
- - the risks generally associated with concentrating investments in the banking
industry, such as interest rate risk, credit risk and regulatory developments
relating to the banking and financial services industries
- - the risks generally associated with dollar-denominated foreign investments,
including political and economic upheaval, seizure or nationalization of
deposits, imposition of taxes or other restrictions on the payment of
principal and interest.
If the seller of a repurchase agreement in which the fund invests defaults on
its obligation or declares bankruptcy, the fund may experience delays in selling
the securities underlying the repurchase agreement. As a result, the fund may
incur losses arising from decline in the value of those securities, reduced
levels of income and expenses of enforcing its rights.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
1
<PAGE> 90
---------------------
AIM MONEY MARKET FUND
---------------------
Performance Information
- --------------------------------------------------------------------------------
The bar chart shown below provides an indication of the risks of investing in
the fund. The fund's past performance is not necessarily an indication of its
future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's AIM Cash
Reserve Shares from year to year. AIM Cash Reserve Shares do not have sales
loads.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ----------- ------
<S> <C>
1994 ....................................... 3.42%
1995 ....................................... 5.04%
1996 ....................................... 4.41%
1997 ....................................... 4.66%
1998 ....................................... 4.62%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
1.27% (quarters ended March 31, 1995 and June 30, 1995) and the lowest quarterly
return was 0.59% (quarter ended March 31, 1994).
PERFORMANCE TABLE
The following performance table reflects the fund's performance over the period
indicated. The fund's performance reflects payment of sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AIM Cash Reserve Shares 4.62% 4.43% -- 4.35% 10/16/93
Class B -1.22% 3.29% -- 3.38% 10/16/93
Class C 2.78% -- -- 3.82% 08/04/97
- ---------------------------------------------------------------------------------
</TABLE>
AIM Cash Reserve Shares', Class B shares' and Class C shares' seven day yields
on December 31, 1998 were 4.07%, 3.32% and 3.31%, respectively. For the current
seven day yield, call (800) 347-4246.
2
<PAGE> 91
---------------------
AIM MONEY MARKET FUND
---------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- -----------------------------------------------------------------------
(fees paid directly from AIM CASH
your investment) RESERVE SHARES CLASS B CLASS C
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases (as a
percentage of offering
price) None None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None 5.00% 1.00%
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- ----------------------------------------------------------------------
(expenses that are deducted AIM CASH
from fund assets) RESERVE SHARES CLASS B CLASS C
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.54% 0.54% 0.54%
Distribution and/or Service
(12b-1) Fees 0.25 1.00 1.00
Other Expenses 0.20 0.27 0.27
Total Annual Fund Operating
Expenses 0.99 1.81 1.81
- ----------------------------------------------------------------------
</TABLE>
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
AIM Cash Reserve
Shares $101 $315 $ 547 $1,213
Class B 684 869 1,180 1,911
Class C 284 569 980 2,127
- ----------------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
AIM Cash Reserve
Shares $101 $315 $547 $1,213
Class B 184 569 980 1,911
Class C 184 569 980 2,127
- ----------------------------------------------------------
</TABLE>
3
<PAGE> 92
---------------------
AIM MONEY MARKET FUND
---------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all
aspects of the fund's operations and provides investment advisory services to
the fund, including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 110
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of 0.55% of average daily net assets.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchase of Class B and Class C Shares of AIM Money Market Fund are subject to
the contingent deferred sales charges listed in the "Shareholder
Information -- Choosing a Share Class" section of this prospectus.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares dividends daily and pays dividends, if any, monthly.
In order to earn dividends on a purchase of fund shares on the day of the
purchase, the transfer agent must receive payment in federal funds before 12:00
noon Eastern Time on that day. Purchases made by payments in other forms, or
payments in federal funds received after 12:00 noon Eastern Time but before the
close of the New York Stock Exchange, will begin to earn dividends on the next
business day.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
4
<PAGE> 93
---------------------
AIM MONEY MARKET FUND
---------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
AIM CASH RESERVE SHARES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------
<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(a) 0.0456 0.0433 0.0493 0.0337
Less distributions:
Dividends from net investment income (0.0453) (0.0456) (0.0433) (0.0493) (0.0337)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return 4.62% 4.66% 4.41% 5.04% 3.42%
- --------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- --------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $1,179,072 $344,117 $315,470 $293,450 $359,952
Ratio of expenses to average net assets 0.99%(b) 1.05% 1.08% 1.04% 0.99%(c)
Ratio of net investment income (loss) to average
net assets 4.53%(b) 4.55% 4.32% 4.92% 3.49%(c)
- --------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Ratios are based on average daily net assets of $419,781,232.
(c) 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.
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<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 0.0371(a) 0.0378 0.0360 0.0419 0.0259
Less distributions:
Dividends from net investment income (0.0371) (0.0378) (0.0360) (0.0419) (0.0259)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return(b) 3.78% 3.84% 3.66% 4.27% 2.62%
- ------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $310,534 $116,058 $ 91,148 $ 69,857 $ 33,999
Ratio of expenses to average net assets 1.81%(c) 1.80% 1.81% 1.78% 1.78%(d)
Ratio of net investment income to average net
assets 3.71%(c) 3.80% 3.60% 4.14% 3.14%(d)
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges where applicable.
(c) Ratios are based on average net assets of $176,756,795.
(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.
5
<PAGE> 94
---------------------
AIM MONEY MARKET FUND
---------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
- --------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
AUGUST 4,
YEAR ENDED THROUGH
DECEMBER 31, 1998 DECEMBER 31, 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00
Income from investment operations:
Net investment income 0.0371(a) 0.0158
Less distributions:
Dividends from net investment income (0.0371) (0.0158)
Net asset value, end of period $ 1.00 $ 1.00
Total return(b) 3.78% 3.92%
- --------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $ 27,391 $ 8,287
Ratio of expenses to average net assets 1.81%(c) 1.80%(d)
Ratio of net investment income (loss) to average
net assets 3.71%(c) 3.80%(d)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges where applicable, and is
annualized for periods less than one year.
(c) Ratios are based on average net assets of $17,638,255.
(d) Annualized.
6
<PAGE> 95
-------------------
THE AIM FUNDS
-------------------
Shareholder Information
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
A- 1 MCF--05/99
<PAGE> 96
-------------------
THE AIM FUNDS
-------------------
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- ----------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a
MCF--05/99 A- 2
<PAGE> 97
-------------------
THE AIM FUNDS
-------------------
13-month period. The amount you agree to purchase determines the initial sales
charge you pay. If the full face amount of the LOI is not invested by the end of
the 13-month period, your account will be adjusted to the higher initial sales
charge level for the amount actually invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 25 50
All other accounts 50 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A- 3 MCF--05/99
<PAGE> 98
-------------------
THE AIM FUNDS
-------------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. We may modify, suspend or terminate the
Program at any time on 60 days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through
tax-sheltered retirement plans made available to corporations, individuals and
employees of non-profit organizations and public schools. A plan document must
be adopted to establish a retirement plan. You may use AIM Funds-sponsored
retirement plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans,
401(k) plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit
Sharing plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ACQUIRED
BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--05/99 A- 4
<PAGE> 99
-------------------
THE AIM FUNDS
-------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last 30 days; (3)
you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not redeem by telephone. The transfer agent must
receive your call during the hours the NYSE is open for
business in order to effect the redemption at that day's
closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of trading
on the New York Stock Exchange (NYSE), we generally will transmit payment on the
next business day.
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
A- 5 MCF--05/99
<PAGE> 100
-------------------
THE AIM FUNDS
-------------------
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, at its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You also may exchange AIM Cash Reserve Shares of
AIM Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
may be required to pay an initial sales charge when exchanging from a Fund with
a lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
You also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for
Advisor Class shares, but only if you acquired the AIM Cash Reserve Shares
through an exchange from Advisor Class shares.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
MCF--05/99 A- 6
<PAGE> 101
-------------------
THE AIM FUNDS
-------------------
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
EACH AIM FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET-TIMING ACTIVITY.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. 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.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the New
York Stock Exchange (NYSE), events occur that materially affect the value of the
security, the AIM Funds may value the security at its fair value as determined
in good faith by or under the supervision of the Board of Directors or Trustees
of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's
net asset value will be subject to the judgment of the Board of Directors or
Trustees or its designee instead of being determined by the market. Because some
of the AIM Funds may invest in securities that are primarily listed on foreign
exchanges, the value of those funds' shares may change on days when you will not
be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each day the
NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange and redemption orders at
the net asset value calculated after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
A- 7 MCF--05/99
<PAGE> 102
-------------------
THE AIM FUNDS
-------------------
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--05/99 A- 8
<PAGE> 103
---------------------
AIM MONEY MARKET FUND
---------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, on the SEC's website
(http://www.sec.gov) or by sending a letter, including a duplicating fee, to the
SEC's Public Reference Section, Washington, DC 20549-6009. Please call the SEC
at 1-800-SEC-0330 for information about the Public Reference Room.
- -----------------------------------
AIM Money Market Fund
SEC 1940 Act file number: 811-1540
- -----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com MKT-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 104
AIM MUNICIPAL BOND FUND
------------------------------------------------------------------------
AIM Municipal Bond Fund seeks 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.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 105
-----------------------
AIM MUNICIPAL BOND FUND
-----------------------
Table of Contents
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- ----------------------------------------------
PRINCIPAL RISKS OF INVESTING IN THE
FUND 1
- ----------------------------------------------
PERFORMANCE INFORMATION 2
- ----------------------------------------------
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- ----------------------------------------------
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- ----------------------------------------------
The Advisor 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- ----------------------------------------------
Sales Charges 4
Dividends and Distributions 4
Special Tax Information Regarding the
Fund 4
FINANCIAL HIGHLIGHTS 5
- ----------------------------------------------
SHAREHOLDER INFORMATION A-1
- ----------------------------------------------
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-7
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- ----------------------------------------------
</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, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 106
-----------------------
AIM MUNICIPAL BOND FUND
-----------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment 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 fund attempts to meet this objective by investing at least 80% of its
total invested assets in securities that pay interest exempt from all federal
taxes and that do not constitute an item of preference for purposes of the
alternative minimum tax. The fund will invest at least 80% of its total invested
assets in municipal bonds. Municipal bonds include debt obligations of varying
maturities issued to obtain funds for various public purposes 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. Certain types of industrial development bonds, such as
private activity bonds, that meet certain standards, are treated as municipal
bonds.
The fund will also invest at least 80% of its total assets in investment-grade
municipal securities rated by Moody's Investors Service, Inc. (Moody's),
Standard & Poor's Ratings Services (S&P) or any other nationally recognized
statistical rating organization. Other securities meeting certain standards set
by the fund are included in this category. The fund may invest up to 20% of its
total assets in lower-quality municipal securities, i.e. "junk bonds," or
unrated municipal securities.
The fund's portfolio managers focus on municipal securities they believe have
favorable prospects for current income consistent with the fund's objective of
preservation of principal. The fund's portfolio managers consider whether to
sell a particular security when any of those factors materially changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash,
money market instruments, bonds or other debt securities. As a result, the fund
may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. Interest rate increases can cause the
price of a debt security to decrease. The longer a debt security's duration, the
more sensitive it is to this risk. Junk bonds are less sensitive to this risk
than are higher-quality bonds. A municipality may default or otherwise be unable
to honor a financial obligation. Private activity bonds are not backed by the
taxing power of the issuing municipality.
The value of, payment of interest and repayment of principal by, and the
ability of the fund to sell, a municipal security may also be affected by
constitutional amendments, legislative enactments, executive orders,
administrative regulations and voter initiatives as well as the economies of the
regions in which the fund invests.
Compared to higher quality debt securities, junk bonds involve greater risk of
default or price changes due to changes in the credit quality of the issuer
because they are generally unsecured and may be subordinated to other creditors'
claims. The value of junk bonds often fluctuates in response to company,
political or economic developments and can decline significantly over short
periods of time or during periods of general or regional economic difficulty.
During those times the bonds could be difficult to value or sell at a fair
price. Credit ratings on junk bonds do not necessarily reflect their actual
market risk.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 107
-----------------------
AIM MUNICIPAL BOND FUND
-----------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
Total
Year Ended Annual
December 31 Return
- ----------- ------
<S> <C>
1989 ....................................... 9.70%
1990 ....................................... 5.27%
1991 ....................................... 13.30%
1992 ....................................... 9.10%
1993 ....................................... 11.66%
1994 ....................................... -3.79%
1995 ....................................... 13.05%
1996 ....................................... 3.90%
1997 ....................................... 7.27%
1998 ....................................... 5.28%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
5.82% (quarter ended June 30, 1989) and the lowest quarterly return was -4.22%
(quarter ended March 31, 1994).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------------------------------------------------------------------------
(for the periods ended
December 31, 1998) 1 YEAR 5 YEARS
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Class A 0.23% 3.98%
Class B -0.52% 3.85%
Class C 3.36% --
Lehman Municipal Bond Index(1) 6.48% 6.22%
- ----------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -----------------------------------------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1998) 10 YEARS INCEPTION DATE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A 6.84% 6.69% 03/28/77
Class B -- 4.14% 09/01/93
Class C -- 4.80% 08/04/97
Lehman Municipal Bond Index(1) 8.22% 8.67%(2) 12/31/79(2)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Lehman Municipal Bond Index is a broad-based, total return index
comprised of 8000 actual bonds, all of which are investment grade, fixed
rate, long term maturities (greater than two years) and are selected from
issues larger than $50 million dated since January 1984.
(2) The average annual total return given is since the earliest date the index
became available.
2
<PAGE> 108
-----------------------
AIM MUNICIPAL BOND FUND
-----------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- ---------------------------------------------------------
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- ---------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 4.75% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
- ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- ----------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.45% 0.45% 0.45%
Distribution and/or
Service (12b-1) Fees 0.25 1.00 1.00
Other Expenses 0.12 0.12 0.12
Total Annual Fund
Operating Expenses 0.82 1.57 1.57
- ----------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $555 $724 $ 908 $1,440
Class B 660 796 1,055 1,666
Class C 260 496 855 1,867
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
- ----------------------------------------------
Class A $555 $724 $908 $1,440
Class B 160 496 855 1,666
Class C 160 496 855 1,867
- ----------------------------------------------
</TABLE>
3
<PAGE> 109
-----------------------
AIM MUNICIPAL BOND FUND
-----------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all
aspects of the fund's operations and provides investment advisory services to
the fund, including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 110
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of 0.47% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are
- - Richard A. Berry, Senior Portfolio Manager, who has been responsible for the
fund since 1992 and has been associated with the advisor and/or its affiliates
since 1987.
- - Stephen D. Turman, Senior Portfolio Manager, who has been responsible for the
fund since 1992 and has been associated with the advisor and/or its affiliates
since 1985.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Municipal Bond Fund are subject to the
maximum 4.75% initial sales charge as listed under the heading "CATEGORY II
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares dividends daily and pays dividends, if any, monthly.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
SPECIAL TAX INFORMATION REGARDING THE FUND
In addition to the general tax information set forth under the heading
"Shareholder Information--Taxes" in this prospectus, the following information
describes the tax impact of certain dividends you may receive from the fund.
You will not be required to include the "exempt-interest" portion of dividends
paid by the fund in your gross income for federal income tax purposes. You will
be required to report the receipt of exempt-interest dividends and other
tax-exempt interest on your federal income tax returns. Exempt-interest
dividends from the fund may be subject to state and local 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, and may have other collateral
federal income tax consequences for you. The fund may invest in municipal
securities the interest on which constitutes an item of tax preference and could
give rise to a federal alternative minimum tax liability for you, and may invest
up to 20% of its net assets in such securities and other taxable securities. The
fund will try to avoid investments that result in taxable dividends.
To the extent that dividends paid by the fund are derived from taxable
investments or realized capital gains, they will be taxable as ordinary income
or long-term capital gains. The percentage of dividends that constitutes
exempt-interest dividends will be determined annually. This percentage may
differ from the actual percentage of exempt interest received by the fund for
the particular days in which you hold 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 fund
to pay exempt-interest dividends might be adversely affected.
4
<PAGE> 110
-----------------------
AIM MUNICIPAL BOND FUND
-----------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.34 $ 8.19 $ 8.31 $ 7.78 $ 8.61
Income from investment operations:
Net investment income 0.42 0.42 0.43 0.43 0.46
Net gains (losses) on securities (both
realized and unrealized) 0.01 0.16 (0.12) 0.56 (0.78)
Total from investment operations 0.43 0.58 0.31 0.99 (0.32)
Less distributions:
Dividends from net investment income (0.42) (0.43) (0.43) (0.43) (0.45)
Distributions from net realized gains -- -- -- -- (0.03)
Returns of capital -- -- -- (0.03) (0.03)
Total distributions (0.42) (0.43) (0.43) (0.46) (0.51)
Net asset value, end of period $ 8.35 $ 8.34 $ 8.19 $ 8.31 $ 7.78
Total return(a) 5.28% 7.27% 3.90% 13.05% (3.79)%
- ---------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $327,705 $318,469 $278,812 $284,803 $257,456
Ratio of expenses to average net assets 0.82%(b) 0.90% 0.80% 0.88% 0.89%
Ratio of net investment income to average net
assets 5.00%(b) 5.14% 5.29% 5.26% 5.61%
Portfolio turnover rate 19% 24% 26% 36% 43%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average daily net assets of $322,592,733.
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.36 $ 8.19 $ 8.31 $ 7.78 $ 8.61
Income from investment operations:
Net investment income 0.36 0.36 0.37 0.39 0.39
Net gains (losses) on securities (both
realized and unrealized) 0.01 0.17 (0.13) 0.54 (0.78)
Total from investment operations 0.37 0.53 0.24 0.93 (0.39)
Less distributions:
Dividends from net investment income (0.36) (0.36) (0.36) (0.37) (0.38)
Distributions from net realized gains -- -- -- -- (0.03)
Returns of capital -- -- -- (0.03) (0.03)
Total distributions (0.36) (0.36) (0.36) (0.40) (0.44)
Net asset value, end of period $ 8.37 $ 8.36 $ 8.19 $ 8.31 $ 7.78
Total return(a) 4.48% 6.59% 2.99% 12.14% (4.57)%
- -----------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -----------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $72,723 $47,185 $33,770 $21,478 $9,175
Ratio of expenses to average net assets 1.57%(b) 1.66% 1.61% 1.68%(c) 1.67%(c)
Ratio of net investment income to average net
assets 4.25%(b) 4.38% 4.49% 4.46%(d) 4.83%(d)
Portfolio turnover rate 19% 24% 26% 36% 43%
- -----------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct contingent deferred sales charges.
(b) Ratios are based on average daily net assets of $56,881,310.
(c) 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% and 1.84% for the periods 1995-1994, respectively.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average daily net assets prior to fee waivers and/or expense
reimbursement were 4.37% and 4.66% for the periods 1995-1994, respectively.
5
<PAGE> 111
-----------------------
AIM MUNICIPAL BOND FUND
-----------------------
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------
FOR THE PERIOD
YEAR ENDED AUGUST 4, THROUGH
DECEMBER 31, DECEMBER 31,
1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.35 $ 8.30
Income from investment operations:
Net investment income 0.36 0.15
Net gains on securities (both realized and unrealized) -- 0.04
Total from investment operations 0.36 0.19
Less distributions:
Dividends from net investment income (0.36) (0.14)
Distributions from net realized gains -- --
Total distributions (0.36) (0.14)
Net asset value, end of period $ 8.35 $ 8.35
Total return(a) 4.36% 2.36%
- -------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $9,565 $ 825
Ratio of expenses to average net assets 1.57%(b) 1.67%(c)
Ratio of net investment income to average net assets 4.25%(b) 4.37%(c)
Portfolio turnover rate 19% 24%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(b) Ratios are based on average daily net assets of $5,035,467.
(c) Annualized.
6
<PAGE> 112
-------------------
THE AIM FUNDS
-------------------
Shareholder Information
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
A- 1 MCF--05/99
<PAGE> 113
-------------------
THE AIM FUNDS
-------------------
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- ----------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a
MCF--05/99 A- 2
<PAGE> 114
-------------------
THE AIM FUNDS
-------------------
13-month period. The amount you agree to purchase determines the initial sales
charge you pay. If the full face amount of the LOI is not invested by the end of
the 13-month period, your account will be adjusted to the higher initial sales
charge level for the amount actually invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 25 50
All other accounts 50 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A- 3 MCF--05/99
<PAGE> 115
-------------------
THE AIM FUNDS
-------------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. We may modify, suspend or terminate the
Program at any time on 60 days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through
tax-sheltered retirement plans made available to corporations, individuals and
employees of non-profit organizations and public schools. A plan document must
be adopted to establish a retirement plan. You may use AIM Funds-sponsored
retirement plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans,
401(k) plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit
Sharing plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ACQUIRED
BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--05/99 A- 4
<PAGE> 116
-------------------
THE AIM FUNDS
-------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last 30 days; (3)
you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not redeem by telephone. The transfer agent must
receive your call during the hours the NYSE is open for
business in order to effect the redemption at that day's
closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of trading
on the New York Stock Exchange (NYSE), we generally will transmit payment on the
next business day.
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
A- 5 MCF--05/99
<PAGE> 117
-------------------
THE AIM FUNDS
-------------------
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, at its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You also may exchange AIM Cash Reserve Shares of
AIM Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
may be required to pay an initial sales charge when exchanging from a Fund with
a lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
You also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for
Advisor Class shares, but only if you acquired the AIM Cash Reserve Shares
through an exchange from Advisor Class shares.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
MCF--05/99 A- 6
<PAGE> 118
-------------------
THE AIM FUNDS
-------------------
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
EACH AIM FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET-TIMING ACTIVITY.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. 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.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the New
York Stock Exchange (NYSE), events occur that materially affect the value of the
security, the AIM Funds may value the security at its fair value as determined
in good faith by or under the supervision of the Board of Directors or Trustees
of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's
net asset value will be subject to the judgment of the Board of Directors or
Trustees or its designee instead of being determined by the market. Because some
of the AIM Funds may invest in securities that are primarily listed on foreign
exchanges, the value of those funds' shares may change on days when you will not
be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each day the
NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange and redemption orders at
the net asset value calculated after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
A- 7 MCF--05/99
<PAGE> 119
-------------------
THE AIM FUNDS
-------------------
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--05/99 A- 8
<PAGE> 120
-----------------------
AIM MUNICIPAL BOND FUND
-----------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, on the SEC's website
(http://www.sec.gov) or by sending a letter, including a duplicating fee, to the
SEC's Public Reference Section, Washington, DC 20549-6009. Please call the SEC
at 1-800-SEC-0330 for information about the Public Reference Room.
- -----------------------------------
AIM Municipal Bond Fund
SEC 1940 Act file number: 811-1540
- -----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com MBD-PRO-1 INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 121
AIM SELECT GROWTH FUND
------------------------------------------------------------------------
AIM Select Growth Fund seeks 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.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for future
reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 122
----------------------
AIM SELECT GROWTH FUND
----------------------
Table of Contents
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE
FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-7
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</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, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 123
----------------------
AIM SELECT GROWTH FUND
----------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
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.
The fund may invest up to 25% of its total assets in foreign securities.
The fund's management committee focuses on companies that have experienced
above-average, long-term growth in earnings, have excellent prospects for future
growth and whose securities they believe are undervalued relative to the
issuer's current or projected earnings, the current market value of the issuer's
assets or the equity markets generally. The fund's management committee
considers whether to sell a particular security when any of those factors
materially changes.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash,
money market instruments, bonds or other debt securities. As a result, the fund
may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions and market liquidity.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances from other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 124
----------------------
AIM SELECT GROWTH FUND
----------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
Total
Year Ended Annual
December 31 Return
- ----------- ------
<S> <C>
1989 ........................................... 28.87%
1990 ........................................... -5.04%
1991 ........................................... 37.05%
1992 ........................................... 0.19%
1993 ........................................... 3.63%
1994 ........................................... -4.99%
1995 ........................................... 34.31%
1996 ........................................... 18.61%
1997 ........................................... 19.54%
1998 ........................................... 27.09%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
29.40% (quarter ended December 31, 1998) and the lowest quarterly return was
- -19.50% (quarter ended September 30, 1990).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended
December 31, 1998) 1 YEAR 5 YEARS
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Class A 20.12% 16.79%
Class B 21.13% 16.87%
Class C 25.07% --
Russell 3000(R) Index(1) 24.14% 22.26%
- ---------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1998) 10 YEARS INCEPTION DATE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A 14.24% 9.99% 02/02/68
Class B -- 15.64% 09/01/93
Class C -- 14.63% 08/04/97
Russell 3000--Registered Trademark-- Index(1) 18.48% 17.30%(2) 12/31/78(2)
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) The Russell 3000--Registered Trademark--Index is a widely recognized,
unmanaged index of common stocks that measures the performance of the 3,000
largest U.S. companies based on total market capitalization.
(2) The average annual total return given is since the date closest to the
earliest date the index became available.
2
<PAGE> 125
----------------------
AIM SELECT GROWTH FUND
----------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly
from your investment) CLASS A CLASS B CLASS C
- ---------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
- ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -----------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.67% 0.67% 0.67%
Distribution and/or
Service (12b-1) Fees 0.25 1.00 1.00
Other Expenses 0.19 0.26 0.26
Total Annual Fund
Operating Expenses 1.11 1.93 1.93
- -----------------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $657 $883 $1,128 $1,827
Class B 696 906 1,242 2,040
Class C 296 606 1,042 2,254
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $657 $883 $1,128 $1,827
Class B 196 606 1,042 2,040
Class C 196 606 1,042 2,254
- ----------------------------------------------
</TABLE>
3
<PAGE> 126
----------------------
AIM SELECT GROWTH FUND
----------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all
aspects of the fund's operations and provides investment advisory services to
the fund, including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 110
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of 0.68% of average daily net assets.
PORTFOLIO MANAGERS
The fund is managed by a select committee comprised of equity research analysts
employed by the advisor or A I M Capital Management, Inc., a wholly owned
subsidiary of the advisor. The members of the committee provide knowledge
regarding a variety of equity market capitalization sectors and investment
styles. The committee meets periodically to discuss investment opportunities and
ideas; however, purchases and sales of securities must have the prior approval
of one of the following persons:
- - Jonathan C. Schoolar, Senior Portfolio Manager, who has been responsible for
the fund since 1994 and has been associated with the advisor and/or its
affiliates since 1986.
- - Bret W. Stanley, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1998. From 1994 to 1998, he was Vice President and portfolio manager
with Van Kampen American Capital Asset Management, Inc.
- - Kenneth A. Zschappel, Senior Portfolio Manager, who has been responsible for
the fund since 1999 and has been associated with the advisor and/or its
affiliates since 1990.
- - Ryan E. Crane, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1994.
- - Geoffrey V. Keeling, Portfolio Manager, who has been responsible for the fund
since 1999 and has been associated with the advisor and/or its affiliates
since 1995. Prior to 1995 he was a student.
- - Robert L. Shoss, Portfolio Manager, who has been responsible for the fund
since 1999 and has been associated with the advisor and/or its affiliates
since 1995. From 1991 to 1995, he was enrolled in graduate school.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Select Growth Fund are subject to the maximum
5.50% initial sales charge as listed under the heading "CATEGORY I Initial Sales
Charges" in the "Shareholder Information--Choosing a Share Class" section of
this prospectus. Purchases of Class B and Class C shares are subject to the
contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
4
<PAGE> 127
----------------------
AIM SELECT GROWTH FUND
----------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.67 $ 14.78 $ 13.05 $ 10.32 $ 11.32
Income from investment operations:
Net investment income (loss) (0.04) 0.01(a) 0.07 0.02(a) --
Net gains (losses) on securities (both
realized and unrealized) 4.24 2.82 2.34 3.50 (0.57)
Total from investment operations 4.20 2.83 2.41 3.52 (0.57)
Less distributions:
Dividends from net investment income -- (0.01) -- -- --
Distributions from net realized gains (0.52) (1.93) (0.68) (0.79) (0.43)
Total distributions (0.52) (1.94) (0.68) (0.79) (0.43)
Net asset value, end of period $ 19.35 $ 15.67 $ 14.78 $ 13.05 $ 10.32
Total return(b) 27.09% 19.54% 18.61% 34.31% (4.99)%
- --------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- --------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $320,143 $266,168 $227,882 $168,217 $123,271
Ratio of expenses to average net assets 1.11%(c) 1.13% 1.18% 1.28% 1.22%
Ratio of net investment income to average net
assets (0.22)%(c) 0.04% 0.46% 0.20% 0.02%
Portfolio turnover rate 68% 110% 97% 87% 201%
- --------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) Ratios are based on average net assets of $280,671,673.
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.98 $ 14.32 $ 12.77 $ 10.21 $ 11.31
Income from investment operations:
Net investment income (loss) (0.17) (0.13)(a) (0.05) (0.08)(a) (0.06)
Net gains (losses) on securities (both
realized and unrealized) 4.04 2.72 2.28 3.43 (0.61)
Total from investment operations 3.87 2.59 2.23 3.35 (0.67)
Less distributions:
Distributions from net realized gains (0.52) (1.93) (0.68) (0.79) (0.43)
Total distributions (0.52) (1.93) (0.68) (0.79) (0.43)
Net asset value, end of period $ 18.33 $ 14.98 $ 14.32 $ 12.77 $ 10.21
Total return(b) 26.13% 18.50% 17.60% 33.00% (5.88)%
- ----------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $428,002 $356,186 $280,807 $138,034 $ 38,448
Ratio of expenses to average net assets 1.93%(c) 1.99% 2.03% 2.13% 2.18%
Ratio of net investment income (loss) to average
net assets (1.04)%(c) (0.82)% (0.39)% (0.65)% (0.94)%
Portfolio turnover rate 68% 110% 97% 87% 201%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges.
(c) Ratios are based on average net assets of $371,022,634.
5
<PAGE> 128
----------------------
AIM SELECT GROWTH FUND
----------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
--------------------------------------
FOR THE PERIOD
AUGUST 4,
YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31,
1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $14.98 $17.65
Income from investment operations:
Net investment income (loss) (0.17)(a) (0.04)(a)
Net gains (losses) on securities (both realized and 4.03 (0.70)
unrealized)
Total from investment operations 3.86 (0.74)
Less distributions:
Distributions from net realized gains (0.52) (1.93)
Total distributions (0.52) (1.93)
Net asset value, end of period $18.32 $14.98
Total return(b) 26.07% (3.86)%
- -----------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -----------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $8,501 $1,189
Ratio of expenses to average net assets 1.93%(c) 1.95%(d)
Ratio of net investment income (loss) to average net assets (1.04)%(c) (0.77)%(d)
Portfolio turnover rate 68% 110%
- -----------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average net assets of $4,267,476.
(d) Annualized.
6
<PAGE> 129
-------------------
THE AIM FUNDS
-------------------
Shareholder Information
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
A- 1 MCF--05/99
<PAGE> 130
-------------------
THE AIM FUNDS
-------------------
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- ----------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a
MCF--05/99 A- 2
<PAGE> 131
-------------------
THE AIM FUNDS
-------------------
13-month period. The amount you agree to purchase determines the initial sales
charge you pay. If the full face amount of the LOI is not invested by the end of
the 13-month period, your account will be adjusted to the higher initial sales
charge level for the amount actually invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 25 50
All other accounts 50 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A- 3 MCF--05/99
<PAGE> 132
-------------------
THE AIM FUNDS
-------------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. We may modify, suspend or terminate the
Program at any time on 60 days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through
tax-sheltered retirement plans made available to corporations, individuals and
employees of non-profit organizations and public schools. A plan document must
be adopted to establish a retirement plan. You may use AIM Funds-sponsored
retirement plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans,
401(k) plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit
Sharing plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ACQUIRED
BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--05/99 A- 4
<PAGE> 133
-------------------
THE AIM FUNDS
-------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last 30 days; (3)
you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not redeem by telephone. The transfer agent must
receive your call during the hours the NYSE is open for
business in order to effect the redemption at that day's
closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of trading
on the New York Stock Exchange (NYSE), we generally will transmit payment on the
next business day.
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
A- 5 MCF--05/99
<PAGE> 134
-------------------
THE AIM FUNDS
-------------------
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, at its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You also may exchange AIM Cash Reserve Shares of
AIM Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
may be required to pay an initial sales charge when exchanging from a Fund with
a lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
You also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for
Advisor Class shares, but only if you acquired the AIM Cash Reserve Shares
through an exchange from Advisor Class shares.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
MCF--05/99 A- 6
<PAGE> 135
-------------------
THE AIM FUNDS
-------------------
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
EACH AIM FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET-TIMING ACTIVITY.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. 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.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the New
York Stock Exchange (NYSE), events occur that materially affect the value of the
security, the AIM Funds may value the security at its fair value as determined
in good faith by or under the supervision of the Board of Directors or Trustees
of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's
net asset value will be subject to the judgment of the Board of Directors or
Trustees or its designee instead of being determined by the market. Because some
of the AIM Funds may invest in securities that are primarily listed on foreign
exchanges, the value of those funds' shares may change on days when you will not
be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each day the
NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange and redemption orders at
the net asset value calculated after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
A- 7 MCF--05/99
<PAGE> 136
-------------------
THE AIM FUNDS
-------------------
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--05/99 A- 8
<PAGE> 137
----------------------
AIM SELECT GROWTH FUND
----------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, on the SEC's website
(http://www.sec.gov) or by sending a letter, including a duplicating fee, to the
SEC's Public Reference Section, Washington, DC 20549-6009. Please call the SEC
at 1-800-SEC-0330 for information about the Public Reference Room.
- -------------------------------------
AIM Select Growth Fund
SEC 1940 Act file number: 811-1540
- -------------------------------------
[AIM LOGO] www.aimfunds.com GRO-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 138
AIM VALUE FUND
------------------------------------------------------------------------
AIM Value Fund seeks 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 markets generally.
Income is a secondary objective.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information about Class A, B and C
shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
-- Registration Mark --
<PAGE> 139
--------------
AIM VALUE FUND
--------------
Table of Contents
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE
FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-7
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</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, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 140
--------------
AIM VALUE FUND
--------------
INVESTMENT OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's primary investment 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 markets generally.
Income is a secondary objective.
The fund also may invest in preferred stocks and debt instruments that have
prospects for growth of capital. The fund also may invest up to 25% of its total
assets in foreign securities.
The portfolio managers focus on undervalued equity securities of (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 that
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. The
portfolio managers consider whether to sell a particular security when they
believe the company no longer fits into any of the above categories.
In anticipation of or in response to adverse market conditions or for cash
management purposes, the fund may hold all or a portion of its assets in cash,
money market instruments, bonds or other debt securities. As a result, the fund
may not achieve its investment objectives.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. The prices of equity securities change in
response to many factors, including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions and market liquidity.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 141
--------------
AIM VALUE FUND
--------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
Total
Year Ended Annual
December 31 Return
- ----------- ------
<S> <C>
1989 ................................................ 31.54%
1990 ................................................ 1.88%
1991 ................................................ 43.45%
1992 ................................................ 16.39%
1993 ................................................ 18.71%
1994 ................................................ 3.28%
1995 ................................................ 34.85%
1996 ................................................ 14.52%
1997 ................................................ 23.95%
1998 ................................................ 32.76%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
27.35% (quarter ended December 31, 1998) and the lowest quarterly return was
- -20.11% (quarter ended September 30, 1990).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -----------------------------------------------------------------
(for the periods ended
December 31, 1998)
SINCE INCEPTION
1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 25.45% 19.92% 20.75% 18.69% 05/01/84
Class B 26.70% 20.11% -- 19.18% 10/18/93
Class C 30.72% -- -- 21.54% 08/04/97
S&P 500(1) 28.60% 24.08% 19.20% 18.44%(2) 04/30/84(2)
- -----------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
2
<PAGE> 142
--------------
AIM VALUE FUND
--------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- -------------------------------------------------------
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales
Charge (Load) Imposed
on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.63% 0.63% 0.63%
Distribution and/or
Service (12b-1) Fees 0.25 1.00 1.00
Other Expenses 0.14 0.19 0.19
Total Annual Fund
Operating Expenses 1.02 1.82 1.82
Fee Waiver(2) 0.02 0.02 0.02
Net Expenses 1.00 1.80 1.80
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) The investment advisor has contractually agreed to waive a portion of its
fees.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's gross operating expenses remain the same. To the extent fees are waived
or expenses are reimbursed, the expenses will be lower. Although your actual
returns and costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $646 $851 $1,072 $1,707
Class B 683 866 1,175 1,906
Class C 283 566 975 2,116
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $646 $851 $1,072 $1,707
Class B 183 566 975 1,906
Class C 183 566 975 2,116
- ----------------------------------------------
</TABLE>
3
<PAGE> 143
--------------
AIM VALUE FUND
--------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all
aspects of the fund's operations and provides investment advisory services to
the fund, including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 110
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of 0.61% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are
- - Joel E. Dobberpuhl, Senior Portfolio Manager, who has been responsible for the
fund since 1992 and has been associated with the advisor and/or its affiliates
since 1990.
- - Robert A. Shelton, Portfolio Manager, who has been responsible for the fund
since 1997 and has been associated with the advisor and/or its affiliates
since 1995. From 1991 to 1995, he was a financial analyst for CS First Boston.
- - Evan G. Harrel, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its affiliates
since 1998. From 1994 to 1998, he was Vice President of Van Kampen American
Capital Asset Management, Inc. and a portfolio manager of various growth and
equity funds.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Value Fund are subject to the maximum 5.50%
initial sales charge as listed under the heading "CATEGORY I Initial Sales
Charges" in the "Shareholder Information--Choosing a Share Class" section of
this prospectus. Purchases of Class B and Class C shares are subject to the
contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
4
<PAGE> 144
--------------
AIM VALUE FUND
--------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 32.42 $ 29.15 $ 26.81 $ 21.14 $ 20.82
Income from investment operations:
Net investment income 0.09 0.17 0.43(a) 0.14 0.16
Net gains on securities (both realized and
unrealized) 10.38 6.78 3.42 7.21 0.52
Total from investment operations 10.47 6.95 3.85 7.35 0.68
Less distributions:
Dividends from net investment income (0.09) (0.04) (0.41) (0.09) (0.16)
Distributions from net realized gains (2.61) (3.64) (1.10) (1.59) (0.20)
Total distributions (2.70) (3.68) (1.51) (1.68) (0.36)
Net asset value, end of period $ 40.19 $ 32.42 $ 29.15 $ 26.81 $ 21.14
Total return(b) 32.76% 23.95% 14.52% 34.85% 3.28%
- --------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $8,823,094 $6,745,253 $5,100,061 $3,408,952 $1,358,725
Ratio of expenses to average net assets(c) 1.00%(d) 1.04% 1.11% 1.12% 0.98%
Ratio of net investment income to average net
assets(e) 0.26%(d) 0.57% 1.65% 0.74% 0.92%
Portfolio turnover rate 113% 137% 126% 151% 127%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.02%, 1.06%, 1.13% and 1.13% for 1998-1995, respectively.
(d) Ratios are based on average net assets of $7,602,379,116.
(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 0.24%, 0.55%, 1.63% and 0.73% for 1998-1995,
respectively.
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 31.89 $ 28.92 $ 26.65 $ 21.13 $ 20.82
Income from investment operations:
Net investment income (loss) (0.18) (0.07) 0.20(a) (0.01) --
Net gains (losses) on securities (both
realized and unrealized) 10.14 6.68 3.38 7.12 0.51
Total from investment operations 9.96 6.61 3.58 7.11 0.51
Less distributions:
Dividends from net investment income -- -- (0.21) -- --
Distributions from net realized gains (2.61) (3.64) (1.10) (1.59) (0.20)
Total distributions (2.61) (3.64) (1.31) (1.59) (0.20)
Net asset value, end of period $ 39.24 $ 31.89 $ 28.92 $ 26.65 $ 21.13
Total return(b) 31.70% 22.96% 13.57% 33.73% 2.46%
- -------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $9,680,068 $6,831,796 $4,875,933 $2,860,531 $ 680,119
Ratio of expenses to average net assets(c) 1.80%(d) 1.85% 1.94% 1.94% 1.90%
Ratio of net investment income (loss) to average
net assets(e) (0.54)%(d) (0.24)% 0.82% (0.08)% 0.00%
Portfolio turnover rate 113% 137% 126% 151% 127%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.82%, 1.87%, 1.96% and 1.96% for 1998-1995, respectively.
(d) Ratios are based on average net assets of $7,981,928,079.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (0.56)%, (0.26)%, 0.81% and (0.09)% for 1998-1995,
respectively.
5
<PAGE> 145
--------------
AIM VALUE FUND
--------------
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------
FOR THE PERIOD
AUGUST 4,
YEAR ENDED THROUGH
DECEMBER 31, 1998 DECEMBER 31, 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 31.90 $ 35.60
Income from investment operations:
Net investment income (loss) (0.19)(a) (0.01)
Net gains (losses) on securities (both realized and unrealized) 10.16 (0.05)
Total from investment operations 9.97 (0.06)
Less distributions:
Dividends from net investment income -- --
Distributions from net realized gains (2.61) (3.64)
Total distributions (2.61) (3.64)
Net asset value, end of period $ 39.26 $ 31.90
Total return(b) 31.72% (0.08)%
- --------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $212,095 $ 32,900
Ratio of expenses to average net assets(c) 1.80%(d) 1.84%(f)
Ratio of net investment income (loss) to average
net assets(e) (0.54)%(d) (0.23)%(f)
Portfolio turnover rate 113% 137%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.82% and 1.86% (annualized) for 1998-1997, respectively.
(d) Ratios are based on average net assets of $111,442,755.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (0.56)% and (0.25)% (annualized) for 1998-1997,
respectively.
(f) Annualized.
6
<PAGE> 146
-------------------
THE AIM FUNDS
-------------------
Shareholder Information
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
A- 1 MCF--05/99
<PAGE> 147
-------------------
THE AIM FUNDS
-------------------
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
<S> <C> <C>
- - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - -
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- ----------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a
MCF--05/99 A- 2
<PAGE> 148
-------------------
THE AIM FUNDS
-------------------
13-month period. The amount you agree to purchase determines the initial sales
charge you pay. If the full face amount of the LOI is not invested by the end of
the 13-month period, your account will be adjusted to the higher initial sales
charge level for the amount actually invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 25 50
All other accounts 50 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A- 3 MCF--05/99
<PAGE> 149
-------------------
THE AIM FUNDS
-------------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. We may modify, suspend or terminate the
Program at any time on 60 days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through
tax-sheltered retirement plans made available to corporations, individuals and
employees of non-profit organizations and public schools. A plan document must
be adopted to establish a retirement plan. You may use AIM Funds-sponsored
retirement plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans,
401(k) plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit
Sharing plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ACQUIRED
BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--05/99 A- 4
<PAGE> 150
-------------------
THE AIM FUNDS
-------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last 30 days; (3)
you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not redeem by telephone. The transfer agent must
receive your call during the hours the NYSE is open for
business in order to effect the redemption at that day's
closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of trading
on the New York Stock Exchange (NYSE), we generally will transmit payment on the
next business day.
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
A- 5 MCF--05/99
<PAGE> 151
-------------------
THE AIM FUNDS
-------------------
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, at its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You also may exchange AIM Cash Reserve Shares of
AIM Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
may be required to pay an initial sales charge when exchanging from a Fund with
a lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
You also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for
Advisor Class shares, but only if you acquired the AIM Cash Reserve Shares
through an exchange from Advisor Class shares.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
MCF--05/99 A- 6
<PAGE> 152
-------------------
THE AIM FUNDS
-------------------
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
EACH AIM FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET-TIMING ACTIVITY.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. 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.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the New
York Stock Exchange (NYSE), events occur that materially affect the value of the
security, the AIM Funds may value the security at its fair value as determined
in good faith by or under the supervision of the Board of Directors or Trustees
of the AIM Fund. The effect of using fair value pricing is that an AIM Fund's
net asset value will be subject to the judgment of the Board of Directors or
Trustees or its designee instead of being determined by the market. Because some
of the AIM Funds may invest in securities that are primarily listed on foreign
exchanges, the value of those funds' shares may change on days when you will not
be able to purchase or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each day the
NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange and redemption orders at
the net asset value calculated after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
A- 7 MCF--05/99
<PAGE> 153
-------------------
THE AIM FUNDS
-------------------
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--05/99 A- 8
<PAGE> 154
--------------
AIM VALUE FUND
--------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, on the SEC's website
(http://www.sec.gov) or by sending a letter, including a duplicating fee, to the
SEC's Public Reference Section, Washington, DC 20549-6009. Please call the SEC
at 1-800-SEC-0330 for information about the Public Reference Room.
- -----------------------------------
AIM Value Fund
SEC 1940 Act file number: 811-1540
- -----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com VAL-PRO-1 INVEST WITH DISCIPLINE
-- Registered Trademark --
<PAGE> 155
STATEMENT OF
ADDITIONAL INFORMATION
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
(SERIES PORTFOLIOS OF
AIM FUNDS GROUP)
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 3, 1999, RELATING TO
THE AIM BALANCED FUND PROSPECTUS DATED MAY 3, 1999,
THE AIM GLOBAL UTILITIES FUND PROSPECTUS DATED MAY 3, 1999,
THE AIM HIGH YIELD FUND PROSPECTUS DATED MAY 3, 1999,
THE AIM INCOME FUND PROSPECTUS DATED MAY 3, 1999,
THE INTERMEDIATE GOVERNMENT FUND PROSPECTUS DATED MAY 3, 1999,
THE AIM MONEY MARKET FUND PROSPECTUS DATED MAY 3, 1999,
THE AIM MUNICIPAL BOND FUND PROSPECTUS DATED MAY 3, 1999,
THE AIM SELECT GROWTH FUND PROSPECTUS DATED MAY 3, 1999,
AND THE AIM VALUE FUND PROSPECTUS DATED MAY 3, 1999
<PAGE> 156
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INTRODUCTION......................................................................................................1
GENERAL INFORMATION ABOUT THE TRUST...............................................................................1
The Trust and its Shares.................................................................................1
PERFORMANCE INFORMATION...........................................................................................3
Total Return Quotations..................................................................................6
Yield Quotations.........................................................................................7
PORTFOLIO TRANSACTIONS AND BROKERAGE..............................................................................9
General Brokerage Policy.................................................................................9
Allocation of Portfolio Transactions....................................................................10
Section 28(e) Standards.................................................................................10
Transactions with Regular Brokers.......................................................................11
Brokerage Commissions Paid..............................................................................11
Portfolio Turnover: (All Funds except AIM Money Market Fund)...........................................12
INVESTMENT STRATEGIES AND RISKS..................................................................................12
All Funds except AIM Money Market Fund..................................................................12
AIM Money Market Fund...................................................................................13
AIM Municipal Bond Fund.................................................................................14
AIM High Yield Fund.....................................................................................15
AIM Global Utilities Fund...............................................................................15
AIM Balanced Fund.......................................................................................16
Risk Factors Regarding Non-Investment Grade Debt Securities.............................................17
Real Estate Investment Trusts ("REITs").................................................................17
Lending Portfolio Securities: All Funds................................................................18
Short Sales: AIM Balanced Fund and AIM High Yield Fund.................................................18
Delayed Delivery Agreements: All Funds.................................................................19
When-Issued Securities: All Funds......................................................................19
Investments in Foreign Securities: All Funds (except AIM Intermediate Government Fund and AIM
Municipal Bond Fund)...........................................................................20
Risk Factors Regarding Foreign Securities...............................................................20
Illiquid Securities.....................................................................................21
Rule 144A Securities....................................................................................21
Repurchase Agreements...................................................................................22
Reverse Repurchase Agreements...........................................................................22
Dollar Roll Transactions: AIM Income Fund and AIM Intermediate Government Fund..........................22
Borrowing...............................................................................................23
Investment in Other Investment Companies................................................................23
OPTIONS, FUTURES AND CURRENCY STRATEGIES.........................................................................23
Introduction............................................................................................23
General Risks of Options, Futures and Currency Strategies...............................................23
Cover ...............................................................................................24
Writing Call Options....................................................................................24
Writing Put Options.....................................................................................25
Purchasing Put Options..................................................................................25
Purchasing Call Options.................................................................................25
Index Options...........................................................................................26
</TABLE>
i
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<TABLE>
<S> <C>
Limitations on Options..................................................................................27
Interest Rate, Currency and Stock Index Futures Contracts...............................................27
Options on Futures Contracts............................................................................28
Forward Contracts.......................................................................................28
Limitations on Use of Futures, Options on Futures and Certain Options on Currencies.....................28
HEDGING AND OTHER INVESTMENT TECHNIQUES..........................................................................29
Covered Call Options....................................................................................29
Futures Contracts.......................................................................................29
Options on Futures Contracts............................................................................30
Risks as to Futures Contracts and Related Options.......................................................30
Foreign Exchange Transactions: AIM Income Fund and AIM High Yield Fund.................................31
INVESTMENT RESTRICTIONS..........................................................................................31
AIM Balanced Fund.......................................................................................32
AIM Global Utilities Fund...............................................................................32
AIM High Yield Fund.....................................................................................33
AIM Income Fund.........................................................................................34
AIM Intermediate Government Fund........................................................................35
AIM Money Market Fund...................................................................................36
AIM Municipal Bond Fund.................................................................................37
AIM Select Growth Fund..................................................................................38
AIM Value Fund..........................................................................................38
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES..............................................................39
MANAGEMENT.......................................................................................................46
Trustees and Officers...................................................................................46
INVESTMENT ADVISORY AND OTHER SERVICES...........................................................................51
THE DISTRIBUTION PLANS...........................................................................................55
THE DISTRIBUTOR..................................................................................................60
SALES CHARGES AND DEALER CONCESSIONS.............................................................................62
REDUCTIONS IN INITIAL SALES CHARGES..............................................................................64
Contingent Deferred Sales Charge Exceptions.............................................................68
HOW TO PURCHASE AND REDEEM SHARES................................................................................70
AIM High Yield Fund.....................................................................................71
Backup Withholding......................................................................................71
NET ASSET VALUE DETERMINATION....................................................................................73
TAX MATTERS......................................................................................................74
DESCRIPTION OF MONEY MARKET INSTRUMENTS..........................................................................77
SHAREHOLDER INFORMATION..........................................................................................78
MISCELLANEOUS INFORMATION........................................................................................80
Charges for Certain Account Information.................................................................80
</TABLE>
ii
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<TABLE>
<S> <C>
Audit Reports...........................................................................................81
Legal Matters...........................................................................................81
Custodians and Transfer Agent...........................................................................81
DESCRIPTION OF OBLIGATIONS ISSUED OR GUARANTEED
BY U.S. GOVERNMENT AGENCIES OR INSTRUMENTALITIES........................................................81
RATINGS OF SECURITIES............................................................................................84
FINANCIAL STATEMENTS.............................................................................................FS
</TABLE>
iii
<PAGE> 159
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. The information for AIM
BALANCED FUND is included in a Prospectus dated May 3, 1999. The information for
AIM GLOBAL UTILITIES FUND is included in a Prospectus dated May 3, 1999. The
information for AIM HIGH YIELD FUND is included in a Prospectus dated May 3,
1999. The information for AIM INCOME FUND is included in a Prospectus dated May
3, 1999. The information for AIM INTERMEDIATE GOVERNMENT FUND is included in a
Prospectus dated May 3, 1999. The information for AIM MONEY MARKET FUND is
included in a Prospectuses dated May 3, 1999. The information for AIM MUNICIPAL
BOND FUND is included in a Prospectus dated May 3, 1999. The information for AIM
SELECT GROWTH FUND is included in a Prospectus dated May 3, 1999. The
information for AIM VALUE FUND is included in a Prospectus dated May 3, 1999.
Copies of each 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 Prospectuses, and in order to avoid repetition, reference
will be made herein to sections of the Prospectuses. Additionally, the
Prospectuses 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
Prospectuses 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
which is registered under the Investment Company Act of 1940, as amended (the
"1940 Act") as a diversified open-end series management investment company. The
Trust currently is organized under an Amended and Restated Agreement and
Declaration of Trust, dated November 5, 1998, (the "Trust Agreement"). Each Fund
is a series of shares of the Trust. The Trust currently consists of nine
separate portfolios: 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 a
"Fund" and collectively, the "Funds"). 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 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
1
<PAGE> 160
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
(subject, in certain circumstances, to a contingent deferred sales charge) at
the option of the shareholder or at the option of the Trust in certain
circumstances. For information concerning the methods of redemption, investors
should consult the Prospectuses under the caption "Redeeming 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 as follows: Class A shares, Class B shares and Class C shares. AIM MONEY
MARKET FUND offers three separate classes of 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 Prospectuses,
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
allocable to such class available for distribution after satisfaction of
outstanding liabilities of the Fund allocable to such class.
Class A shares (except for AIM MONEY MARKET FUND), 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 shares and Class B
shareholders of a given Fund (AIM Cash Reserve Shares and Class B shares of AIM
MONEY MARKET FUND) must approve any material increase in fees payable with
respect to the Class A shares of such Fund (AIM Cash Reserve Shares of AIM MONEY
MARKET FUND) 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.
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
2
<PAGE> 161
or subscription rights, and are fully transferable. Other than the automatic
conversion of Class B shares to Class A shares (Class B shares to AIM Cash
Reserve Shares of AIM MONEY MARKET FUND), 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 at least
two-thirds 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, shareholders of a Delaware business trust shall be
entitled to the same limitations of liability extended to shareholders of
private for-profit corporations, however, there is a remote possibility that
shareholders could, under certain circumstances, be held liable for the
obligations of the Trust 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. 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 the trustees to all parties, and each
party thereto must expressly waive all rights of action directly against
shareholders of the Trust. The Trust Agreement provides for indemnification out
of the property of a Fund for all losses and expenses of any shareholder of such
Fund held liable on account of being or having been a shareholder. Thus, the
risk of a shareholder incurring financial loss due to shareholder liability is
limited to circumstances in which a Fund would be unable to meet its obligations
and wherein the complaining party was held not to be bound by the disclaimer.
The Trust Agreement further provides that the trustees and officers will
not be liable for any act, omission or obligation of the Trust or any Trustee or
officer. However, nothing in the Trust Agreement protects a trustee or officer
against any liability to the Trust or to the shareholders to which a trustee or
officer would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his office with the Trust. The Trust Agreement provides for indemnification by
the Trust of the trustees, the officers and employees or agents of the Trust, if
it is determined that such person acted in good faith and reasonably believed:
(1) in the case of conduct in his official capacity for the Trust, that his
conduct was in the Trust's best interests, (2) in all other cases, that his
conduct was at least not opposed to the Trust's best interests and (3) in a
criminal proceeding, that he had no reason to believe that his conduct was
unlawful. Such person may not be indemnified against any liability to the Trust
or to the Trust's shareholders to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. The Trust Agreement also
authorizes the purchase of liability insurance on behalf of trustees and
officers.
PERFORMANCE INFORMATION
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. 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
3
<PAGE> 162
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
below 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 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, A I M Advisors, Inc. ("AIM") or its affiliates may
waive all or a portion of their fees and/or assume certain expenses of any Fund.
Voluntary fee waivers or reductions or commitments to assume expenses may be
rescinded at any time without further notice to investors. During periods of
voluntary fee waivers or reductions or commitments to assume expenses, AIM will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions or reimbursement of expenses set
forth in the Fee Table in a Prospectus may not be terminated or amended to the
Funds' detriment during the period stated in the agreement between AIM and the
Fund. Fee waivers or reductions or commitments to reduce expenses 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 indicative 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 and
market conditions. 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 any Fund.
Total return and yield figures for the Funds are neither fixed nor
guaranteed. 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:
4
<PAGE> 163
<TABLE>
<S> <C> <C>
Advertising Age Forbes Nation's Business
Barron's Fortune New York Times
Best's Review Hartford Courant Pension World
Broker World Inc. Pensions & Investments
Business Week Institutional Investor Personal Investor
Changing Times Insurance Forum Philadelphia Inquirer
Christian Science Monitor Insurance Week USA Today
Consumer Reports Investor's Daily U.S. News & World Report
Economist Journal of the American Wall Street Journal
FACS of the Week Society of CLU & ChFC Washington Post
Financial Planning Kiplinger Letter CNN
Financial Product News Money CNBC
Financial Services Week Mutual Fund Forecaster PBS
Financial World
</TABLE>
Each Fund may also compare its performance to performance data of
similar mutual funds as published by the following services:
Bank Rate Monitor Stanger
Donoghue's Weisenberger
Mutual Fund Values (Morningstar) Lipper, Inc.
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 and inflation.
5
<PAGE> 164
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 is as follows:
(n)
P(1+T) =ERV
Where P = a hypothetical initial payment of $1,000.
T = average annual total return (assuming the applicable
maximum sales load is deducted at the beginning of the
1, 5, or 10 year periods).
(n) = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the 1, 5, or 10 year periods (or
fractional portion of such period).
The average annual total returns for each of the named Funds, with
respect to its Class A shares, for the one, five and ten year periods (or since
inception, if shorter) ended December 31, 1998, were as follows:
<TABLE>
<CAPTION>
PERIODS ENDED DECEMBER 31, 1998
----------------------------------------
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS
-------------- ------- ------- --------
<S> <C> <C> <C>
AIM Balanced Fund.............................................. 7.10% 15.20% 15.01%
AIM Global Utilities Fund...................................... 9.63% 11.83% 13.22%
AIM High Yield Fund............................................ -9.63% 6.17% 9.50%
AIM Income Fund................................................ -0.07% 6.62% 9.00%
AIM Intermediate Government Fund............................... 3.05% 5.25% 7.29%
AIM Municipal Bond Fund........................................ 0.23% 3.98% 6.84%
AIM Select Growth Fund......................................... 20.12% 16.79% 14.24%
AIM Value Fund................................................. 25.45% 19.92% 20.75%
</TABLE>
The average annual total returns for each of the named Funds, with
respect to its Class B shares, for the periods ended December 31, 1998, were as
follows:
<TABLE>
<CAPTION>
PERIODS ENDED DECEMBER 31, 1998
----------------------------------------
CLASS B SHARES: SINCE
-------------- -----
1 YEAR 5 YEARS INCEPTION*
------- ------- ----------
<S> <C> <C> <C>
AIM Balanced Fund.............................................. 6.53% 15.15% 13.90%
AIM Global Utilities Fund...................................... 10.14% 11.97% 10.16%
AIM High Yield Fund............................................ -10.22% 6.11% 6.63%
AIM Income Fund................................................ -0.69% 6.48% 5.77%
AIM Intermediate Government Fund............................... 2.40% 5.14% 4.88%
AIM Municipal Bond Fund........................................ -0.52% 3.85% 4.14%
AIM Select Growth Fund......................................... 21.13% 16.87% 15.64%
AIM Value Fund................................................. 26.70% 20.11% 19.18%
</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.
6
<PAGE> 165
The average annual total returns for AIM MONEY MARKET FUND, with
respect to its Class B shares and AIM Cash Reserve Shares, for the year ended
December 31, 1998 were -1.22% and 4.62%, respectively; and since inception
(October 16, 1993) were 3.38% and 4.35%, respectively.
Standard total return quotes may be accompanied by total return figures
calculated by alternative methods. For example, average annual total return may
be calculated without assuming payment of the full sales load according to the
following formula:
(n)
P(1+U) =ERV
Where P = a hypothetical initial payment of $1,000.
U = average annual total return assuming payment of only
a stated portion of, or none of, the applicable maximum
sales load at the beginning of the stated period.
(n) = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
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.
The average annual total returns for each of the Funds, with respect to its
Class C shares, for the periods ended December 31, 1998, were as follows:
<TABLE>
<CAPTION>
CLASS C SHARES: PERIODS ENDED DECEMBER 31, 1998
--------------- -------------------------------
1 YEAR SINCE INCEPTION*
------ ----------------
<S> <C> <C>
AIM Balanced Fund 10.60% 11.67%
AIM Global Utilities Fund 14.09% 18.04%
AIM High Yield Fund -6.78% -1.21%
AIM Income Fund 3.23% 6.57%
AIM Intermediate Government Fund 6.31% 7.84%
AIM Money Market Fund 2.78% 3.82%
AIM Municipal Bond Fund 3.36% 4.80%
AIM Select Growth Fund 25.07% 14.63%
AIM Value Fund 30.72% 21.54%
</TABLE>
* The inception date of the Class C shares of the Funds was August 4, 1997.
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 Prospectuses, is as follows:
7
<PAGE> 166
(6)
YIELD = 2[((a-b)/(c x d) + 1) -1]
Where a = dividends and interest earned during a stated
30-day period. For purposes of this calculation,
dividends are accrued rather than recorded on the
ex-dividend date. Interest earned under this formula
must generally be calculated based on the yield to
maturity of each obligation (or, if more appropriate,
based on yield to call date).
b = expenses accrued during period (net of reimbursement).
c = the average daily number of shares outstanding during
the period.
d = the maximum offering price per share on the last day
of the period.
Tax-equivalent yield for AIM MUNICIPAL BOND FUND will be calculated by
dividing that portion of the yield of the Fund (as determined above) which is
tax-exempt by one minus a stated income tax rate and adding the product to that
portion of the yield that is not tax-exempt.
The yields for each of the named Funds were as follows:
<TABLE>
<CAPTION>
30 DAYS ENDED DECEMBER 31, 1998
-------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
-------------- -------------- --------------
<S> <C> <C> <C>
AIM Balanced Fund........................... 2.33% 1.68% 1.68%
AIM Global Utilities Fund................... 2.01% 1.39% 1.39%
AIM High Yield Fund......................... 10.92%* 10.70%* 10.70%*
AIM Income Fund............................. 6.49% 6.06% 6.06%
AIM Intermediate Government Fund............ 4.81% 4.30% 4.30%
AIM Municipal Bond Fund..................... 3.58%** 2.99%** 2.99%**
</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 5.93%, 4.95% and 4.95%, respectively.
The standard formula for calculating annualized yield for AIM MONEY
MARKET FUND is as follows:
Y = V(1) - V(0) x 365
----------- ---
V(0) 7
Where Y = annualized yield.
V(0) = the value of a hypothetical pre-existing account in
the Fund having a balance of one share at the
beginning of a stated seven-day period.
V(1) = the value of such an account at the end of the
stated period.
The annualized yield for each of the Class B, Class C shares and AIM
Cash Reserve Shares of AIM MONEY MARKET FUND for the 7 days ended December 31,
1998, was 3.32%, 3.31% and 4.07%, respectively.
The standard formula for calculating effective annualized yield for AIM
MONEY MARKET FUND is as follows:
(365/7)
EY = (Y+1) -1
Where EY = effective annualized yield.
Y = annualized yield, as determined above.
8
<PAGE> 167
The effective annualized yield for each of the Class B, Class C shares
and AIM Cash Reserve Shares of AIM MONEY MARKET FUND for the 7 days ended
December 31, 1998, was 3.37%, 3.37% and 4.16%, respectively.
For the purpose of determining the annualized yield and effective
annualized yield, the net change in the value of the hypothetical AIM MONEY
MARKET FUND account reflects the value of additional shares purchased with
dividends from the original shares and any such additional shares, and all fees
charged, other than non-recurring account or sales charges, to all shareholder
accounts in proportion to the length of the base period and the Fund's average
account size, but does not include realized gains and losses or unrealized
appreciation and depreciation or income other than investment income.
PORTFOLIO TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
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
9
<PAGE> 168
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 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
10
<PAGE> 169
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, in
written form or on computer software. 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.
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, 1998, 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 Global Utilities Fund $ 10,092,144 --
AIM Income Fund 16,570,735 --
AIM Money Market Fund 300,000,000 --
AIM Select Growth Fund 35,047,833 --
AIM Value Fund 400,000,000 --
</TABLE>
As of December 31, 1998, AIM BALANCED FUND and AIM VALUE FUND held an
amount of common stock issued by Merrill Lynch & Co. Inc. having a market value
of $5,340,000, and $40,016,625.
BROKERAGE COMMISSIONS PAID
For the year ended December 31, 1998, 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: $58,142,369, $5,988,425, $36,056,382 and
$2,328,185,251, respectively. For the same
11
<PAGE> 170
period, AIM BALANCED FUND, AIM GLOBAL UTILITIES FUND, AIM SELECT GROWTH FUND,
and AIM VALUE FUND paid the following in related brokerage commissions:
$101,371, $12,534, $56,425 and $3,368,994, 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, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
FUND 1998 1997 1996
---- ------------ ------------ ------------
(000) (000) (000)
<S> <C> <C> <C>
AIM Balanced Fund.............................. $ 1,328 $ 726 $ 357
AIM Global Utilities Fund...................... 209 150 275
AIM High Yield Fund............................ 14 102 87
AIM Income Fund................................ 12 28 11
AIM Intermediate Government Fund............... -0- -0- -0-
AIM Municipal Bond Fund........................ -0- -0- -0-
AIM Select Growth Fund......................... 906 1,101 929
AIM Value Fund................................. 34,489 35,473 29,515
</TABLE>
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 of the Fund's Prospectus. 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 "Tax Matters."
INVESTMENT STRATEGIES AND RISKS
The following discussion of investment policies supplements the
discussion of the investment objectives and policies set forth in the
Prospectuses under the headings "Investment Objectives and Strategies" and
"Principal Risks of Investing in the Fund."
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.
A portion of each Fund's assets may be held in cash and high quality,
short-term money market instruments such as certificates of deposit, commercial
paper, bankers' acceptances, short-term U.S. Government obligations, taxable
municipal securities, master notes, and repurchase agreements, pending
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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. 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. 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 FNMA). In the case of
securities not backed by the full faith and credit of the United States, the
Funds must look principally to the agency issuing or guaranteeing the obligation
for ultimate repayment and may not be able to assert a claim against the United
States itself in the event the agency or instrumentality does not meet its
commitments.
AIM MONEY MARKET FUND
The types of money market instruments in which the Fund presently invests
are listed under "Description of Money Market Instruments" in 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 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 for short-term debt obligations by two nationally recognized
statistical rating organizations ("NRSROs"), or, if only rated by one NRSRO, are
rated in the highest rating category for short-term debt obligations 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, as well
as securities issued by a registered investment company that is a money market
fund and U.S. government securities.
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 must 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 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.
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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
For purposes of the Fund's investment policies and limitations, the term
"municipal bonds" includes 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 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."
At least 80% of the Fund's total assets will be invested in municipal
securities rated within the four highest rating categories of Moody's Investors
Service, Inc. ("Moody's"), Standard & Poor's Ratings Services ("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.
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.
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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 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.
The Fund will not acquire equity securities, other than preferred stocks,
except when (a) attached to or included in a unit with income-generating
securities that otherwise would be attractive to the Fund; (b) acquired through
the exercise of equity features accompanying convertible securities held by the
Fund, such as conversion or exchange privileges or warrants for the acquisition
of stock or equity interests of the same or a different issuer; or (c) in the
case of an exchange offer whereby the equity security would be acquired with the
intention of exchanging it for a debt security issued on a "when-issued" basis.
The Fund does not expect to invest more than 5% of the value of its total assets
in issues, other than preferred stocks, of the type discussed in this paragraph.
AIM GLOBAL UTILITIES FUND
DESCRIPTION OF THE UTILITIES INDUSTRY
Electric Utility Industry. Electric utilities are heavily regulated. Local
rates are subject to the review of state commissions, and sales either between
companies or that cross state lines are subject to review by the Federal Energy
Regulatory Commission. The industry is also subject to regulation by the SEC
under the 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.
Electric utilities and their predominant business, electric energy
generation, transmission and distribution, are undergoing fundamental changes
that may materially affect their financial condition. These changes are
attributable to advancements in technology, as well as deregulation of the
retail sale of electric generation and other aspects of utilities' core
businesses. For example, Federal law and regulations have been amended to
provide for open transmission system access and competitive wholesale sales of
electric generation, and various states are considering, or have adopted
(including California, Illinois, Massachusetts, New Hampshire, New York, and
Pennsylvania), new regulatory structures to allow access by some or all
customers to energy suppliers in addition to the local utility.
Competition in electric generation is expected to create new uncertainties
in the electric utility industry. These uncertainties include future prices of
electricity in both the wholesale and retail markets, potential changes in the
composition of utilities' customer base and supply and demand volatility.
Specifically, it is expected that state deregulation of electric generating
operations will result in price pressures that will reduce the future revenues
of utilities in such states. In addition, to the extent a utility loses retail
customers, it may
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have to sell generation previously used to serve retail customers in the
wholesale market. Since margins in the wholesale market are currently lower than
in the retail market, this change could further reduce revenues and adversely
affect the profit margins of affected utilities.
Furthermore, the ability of utilities to compete in the retail electric
generation market may be compromised by the costs of earlier investments in
generation facilities such as nuclear power plants. While the trend in this area
has been to allow utilities to recover such costs through the imposition of
surcharges on customers' bills, not every state that deregulates its retail
electric generation market may do so. It is also unknown at this time whether
the existing state statutory schemes designed to address the loss of investments
suffered by deregulated utilities will adequately compensate such utilities or
place them in a position to effectively compete with new market entrants who are
not encumbered by these investments.
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.
In addition, the gas industry is continuing to undergo structural changes
in response to federal policies designed to increase competition. These policies
have required interstate gas pipelines to unbundle their gas sales service from
other regulated tariff services, such as transportation and storage. There are
also initiatives in several states, such as Pennsylvania, to deregulate the gas
industry.
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.
AIM BALANCED FUND
Most debt securities purchased by the Fund will be rated Baa or better by
Moody's or BBB or better by 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
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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.
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, AIM SELECT GROWTH 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, environmental liability risks, increases in property taxes and
operating expenses,
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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.
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.
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
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reduced will depend upon the amount of the security sold short relative to the
amount a Fund owns, either directly or indirectly, and, in the case where the
Fund owns convertible securities, changes in the conversion premium. In
determining the number of shares to be sold short against a Fund's position in a
convertible security, the anticipated fluctuation in the conversion premium is
considered. A Fund may also make short sales to generate additional income from
the investment of the cash proceeds of short sales.
DELAYED DELIVERY AGREEMENTS: ALL FUNDS
Each Fund may purchase or sell securities on a delayed delivery basis.
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. AIM INTERMEDIATE GOVERNMENT FUND also may engage in buy/sellback
transactions (a form of delayed delivery agreement). In a buy/sellback
transaction, the Fund enters a trade to sell securities at one price and
simultaneously enters a trade to buy the same securities at another price for
settlement at a future date. 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
Each Fund may purchase securities 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 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
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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).
Investment in securities on a when-issued or delayed delivery basis may
increase a Fund's exposure to market fluctuation and may increase the
possibility that the Fund will incur short-term gains subject to federal
taxation or short-term losses if the Fund must engage in portfolio transactions
in order to honor a when-issued or delayed delivery commitment. In a delayed
delivery transaction, the Fund relies on the other party to complete the
transaction. If the transaction is not completed, the Fund may miss a price or
yield considered to be advantageous. A Fund will employ techniques designed to
reduce such risks. If a Fund purchases a when-issued security, the Fund's
custodian bank will segregate 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.
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.
RISK FACTORS REGARDING FOREIGN SECURITIES
Investments by a Fund in foreign securities, whether denominated in U.S.
dollars or foreign currencies, may entail all of the risks set forth below.
Investments by a Fund in ADRs, EDRs or similar securities also may entail some
or all of the risks described below.
Currency Risk. The value of the Funds' foreign investments will be affected
by changes in currency exchange rates. The U.S. dollar value of a foreign
security decreases when the value of the U.S. dollar rises against the foreign
currency in which the security is denominated, and increases when the value of
the U.S. dollar falls against such currency.
Political and Economic Risk. The economies of many of the countries in
which the Funds may invest may not be as developed as the United States' economy
and may be subject to significantly different forces. Political or social
instability, expropriation or confiscatory taxation, and limitations on the
removal of funds or other assets could also adversely affect the value of the
Funds' investments.
Regulatory Risk. Foreign companies are not registered with the Securities
and Exchange Commission and are generally not subject to the regulatory controls
imposed on United States issuers and, as a consequence, there is generally less
publicly available information about foreign securities than is available about
domestic securities. Foreign companies are not subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic companies.
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Income from foreign securities owned by the Funds may be reduced by a
withholding tax at the source, which tax would reduce dividend income payable to
the Fund's shareholders.
Market Risk. The securities markets in many of the countries in which the
Funds invest will have substantially less trading volume than the major United
States markets. As a result, the securities of some foreign companies may be
less liquid and experience more price volatility than comparable domestic
securities. Increased custodian costs as well as administrative costs (such as
the need to use foreign custodians) may be associated with the maintenance of
assets in foreign jurisdictions. There is generally less government regulation
and supervision of foreign stock exchanges, brokers and issuers which may make
it difficult to enforce contractual obligations. In addition, transaction costs
in foreign securities markets are likely to be higher, since brokerage
commission rates in foreign countries are likely to be higher than in the United
States.
On January 1, 1999, certain members of the European Economic and Monetary
Union ("EMU"), namely Austria, Belgium, Finland, France, Germany, Ireland,
Italy, Luxembourg, the Netherlands, Portugal, and Spain established a common
European currency known as the "euro" and each member's local currency became a
denomination of the euro. It is anticipated that each participating country will
replace its local currency with the euro on July 1, 2002. Any other European
country that is a member of the European Union and satisfies the criteria for
participation in the EMU may elect to participate in the EMU and may supplement
its existing currency with the euro. The anticipated replacement of existing
currencies with the euro on July 1, 2002 could cause market disruptions before
or after July 1, 2002 and could adversely affect the value of securities held by
a Fund.
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 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.
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
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amount of each Fund's investments in illiquid securities if qualified
institutional buyers are unwilling to purchase such securities.
REPURCHASE AGREEMENTS
Each of the Funds may engage in repurchase agreement transactions involving
the types of securities in which it is permitted to invest. Repurchase
agreements are agreements under which the purchaser (for example, a Fund)
acquires ownership of a security and the seller agrees, at the time of the sale,
to repurchase the security at a mutually agreed upon time and price, thereby
determining the yield during the purchaser's holding period. A Fund may,
however, enter into a "continuing contract" or "open" repurchase agreement under
which the seller is under a continuing obligation to repurchase the underlying
obligation from the Fund on demand and the effective interest rate is negotiated
on a daily basis. In general, a Fund will enter into repurchase agreements only
with domestic banks with total assets of at least $1 billion or with primary
dealers in U.S. Government securities; however, total assets will not be the
sole determinative factor, and a Fund may enter into repurchase agreements with
other institutions which the Board of Trustees believes present minimal credit
risks. Nevertheless, if the seller of a repurchase agreement fails to repurchase
the debt instrument in accordance with the terms of the agreement, the Fund
which entered into the repurchase agreement may incur a loss to the extent that
the proceeds it realizes on the sale of the underlying obligation are less than
the repurchase price. Repurchase agreements are considered to be loans by a Fund
under the 1940 Act.
Rule 2a-7 under the 1940 Act provides that, for purposes of determining the
percentage of the total assets of AIM MONEY MARKET FUND 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 (as defined in Rule 2a-7), 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
Reverse repurchase agreements are 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.
DOLLAR ROLL TRANSACTIONS: AIM INCOME FUND AND AIM INTERMEDIATE GOVERNMENT FUND
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.
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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.
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.
OPTIONS, FUTURES AND CURRENCY STRATEGIES
The following discussion on options, futures and currency strategies
applies to AIM BALANCED FUND, AIM GLOBAL UTILITIES FUND, AIM SELECT GROWTH FUND
and AIM VALUE FUND.
INTRODUCTION
The Funds may each use forward contracts, futures contracts, options on
securities, options on indices, options on currencies, and options on futures
contracts to attempt to hedge against the overall level of investment and
currency risk normally associated with each Fund's investments. These
instruments are often referred to as "derivatives," which may be defined as
financial instruments whose performance is derived, at least in part, from the
performance of another asset (such as a security, currency or an index of
securities).
GENERAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use by the Funds of options, futures contracts and forward currency
contracts involves special considerations and risks, as described below. Risks
pertaining to particular strategies are described in the sections that follow.
(1) Successful use of hedging transactions depends upon AIM's ability to
correctly predict the direction of changes in the value of the applicable
markets and securities, contracts and/or currencies. While AIM is experienced in
the use of these instruments, there can be no assurance that any particular
hedging strategy will succeed.
(2) There might be imperfect correlation, or even no correlation, between
the price movements of an instrument (such as an option contract) and the price
movements of the investments being hedged. For example, if a "protective put" is
used to hedge a potential decline in a security and the security does decline in
price, the put option's increased value may not completely offset the loss in
the underlying security. Such a lack of correlation might occur due to factors
unrelated to the value of the investments being hedged, such as changing
interest rates, market liquidity, and speculative or other pressures on the
markets in which the hedging instrument is traded.
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(3) Hedging strategies, if successful, can reduce risk of loss by wholly or
partially offsetting the negative effect of unfavorable price movements in the
investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments.
(4) There is no assurance that a liquid secondary market will exist for any
particular option, futures contract, forward contract or option thereon at any
particular time.
(5) As described below, a Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in instruments involving obligations to third parties. If a Fund were
unable to close out its positions in such instruments, it might be required to
continue to maintain such assets or accounts or make such payments until the
position expired or matured. The requirements might impair the Fund's ability to
sell a portfolio security or make an investment at a time when it would
otherwise be favorable to do so, or require that the Fund sell a portfolio
security at a disadvantageous time.
(6) There is no assurance that a Fund will use hedging transactions. For
example, if a Fund determines that the cost of hedging will exceed the potential
benefit to the Fund, the Fund will not enter into such transaction.
COVER
Transactions using forward contracts, futures contracts and options (other
than options purchased by a Fund) expose a Fund to an obligation to another
party. A Fund will not enter into any such transactions unless it owns either
(1) an offsetting ("covered") position in securities, currencies, or other
options, forward contracts or futures contracts or (2) cash, liquid assets
and/or short-term debt securities with a value sufficient at all times to cover
its potential obligations not covered as provided in (1) above. Each Fund will
comply with SEC guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash or liquid securities.
Assets used as cover cannot be sold while the position in the corresponding
forward contract, futures contract or option is open, unless they are replaced
with other appropriate assets. If a large portion of a Fund's assets is used for
cover or otherwise set aside, it could affect portfolio management or the Fund's
ability to meet redemption requests or other current obligations.
WRITING CALL OPTIONS
Each of the Funds may write (sell) covered call options on securities,
futures contracts, forward contracts, indices and currencies. As the writer of a
call option, a Fund would have the obligation to deliver the underlying
security, cash or currency (depending on the type of derivative) to the holder
(buyer) at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). So long as
the obligation of a Fund continues, it may be assigned an exercise notice,
requiring it to deliver the underlying security, cash or currency against
payment of the exercise price. This obligation terminates upon the expiration of
the call option, or such earlier time at which a Fund effects a closing purchase
transaction by purchasing an option identical to that previously sold.
When writing a call option a Fund, in return for the premium, gives up the
opportunity for profit from a price increase in the underlying security,
contract or currency above the exercise price, and retains the risk of loss
should the price of the security, contract or currency decline. Unlike one who
owns securities, contracts or currencies not subject to an option, a Fund has no
control over when it may be required to sell the underlying securities,
contracts or currencies, since most options may be exercised at any time prior
to the option's expiration. If a call option that a Fund has written expires, it
will realize a gain in the amount of the premium; however, such gain may be
offset by a decline in the market value of the underlying security, contract or
currency during the option period. If the call option is exercised, a Fund will
realize a gain or loss from the sale of the underlying security, contract or
currency, which will be increased or offset by the premium received.
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Writing call options can serve as a limited hedge because declines in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option.
Closing transactions may be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security, contract or currency
from being called or to permit the sale of the underlying security, contract or
currency. Furthermore, effecting a closing transaction will permit a Fund to
write another call option on the underlying security, contract or currency with
either a different exercise price or expiration date, or both.
WRITING PUT OPTIONS
Each of the Funds may write (sell) covered put options on securities,
futures contracts, forward contracts, indices and currencies. As the writer of a
put option, a Fund would have the obligation to buy the underlying security,
contract or currency (depending on the type of derivative) at the exercise price
at any time until (American style) or on (European style) the expiration date.
This obligation terminates upon the expiration of the put option, or such
earlier time at which a Fund effects a closing purchase transaction by
purchasing an option identical to that previously sold.
A Fund would write a put option at an exercise price that, reduced by the
premium received on the option, reflects the lower price it is willing to pay
for the underlying security, contract or currency. The risk in such a
transaction would be that the market price of the underlying security, contract
or currency would decline below the exercise price less the premium received.
PURCHASING PUT OPTIONS
Each of the Funds may purchase put options on securities, futures
contracts, forward contracts, indices and currencies. As the holder of a put
option, a Fund would have the right to sell the underlying security, contract or
currency at the exercise price at any time until (American style) or on
(European style) the expiration date. A Fund may enter into closing sale
transactions with respect to such options, exercise such option or permit such
option to expire.
A Fund may purchase a put option on an underlying security, contract or
currency ("protective put") owned by the Fund in order to protect against an
anticipated decline in the value of the security, contract or currency. Such
hedge protection is provided only during the life of the put option. The premium
paid for the put option and any transaction costs would reduce any profit
realized when the security, contract or currency is delivered upon exercise of
said option. Conversely, if the underlying security, contract or currency does
not decline in value, the option may expire worthless and the premium paid for
the protective put would be lost.
A Fund may also purchase put options on underlying securities, contracts or
currencies against which it has written other put options. For example, where a
Fund has written a put option on an underlying security, rather than entering a
closing transaction of the written option, it may purchase a put option with a
different exercise strike and/or expiration date that would eliminate some or
all of the risk associated with the written put. Used in combinations, these
strategies are commonly referred to as "put spreads." Likewise, a Fund may write
call options on underlying securities, contracts or currencies against which it
has purchased protective put options. This strategy is commonly referred to as a
"collar."
PURCHASING CALL OPTIONS
Each of the Funds may purchase covered call options on securities, futures
contracts, forward contracts, indices and currencies. As the holder of a call
option, a Fund would have the right to purchase the underlying security,
contract or currency at the exercise price at any time until (American style) or
on (European style) the expiration date. A Fund may enter into closing sale
transactions with respect to such options, exercise such options or permit such
options to expire.
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Call options may be purchased by a Fund for the purpose of acquiring the
underlying security, contract or currency for its portfolio. Utilized in this
fashion, the purchase of call options would enable a Fund to acquire the
security, contract or currency at the exercise price of the call option plus the
premium paid. So long as it holds such a call option, rather than the underlying
security or currency itself, the Fund is partially protected from any unexpected
decline in the market price of the underlying security, contract or currency
and, in such event, could allow the call option to expire, incurring a loss only
to the extent of the premium paid for the option.
Each of the Funds may also purchase call options on underlying securities,
contracts or currencies against which it has written other call options. For
example, where a Fund has written a call option on an underlying security,
rather than entering a closing transaction of the written option, it may
purchase a call option with a different exercise strike and/or expiration date
that would eliminate some or all of the risk associated with the written call.
Used in combinations, these strategies are commonly referred to as "call
spreads."
Options may be either listed on an exchange or traded in over-the-counter
("OTC") markets. Listed options are third-party contracts (i.e., performance of
the obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation) and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. A Fund will not purchase an OTC option unless it believes that daily
valuations for such options are readily obtainable. OTC options differ from
exchange-traded options in that OTC options are transacted with dealers directly
and not through a clearing corporation (which guarantees performance).
Consequently, there is a risk of non-performance by the dealer. Since no
exchange is involved, OTC options are valued on the basis of an average of the
last bid prices obtained from dealers, unless a quotation from only one dealer
is available, in which case only that dealer's price will be used. In the case
of OTC options, there can be no assurance that a liquid secondary market will
exist for any particular option at any specific time. Although a Fund will enter
into OTC options only with dealers that are expected to be capable of entering
into closing transactions with it, there is no assurance that the Fund will in
fact be able to close out an OTC option position at a favorable price prior to
expiration. In the event of insolvency of the dealer, a Fund might be unable to
close out an OTC option position at any time prior to its expiration.
The staff of the SEC considers purchased OTC options to be illiquid
securities. A Fund may also sell OTC options and, in connection therewith,
segregate assets or cover its obligations with respect to OTC options written by
it. The assets used as cover for OTC options written by the Fund will be
considered illiquid unless the OTC options are sold to qualified dealers who
agree that the Fund may repurchase any OTC option it writes at a maximum price
to be calculated by a formula set forth in the option agreement. The cover for
an OTC option written subject to this procedure would be considered illiquid
only to the extent that the maximum repurchase price under the formula exceeds
the intrinsic value of the option.
INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities or
futures contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price movements in the
securities market or a particular market sector generally) rather than on price
movements in individual securities or futures contracts. The amount of cash is
equal to the difference between the closing price of the index and the exercise
price of the call or put times a specified multiple (the "multiplier"), which
determines the total dollar value for each point of such difference.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Fund writes a call
on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. A Fund can
offset some of the risk of writing a call index option position by holding a
diversified portfolio of securities similar to those on which the underlying
index is based. However, the Fund cannot, as a practical matter, acquire and
hold a portfolio containing exactly the same securities as underlie the index
and, as a result, bears a risk that the value of the securities held will not be
perfectly correlated with the value of the index.
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LIMITATIONS ON OPTIONS
A Fund will not write options if, immediately after such sale, the
aggregate value of securities or obligations underlying the outstanding options
exceeds 20% of the Fund's total assets. A Fund will not purchase options if, at
any time of the investment, the aggregate premiums paid for the options will
exceed 5% of the Fund's total assets.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
Each of the Funds may enter into interest rate, currency or stock index
futures contracts (collectively, "Futures" or "Futures Contracts") as a hedge
against changes in prevailing levels of interest rates, currency exchange rates
or stock price levels, respectively, in order to establish more definitely the
effective return on securities or currencies held or intended to be acquired by
it. A Fund's hedging may include sales of Futures as an offset against the
effect of expected increases in interest rates, and decreases in currency
exchange rates and stock prices, and purchases of Futures as an offset against
the effect of expected declines in interest rates, and increases in currency
exchange rates or stock prices.
A Futures Contract is a two party agreement to buy or sell a specified
amount of a specified security or currency (or delivery of a cash settlement
price, in the case of an index future) for a specified price at a designated
date, time and place. A stock index future provides for the delivery, at a
designated date, time and place, of an amount of cash equal to a specified
dollar amount times the difference between the stock index value at the close of
trading on the contract and the price agreed upon in the Futures Contract; no
physical delivery of stocks comprising the index is made. Brokerage fees are
incurred when a Futures Contract is bought or sold, and margin deposits must be
maintained at all times the Future is outstanding.
The Funds will only enter into Futures Contracts that are traded on futures
exchanges and are standardized as to maturity date and underlying financial
instrument. Futures exchanges and trading thereon in the United States are
regulated under the Commodity Exchange Act and by the Commodity Futures Trading
Commission ("CFTC").
Closing out an open Future is effected by entering into an offsetting
Future for the same aggregate amount of the identical financial instrument or
currency and the same delivery date. There can be no assurance, however, that a
Fund will be able to enter into an offsetting transaction with respect to a
particular Future at a particular time. If a Fund is not able to enter into an
offsetting transaction, it will continue to be required to maintain the margin
deposits on the Future.
A Fund's Futures transactions will be entered into for hedging purposes
only; that is, Futures will be sold to protect against a decline in the price of
securities or currencies that the Fund owns, or Futures will be purchased to
protect the Fund against an increase in the price of securities or currencies it
has committed to purchase or expects to purchase.
"Margin" with respect to Futures is the amount of funds that must be
deposited by a Fund in order to initiate Futures trading and maintain its open
positions in Futures. A margin deposit made when the Futures Contract is entered
("initial margin") is intended to ensure the Fund's performance under the
Futures Contract. The margin required for a particular Future is set by the
exchange on which the Future is traded and may be significantly modified from
time to time by the exchange during the term of the Futures Contract.
Subsequent payments, called "variation margin," to and from the futures
commission merchant through which a Fund entered into the Futures Contract will
be made on a daily basis as the price of the underlying security, currency or
index fluctuates making the Futures more or less valuable, a process known as
marking-to-market.
If a Fund were unable to liquidate a Future or an option on a Futures
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. The Fund would continue
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to be subject to market risk with respect to the position. In addition, except
in the case of purchased options, the Fund would continue to be required to make
daily variation margin payments and might be required to maintain the position
being hedged by the Future or option or to maintain cash or securities in a
segregated account.
OPTIONS ON FUTURES CONTRACTS
Options on Futures Contracts are similar to options on securities or
currencies except that options on Futures Contracts give 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 period of
the option. Upon exercise of the option, the delivery of the Futures position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's Futures margin account.
FORWARD CONTRACTS
A forward contract is an obligation, usually arranged with a commercial
bank or other currency dealer, to purchase or sell a currency against another
currency at a future date and price as agreed upon by the parties. A Fund either
may accept or make delivery of the currency at the maturity of the forward
contract. A Fund may also, if its contra party agrees prior to maturity, enter
into a closing transaction involving the purchase or sale of an offsetting
contract. Forward contracts are traded over-the-counter, and not on organized
commodities or securities exchanges. As a result, it may be more difficult to
value such contracts, and it may be difficult to enter into closing
transactions.
Each of the Funds may engage in forward currency transactions in
anticipation of, or to protect itself against, fluctuations in exchange rates. A
Fund may enter into forward contracts with respect to a specific purchase or
sale of a security, or with respect to its portfolio positions generally. When a
Fund purchases a security denominated in a foreign currency for settlement in
the near future, it may immediately purchase in the forward market the currency
needed to pay for and settle the purchase. By entering into a forward contract
with respect to the specific purchase or sale of a security denominated in a
foreign currency, the Fund can secure an exchange rate between the trade and
settlement dates for that purchase or sale transaction. This practice is
sometimes referred to as "transaction hedging." Position hedging is the purchase
or sale of foreign currency with respect to portfolio security positions
denominated or quoted in a foreign currency.
The cost to a Fund of engaging in forward contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because forward contracts are usually entered
into on a principal basis, no fees or commissions are involved. The use of
forward contracts does not eliminate fluctuations in the prices of the
underlying securities a Fund owns or intends to acquire, but it does establish a
rate of exchange in advance. In addition, while forward contract sales limit the
risk of loss due to a decline in the value of the hedged currencies, they also
limit any potential gain that might result should the value of the currencies
increase.
LIMITATIONS ON USE OF FUTURES, OPTIONS ON FUTURES AND CERTAIN OPTIONS ON
CURRENCIES
To the extent that a Fund enters into Futures Contracts, options on Futures
Contracts and options on foreign currencies traded on a CFTC-regulated exchange,
in each case other than for bona fide hedging purposes (as defined by the CFTC),
the aggregate initial margin and premiums required to establish those positions
(excluding the amount by which options are "in-the-money") will not exceed 5% of
the total assets of the Fund, after taking into account unrealized profits and
unrealized losses on any contracts it has entered into. This guideline may be
modified by the Board, without a shareholder vote. This limitation does not
limit the percentage of the Fund's assets at risk to 5%.
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HEDGING AND OTHER INVESTMENT TECHNIQUES
The following discussion on hedging and other investment techniques applies
to AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND and
AIM MUNICIPAL BOND FUND.
COVERED CALL OPTIONS
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.
FUTURES CONTRACTS
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
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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.
Interest Rate Futures Contracts - Each of the Funds may purchase and sell
interest rate futures contracts in order to hedge the value of their respective
portfolios against changes in market conditions. 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 - AIM HIGH YIELD FUND and AIM INCOME
FUND
Futures contracts may also be used to hedge the risk of changes in the
exchange rates of foreign currencies.
OPTIONS ON FUTURES CONTRACTS
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 interest rates 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.
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It is also possible that where a Fund has sold futures contracts to hedge
its portfolio against a decline in the market, the market may advance and the
value of stocks or debt securities held in a Fund's portfolio may decline. If
this occurred, a Fund would lose money on the futures contracts and also
experience a decline in the value of its portfolio securities. Similar risks
exist with respect to foreign currency hedges.
Positions in futures contracts or options may be closed out only on an
exchange on which such contracts are traded. Although the Funds intend to
purchase or sell futures contracts or purchase options only on exchanges or
boards of trade where there appears to be an active market, there is no
assurance that a liquid market on an exchange or board of trade will exist for
any particular contract or at any particular time. If there is not a liquid
market at a particular time, it may not be possible to close a futures position
or purchase an option at such time. In the event of adverse price movements
under those circumstances, the Fund would continue to be required to 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.
FOREIGN EXCHANGE TRANSACTIONS: AIM INCOME FUND and AIM HIGH YIELD FUND
Each Fund has authority to deal in foreign exchange between currencies of
the different countries in which it will invest either for the settlement of
transactions or as a hedge against possible variations in the foreign exchange
rates between those currencies. 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 foreign
currency exposure and may involve 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 (or underlying portfolio security positions,
such as in an ADR) 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.
INVESTMENT RESTRICTIONS
Each Fund is subject to the following restrictions which may not be changed
without approval of the lesser of (i) 67% or more of the Fund's shares present
at a meeting if the holders of more than 50% of the outstanding shares are
present in person or represented by proxy, or (ii) more than 50% of the Fund's
outstanding shares. Any investment restriction that involves a maximum or
minimum percentage of securities or assets shall not be considered to be
violated unless an excess over or a deficiency under the percentage occurs
immediately after, and is caused by, an acquisition or disposition of securities
or utilization of assets by the Fund.
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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 that the Fund
may purchase securities of other investment companies to the extent
permitted by applicable law or exemptive order.
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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.
4. Act as a securities underwriter.
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5. Purchase or sell commodities or commodity contracts, other than
financial futures contracts and options thereon.
6. With respect to 75% of the value of its total assets, invest more
than 5% of the market value of its total assets in the securities of any
one issuer, other than obligations of or guaranteed by the U.S. Government
or any of its agencies or instrumentalities, 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.
37
<PAGE> 196
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
38
<PAGE> 197
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. As a non-fundamental policy, AIM INTERMEDIATE GOVERNMENT
FUND will maintain a dollar-weighted average portfolio maturity of between three
and ten years.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 1, 1999, the trustees and officers of the Trust as a group
owned less than 1% of all classes of outstanding shares of the Trust; except
that the trustees and officers as a group owned 1.34% of the outstanding AIM
Cash Reserve Shares of AIM MONEY MARKET FUND, and 4.42% 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 April 1, 1999, and the percentage of the outstanding shares
held by such holders are set forth below:
39
<PAGE> 198
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address of Owned of and
Beneficial Owner Record* Beneficially
- ---------------- ------- ------------
<S> <C> <C>
AIM BALANCED FUND -
Class A shares
Merrill Lynch Pierce Fenner & Smith 11.30% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
American Express Trust Co. 7.38% - 0 -
FBO American Express Trust
Retirement Service Plans
1200 Northstar
West P. O. Box 534
Minneapolis, MN 55440-0534
Class B shares
Merrill Lynch Pierce Fenner & Smith 12.25% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Class C shares
Merrill Lynch Pierce Fenner & Smith 26.84% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
AIM GLOBAL UTILITIES FUND -
Class B shares
Merrill Lynch Pierce Fenner & Smith 8.54% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
</TABLE>
- --------
* The Company has no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
40
<PAGE> 199
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address of Owned of and
Beneficial Owner Record* Beneficially
- ---------------- ------- ------------
<S> <C> <C>
Class C shares
Merrill Lynch Pierce Fenner & Smith 7.80% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
First Clearing Corporation 7.53% - 0 -
A/C 1523-1732
Penelope R. Best
200 Magnolia Avenue
Frederick, MD 21701-4815
Frederick, MD 21701-5800
ITC Cust Rollover IRA 7.49% - 0 -
FBO James P. Crawford
6934 Brittany Ridge Lane
Cincinnati, OH 45233-0000
AIM HIGH YIELD FUND -
Class A shares
Merrill Lynch Pierce Fenner & Smith 6.70% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Class B shares
Merrill Lynch Pierce Fenner & Smith 15.01% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
</TABLE>
- --------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
41
<PAGE> 200
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address of Owned of and
Beneficial Owner Record* Beneficially
- ---------------- ------- ------------
<S> <C> <C>
Class C shares
Merrill Lynch Pierce Fenner & Smith 22.29% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Banc One Securities Corp FBO 5.38% - 0 -
The One Investment Solution
733 Greencrest Drive
Westerville, OH 43081-0000
AIM INCOME FUND -
Class A shares
Merrill Lynch Pierce Fenner & Smith 5.78% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Class B shares
Merrill Lynch Pierce Fenner & Smith 10.07% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Class C shares
Merrill Lynch Pierce Fenner & Smith 17.58% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
</TABLE>
- --------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
42
<PAGE> 201
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address of Owned of and
Beneficial Owner Record* Beneficially
- ---------------- ------- ------------
<S> <C> <C>
AIM INTERMEDIATE GOVERNMENT FUND -
Class A shares
Merrill Lynch Pierce Fenner & Smith 12.47% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Class B shares
Merrill Lynch Pierce Fenner & Smith 29.62% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Class C shares
Merrill Lynch Pierce Fenner & Smith 25.70% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
AIM MUNICIPAL BOND FUND -
Class B shares
Merrill Lynch Pierce Fenner & Smith 14.50% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Class C shares
Merrill Lynch Pierce Fenner & Smith 15.52% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
</TABLE>
- --------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
43
<PAGE> 202
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address of Owned of and
Beneficial Owner Record* Beneficially
- ---------------- ------- ------------
<S> <C> <C>
Robert A. Chernow 13.39% - 0 -
4 Fox Run Lane
Westport, CT 06880-0000
Donaldson Lufkin Jenrette 6.56% - 0 -
Securities Corporation Inc.
P. O. Box 2052
Jersey City, NJ 07303-9998
Reagan Family Partners Ltd. 5.21% - 0 -
Robert L. Reagan Gen Partner
Dalene C. Reagan Gen Partner
125 Crestline Drive
Kerrville, TX 78028
AIM SELECT GROWTH FUND -
Class B shares
Merrill Lynch Pierce Fenner & Smith 16.48% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Class C shares
Merrill Lynch Pierce Fenner & Smith 20.19% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
AIM VALUE FUND -
Class A shares
Merrill Lynch Pierce Fenner & Smith 11.81% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
</TABLE>
- --------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
44
<PAGE> 203
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address of Owned of and
Beneficial Owner Record* Beneficially
- ---------------- ------- ------------
<S> <C> <C>
Class B shares
Merrill Lynch Pierce Fenner & Smith 15.11% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Class C shares
Merrill Lynch Pierce Fenner & Smith 28.19% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
</TABLE>
- --------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
45
<PAGE> 204
MANAGEMENT
The overall management of the business and affairs of the Funds and the
Trust is vested in the 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. The day-to-day
operations of each Fund are delegated to the officers of the Trust and to AIM,
subject always to the objective(s) 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.
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 (80) 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 (55) 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 (74) 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. (63) Trustee Chairman of the Board of Directors, Mercantile Mortgage
Mercantile Mortgage Corp. Corp. Formerly, Vice Chairman of the Board of Directors
P. O. Box 1477 and President, Mercantile-Safe Deposit & Trust Co.; and
Baltimore, MD 21203 President, Mercantile Bankshares.
- ----------------------------------------------------------------------------------------------------------------------
JACK FIELDS (47) Trustee Chief Executive Officer, Texana Global, Inc. (foreign
Jetero Plaza, Suite E trading company) and Twenty First Century Group, Inc.
8810 Will Clayton Parkway (governmental affairs company). Formerly, Member of
Humble, TX 77338 the U.S. House of Representatives.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------
* A trustee who is an "interested person" of the Trust and A I M Advisors,
Inc. as defined in the 1940 Act.
46
<PAGE> 205
<TABLE>
<CAPTION>
=========================================================================================================================
POSITIONS
HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST
NAME, ADDRESS AND AGE REGISTRANT THE PAST 5 YEARS
=========================================================================================================================
<S> <C> <C>
***CARL FRISCHLING (62) Trustee Partner, Kramer, Levin, Naftalis & Frankel LLP (law firm).
919 Third Avenue Formerly, Partner, Reid & Priest (law firm).
New York, NY 10022
- -------------------------------------------------------------------------------------------------------------------------
*ROBERT H. GRAHAM (52) 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.
- -------------------------------------------------------------------------------------------------------------------------
PREMA MATHAI-DAVIS (48) Trustee Chief Executive Officer, YWCA of the U.S.A.; Commissioner,
350 Fifth Avenue, Suite 301 New York City Department for the Aging; and Member of the
New York, NY 10118 Board of Directors, Metropolitan Transportation Authority
of New York State.
- -------------------------------------------------------------------------------------------------------------------------
LEWIS F. PENNOCK (56) Trustee Attorney in private practice in Houston, Texas.
6363 Woodway, Suite 825
Houston, TX 77057
- -------------------------------------------------------------------------------------------------------------------------
LOUIS S. SKLAR (59) Trustee Executive Vice President, Development and Operations, Hines
Transco Tower, 50th Floor Interests Limited Partnership (real estate development).
2800 Post Oak Blvd.
Houston, TX 77056
- -------------------------------------------------------------------------------------------------------------------------
GARY T. CRUM (51) 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 (44) Senior Vice Director, Senior Vice President, General Counsel and
President Secretary, A I M Advisors, Inc.; Senior Vice President,
and Secretary General 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 (40) 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.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------
** A trustee who is an "interested person" of the Trust as defined in the 1940
Act.
* A trustee who is an "interested person" of the Trust and A I M Advisors,
Inc. as defined in the 1940 Act.
47
<PAGE> 206
<TABLE>
<CAPTION>
=================================================================================================================
POSITIONS
HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST
NAME, ADDRESS AND AGE REGISTRANT THE PAST 5 YEARS
=================================================================================================================
<S> <C> <C>
ROBERT G. ALLEY (50) Vice President Senior Vice President, A I M Capital Management, Inc.;
and Vice President, A I M Advisors, Inc.
- -----------------------------------------------------------------------------------------------------------------
STUART W. COCO (43) Vice President Senior Vice President, A I M Capital Management, Inc.;
and Vice President, A I M Advisors, Inc.
- -----------------------------------------------------------------------------------------------------------------
MELVILLE B. COX (55) 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 (38) Vice President Senior Vice President, A I M Capital Management, Inc.;
and Vice President, A I M Advisors, Inc.
- -----------------------------------------------------------------------------------------------------------------
EDGAR M. LARSEN (58) Vice President Vice President, A I M Capital Management, Inc.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The standing committees of the Board of Trustees are the Audit
Committee, the Investments Committee and the Nominating and Compensation
Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Dunn
(Chairman), Fields, Frischling, Pennock, Sklar and Ms. Mathai-Davis. 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, Dunn, Fields, Frischling, Pennock, Sklar (Chairman) and Ms. Mathai-Davis.
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 (Chairman), Daly, Dunn, Fields, Pennock, Sklar and Ms. Mathai-Davis.
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
48
<PAGE> 207
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.
Set forth below is information regarding compensation paid or accrued
for each trustee of the Trust during the year ended December 31, 1998:
<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 21,693 37,485 96,000
- -----------------------------------------------------------------------------------------------------
Owen Daly II 21,693 122,898 96,000
- -----------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. 17,768 0 78,889
- -----------------------------------------------------------------------------------------------------
Jack Fields 21,581 15,826 95,500
- -----------------------------------------------------------------------------------------------------
Carl Frischling(4) 21,580 97,791 95,500
- -----------------------------------------------------------------------------------------------------
Robert H. Graham 0 0 0
- -----------------------------------------------------------------------------------------------------
John F. Kroeger(5) 15,136 107,896 91,654
- -----------------------------------------------------------------------------------------------------
Prema Mathai-Davis 7,321 0 32,636
- -----------------------------------------------------------------------------------------------------
Lewis F. Pennock 21,579 45,766 95,500
- -----------------------------------------------------------------------------------------------------
Ian W. Robinson(6) 21,359 94,442 94,500
- -----------------------------------------------------------------------------------------------------
Louis S. Sklar 21,468 90,232 95,500
=====================================================================================================
</TABLE>
- -------------
(1) The total amount of compensation deferred by all Trustees of the Trust
during the fiscal year ended December 31, 1998, including amounts earned
thereon, was $101,838.
(2) During the fiscal year ended December 31, 1998, the total amount of expenses
allocated to the Trust in respect of such retirement benefits was $167,488. Data
reflect compensation estimated for the calendar year ended December 31, 1998.
(3) Each Trustee serves as a director or trustee of a total of 12 registered
investment companies advised by AIM. Data reflect total compensation for the
calendar year ended December 31, 1998.
(4) During the year ended December 31, 1998, 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 $6,473, $3,992, $10,514, $4,444,
$3,924, $5,530, $4,664, $4,830, and $32,680, respectively, in legal fees to Mr.
Frischling's law firm, Kramer, Levin, Naftalis & Frankel LLP for services
rendered.
49
<PAGE> 208
(5) Mr. Kroeger was a trustee until June 11, 1998, when he resigned. On that
date he became a consultant to the Trust. Of the amount listed above, $8,419 was
for compensation for services as a trustee and the remainder as a consultant.
Mr. Kroeger passed away on November 26, 1998. Mr. Kroeger's widow will receive
his pension as described below under "AIM Funds Retirement Plan for Eligible
Directors/Trustees."
(6) Mr. Robinson was a trustee until March 12, 1999, when he retired.
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, AIM Management or any of their affiliates) may be entitled to
certain benefits upon retirement from the Board of Trustees. Pursuant to the
Plan, the normal retirement date is the date on which the eligible trustee has
attained age 65 and has completed at least five years of continuous service with
one or more of the regulated investment companies managed, administered or
distributed by AIM or its affiliates (the "Applicable AIM Funds"). Each eligible
trustee is entitled to receive an annual benefit from the Applicable AIM Funds
commencing on the first day of the calendar quarter coincident with or following
his date of retirement equal to a maximum of 75% of the annual 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) and based on 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, Dunn, Fields, Frischling, Kroeger, Pennock,
Robinson, Sklar and Ms. Mathai-Davis are 11, 11, 0, 1, 21, 20, 17, 11, 9 and 0
years, respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
================================================================================
Annual Retirement
Number of Years Compensation
of Service With Paid By All
Applicable AIM Applicable
Funds AIM Funds
================================================================================
<S> <C>
10 $67,500
- --------------------------------------------------------------------------------
9 $60,750
- --------------------------------------------------------------------------------
8 $54,000
- --------------------------------------------------------------------------------
7 $47,250
- --------------------------------------------------------------------------------
6 $40,500
- --------------------------------------------------------------------------------
5 $33,750
================================================================================
</TABLE>
50
<PAGE> 209
Deferred Compensation Agreements
Messrs. Daly, Dunn, Fields, Frischling, 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.
INVESTMENT ADVISORY AND OTHER SERVICES
AIM was organized in 1976, and along with its subsidiaries, manages or
advises over 110 investment portfolios encompassing a broad range of investment
objectives. The address of AIM is 11 Greenway Plaza, Suite 100, Houston, Texas
77046. 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 institutional investment
management and retail mutual fund businesses in the United States, Europe and
the Pacific Region. Certain of the directors and officers of AIM are also
executive officers of the Trust and their affiliations are shown under
"Management" herein.
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.
The Trust, on behalf of each Fund, has entered into a Master Investment
Advisory Agreement and a Master Administrative Services Agreement with AIM. The
Master Investment Advisory Agreement will continue 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 by votes
cast in person at a meeting called for such purpose. The agreement 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.
Under the terms of the Master Investment Advisory Agreement, AIM
supervises all aspects of the Funds' 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. AIM will not
51
<PAGE> 210
be liable to the Funds or their shareholders except in the case of AIM's willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
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>
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:
52
<PAGE> 211
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $200 million 0.60%
Next $300 million 0.50%
Next $500 million 0.40%
Amount over $1 billion 0.30%
</TABLE>
The Master Investment Advisory Agreement provides that if, for any
fiscal year, the total of all ordinary business expenses of a Fund, including
all investment advisory fees, but excluding brokerage commissions and fees,
taxes, interest and extraordinary expenses, such as litigation costs, exceed the
applicable expense limitations imposed by state securities regulations in any
state in which the Fund's shares are qualified for sale, as such limitations may
be raised or lowered from time to time, the aggregate of all such investment
advisory fees paid by such Fund shall be reduced by the amount of such excess.
The amount of any such reduction to be borne by AIM shall be deducted from the
monthly investment advisory fee otherwise payable to AIM during such fiscal
year. If required pursuant to such state securities regulations, AIM will
reimburse the Fund no later than the last day of the first month of the next
succeeding fiscal year, for any such annual operating expenses (after reduction
of all investment advisory fees in excess of such limitation).
AIM may from time to time waive or reduce its fee. Voluntary fee waivers
or reductions may be rescinded at any time without further notice to investors.
During periods of voluntary fee waivers or reductions, AIM will retain its
ability to be reimbursed for such fee prior to the end of each fiscal year.
Contractual fee waivers or reductions set forth in the Fee Table in a Prospectus
may not be terminated or amended to the Funds' detriment during the period
stated in the agreement between AIM and the Fund.
AIM has contractually agreed to waive a portion of its advisory fees
payable by AIM VALUE FUND, so that the effective fee schedule is 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. During the year ended December 31, 1998, AIM VALUE FUND
waived 0.02% in advisory fees.
Each Fund paid to AIM the following management fees net of any expense
limitations and fee waivers for the years ended December 31, 1998, 1997 and
1996:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
AIM Balanced Fund ........................... $ 9,043,320 $ 4,789,939 $ 2,151,655
AIM Global Utilities Fund ................... $ 1,652,662 1,440,692 1,397,762
AIM High Yield Fund ......................... $17,600,312 13,632,090 9,277,005
AIM Income Fund ............................. $ 2,375,487 1,801,746 1,510,254
AIM Intermediate Government Fund ............ $ 1,611,515 1,174,166 1,188,121
AIM Money Market Fund ....................... $ 5,891,106 4,586,148 4,136,659
AIM Municipal Bond Fund ..................... $ 1,738,038 1,532,157 1,417,007
AIM Select Growth Fund ...................... $ 4,362,261 3,901,342 2,874,943
AIM Value Fund .............................. $94,937,000 72,810,450 50,259,125
</TABLE>
53
<PAGE> 212
For the fiscal years ended December 31, 1998, 1997 and 1996, AIM waived
advisory fees for each Fund as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<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- -0-
AIM Select Growth Fund ...................... -0- -0- -0-
AIM Value Fund .............................. $3,423,939 $2,501,999 $1,562,359
</TABLE>
For the fiscal years ended December 31, 1998, 1997 and 1996, AIM reimbursed
expenses as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<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- -0-
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 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 will continue
from year to year only if such continuance is specifically approved at least
annually by the Trust's Board of Trustees, including the "dis-interested"
trustees, by votes cast in person at a meeting called for such purpose.
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,
1998, 1997 and 1996:
54
<PAGE> 213
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------- -------------------------- -------------------------
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
AVERAGE AVERAGE AVERAGE
AMOUNT PAID NET ASSETS AMOUNT PAID NET ASSETS AMOUNT PAID NET ASSETS
------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
AIM Balanced Fund ...................... $ 104,952 0.006% 87,375 .01% $ 72,493 .02%
AIM Global Utilities Fund .............. 85,383 0.03% 77,375 .03% 80,256 .03%
AIM High Yield Fund .................... 135,537 0.004% 111,767 .004% 98,734 .01%
AIM Income Fund ........................ 87,349 0.02% 81,464 .02% 75,132 .02%
AIM Intermediate Government Fund ....... 80,271 0.02% 70,736 .03% 71,348 .03%
AIM Money Market Fund .................. 71,394 0.007% 68,947 .01% 58,665 .01%
AIM Municipal Bond Fund ................ 73,917 0.02% 70,780 .02% 71,857 .02%
AIM Select Growth Fund ................. 78,567 0.01% 74,201 .01% 72,903 .02%
AIM Value Fund ......................... 323,939 0.002% 225,784 .002% 196,586 .002%
</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 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 (other
than AIM MONEY MARKET FUND) 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% per annum 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 shares. The Class A and C Plan is
designed to compensate AIM Distributors, on a quarterly basis, for certain
promotional and other sales-related costs, and to implement a dealer incentive
program which provides for periodic payments to selected dealers who furnish
continuing personal shareholder services to their customers who purchase and own
Class A or Class C shares of a Fund. Payments can also be directed by AIM
Distributors to selected institutions who have entered into service agreements
with respect to Class A and Class C shares (or AIM Cash Reserve Shares) of each
Fund and who provide continuing personal services to their customers who own
such shares of a Fund. The service fees payable to selected institutions are
calculated at the annual rate of 0.25% of the average daily net asset value of
those Fund shares that are held in such institution's customers' accounts which
were purchased on or after a prescribed date set forth in the Plan. 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.
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 the 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.
Payments pursuant to the
55
<PAGE> 214
Plans are subject to any applicable limitations imposed by rules of the National
Association of Securities Dealers, Inc.
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. Any amounts not
paid as a service fee would constitute an asset-based sales charge. 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.
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.
The Trust may also enter into Variable Group Annuity Contractholder
Service Agreements ("Variable Contract Agreements") on behalf of the Funds
(other than AIM MONEY MARKET FUND) authorizing payments to selected insurance
companies offering variable annuity contracts to employers as funding vehicles
for retirement plans qualified under Section 401(a) of the Code. Services
provided pursuant to such Variable Contract Agreements may include some or all
of the following: answering inquiries regarding the Fund and the Trust;
performing sub-accounting; establishing and maintaining contractholder accounts
and records; processing and bunching purchase and redemption transactions;
providing periodic statements of contract account balances;
56
<PAGE> 215
forwarding such reports and notices to contractholders relative to the Fund as
deemed necessary; generally, facilitating communications with contractholders
concerning investments in a Fund on behalf of plan participants; and performing
such other administrative services as deemed to be necessary or desirable, to
the extent permitted by applicable statute, rule or regulation to provide such
services.
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 may from time to time waive or reduce any portion of
its 12b-1 fee for Class A shares and Class C shares. Voluntary fee waivers or
reductions may be rescinded at any time without further notice to investors.
During periods of voluntary fee waivers or reductions, AIM Distributors will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions set forth in the Fee Table in a
Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM Distributors and the Fund.
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 Funds pursuant to the respective Plans. 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. The
Funds will obtain a representation from such financial institutions that they
will either be licensed as dealers as required under applicable state law, or
that they will not engage in activities which would constitute acting as a
"dealer" as defined under applicable state law.
For the year ended December 31, 1998 (the period from January 1, 1998
to December 21, 1998 for Class A shares of AIM MONEY MARKET FUND), 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 ........................... $ 2,440,180 $ 6,948,906 $ 627,014
AIM Global Utilities Fund ................... 467,750 1,019,004 15,320
AIM High Yield Fund ......................... 4,521,613 18,264,587 760,766
AIM Income Fund ............................. 932,865 1,670,317 99,616
AIM Intermediate Government Fund ............ 478,781 1,359,570 248,197
AIM Money Market Fund ....................... 1,160,113 1,767,568 176,383
AIM Municipal Bond Fund ..................... 806,482 568,813 50,355
AIM Select Growth Fund ...................... 701,677 3,710,226 42,675
AIM Value Fund .............................. 19,005,948 79,819,281 1,114,428
</TABLE>
For the year ended December 31, 1998, the AIM Cash Reserve Shares of
AIM MONEY MARKET FUND paid $1,049,453 to AIM Distributors pursuant to the Class
A and C Plan.
57
<PAGE> 216
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, 1998 (the period from January 1, 1998 to December 21, 1998 for
Class A shares of AIM MONEY MARKET FUND), was as follows:
<TABLE>
<CAPTION>
PRINTING COMPENSATION
ADVERTISING AND MAILING SEMINARS TO DEALERS
----------- ----------- -------- ----------
<S> <C> <C> <C> <C>
AIM Balanced Fund................................ $ 99,666 $ 9,616 $ 22,858 $ 2,308,041
AIM Global Utilities Fund....................... 6,557 659 1,554 458,980
AIM High Yield Fund.............................. 109,499 10,787 26,313 4,375,014
AIM Income Fund.................................. 32,335 3,123 7,626 889,781
AIM Intermediate Government Fund................ 8,043 788 1,898 468,052
AIM Money Market Fund............................ 146,276 15,756 37,870 960,211
AIM Municipal Bond Fund.......................... 27,777 2,720 6,594 769,391
AIM Select Growth Fund........................... 18,874 1,867 4,510 676,426
AIM Value Fund................................... 394,122 38,540 92,138 18,481,148
</TABLE>
During the year ended December 31, 1998, 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: $307,945 was spent on
advertising, $29,796 was spent on printing and mailing, $74,507 was spent on
seminars and $637,205 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, 1998, was as
follows:
<TABLE>
<CAPTION>
COMPENSATION COMPENSATION
PRINTING AND TO TO
ADVERTISING MAILING SEMINARS UNDERWRITERS DEALERS
----------- ------- -------- ------------ -------
<S> <C> <C> <C> <C> <C>
AIM Balanced Fund..................... $ 583,437 $ 57,022 $ 135,438 $ 5,211,679 $ 961,330
AIM Global Utilities Fund............. 26,495 2,620 6,551 764,253 219,085
AIM High Yield Fund................... 1,180,350 114,512 238,567 13,698,440 3,032,718
AIM Income Fund....................... 120,921 11,847 27,234 1,252,738 257,577
AIM Intermediate Government Fund...... 87,316 8,125 19,346 1,019,678 225,105
7AIM Money Market Fund................ 99,083 9,464 22,897 1,325,676 310,448
AIM Municipal Bond Fund............... 32,948 3,136 7,466 426,609 98,654
AIM Select Growth Fund................ 96,972 9,591 22,478 2,782,669 798,516
AIM Value Fund........................ 2,894,592 282,924 676,397 59,864,461 16,100,907
</TABLE>
58
<PAGE> 217
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 during the year ended
December 31, 1998, was as follows:
<TABLE>
<CAPTION>
COMPENSATION COMPENSATION
PRINTING AND TO TO
ADVERTISING MAILING SEMINARS UNDERWRITERS DEALERS
----------- ------- -------- ------------ -------
<S> <C> <C> <C> <C> <C>
AIM Balanced Fund...................... $ 25,897 $ 2,517 $ 5,549 $ 379,261 $ 213,791
AIM Global Utilities Fund.............. 2,492 0 0 10,490 2,338
AIM High Yield Fund.................... 67,640 6,744 15,979 497,574 172,829
AIM Income Fund........................ 9,450 935 2,225 66,712 20,294
AIM Intermediate Government Fund....... 6,798 702 1,500 53,148 186,049
AIM Money Market Fund.................. 4,587 436 1,212 97,287 72,861
AIM Municipal Bond Fund................ 6,281 455 842 33,766 9,011
AIM Select Growth Fund................. 3,062 303 0 26,006 13,304
AIM Value Fund......................... 114,784 11,052 26,531 743,821 218,240
</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.
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.
The Plans do not obligate the Funds to reimburse AIM Distributors for the actual
expenses AIM Distributors may incur in fulfilling its obligations under the
Plans. Thus, even if AIM Distributors' actual expenses exceed the fee payable to
AIM Distributors thereunder at any given time, the Funds will not be obligated
to pay more than that fee. If AIM Distributors' expenses are less than the fee
it receives, AIM Distributors will retain the full amount of the fee.
The Plans require AIM Distributors to provide the Board of Trustees at
least quarterly with a written report of the amounts expended pursuant to the
Plans and the purposes for which such expenditures were made. The Board of
Trustees reviews these reports in connection with their decisions with respect
to the Plans.
Unless terminated earlier in accordance with their terms, the Plans
continue from year to year 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
59
<PAGE> 218
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
The Trust has entered into master distribution agreements relating to
the Funds (the "Distribution Agreements") with A I M Distributors, Inc. ("AIM
Distributors"), a registered broker-dealer and a wholly owned subsidiary of AIM,
pursuant to which AIM Distributors acts as the distributor of Class A, Class B
and Class C shares of the Funds and AIM Cash Reserve Shares of AIM MONEY MARKET
FUND. The address of AIM Distributors is P.O. Box 4739, Houston, Texas
77210-4739. Certain trustees and officers of the Trust are affiliated with AIM
Distributors.
The Distribution Agreements provide AIM Distributors with the exclusive
right to distribute shares of the Funds directly and through institutions with
whom AIM Distributors has entered into selected dealer agreements. Under the
Distribution Agreement for the Class B shares, AIM Distributors sells Class B
shares at net asset value subject to a contingent deferred sales charge
established by AIM Distributors. AIM Distributors is authorized to advance to
institutions through whom Class B shares are sold a sales commission under
schedules established by AIM Distributors. The Distribution Agreement for the
Class B shares provides that AIM Distributors (or its assignee or transferee)
will receive 0.75% (of the total 1.00% payable under the distribution plan
applicable to Class B shares) of each Fund's average daily net assets
attributable to Class B shares attributable to the sales efforts of AIM
Distributors. In the event the Class B shares Distribution Agreement is
terminated, AIM Distributors would continue to receive payments of asset-based
sales charges in respect of the outstanding Class B shares attributable to the
distribution efforts of AIM Distributors; provided, however, that a complete
termination of the Class B shares master distribution plan (as defined in the
plan) would terminate all payments to AIM Distributors. Termination of the Class
B shares distribution plan or Distribution Agreement does not affect the
obligation of Class B shareholders to pay contingent deferred sales charges.
The Distribution Agreements provide that AIM Distributors will bear the
expenses of printing from the final proof and distributing the Funds'
prospectuses and statements of additional information relating to public
offerings made by AIM Distributors pursuant to the Distribution Agreements
(other than those prospectuses and statements of additional information
distributed to existing shareholders of the Funds), and any promotional or sales
literature used by AIM Distributors or furnished by AIM Distributors to dealers
in connection with the public offering of the Funds' shares, including expenses
of advertising in connection with such public offerings. AIM Distributors has
not undertaken to sell any specified number of shares of any classes of the
Funds.
AIM Distributors expects to pay sales commissions from its own
resources to dealers and institutions who sell Class B and Class C shares of the
Funds at the time of such sales.
Payments with respect to Class B shares will equal 4.0% of the purchase
price of the Class B shares sold by the dealer or institution, and will consist
of a sales commission equal to 3.75% of the purchase price of the Class B shares
sold plus an advance of the first year service fee of 0.25% with respect to such
shares. The 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
60
<PAGE> 219
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.
From time to time, AIM Distributors may transfer and sell its right to
payments under the Distribution Agreements relating to Class B shares in order
to finance distribution expenditures in respect of Class B shares.
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, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------- --------------------------- ---------------------------
SALES AMOUNT SALES AMOUNT SALES AMOUNT
CHARGES RETAINED CHARGES RETAINED CHARGES RETAINED
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
AIM Balanced Fund ................. $ 6,719,092 $ 1,172,743 $ 4,100,493 $ 672,146 $ 3,212,414 $ 611,603
AIM Global Utilities Fund ......... 407,940 71,338 376,255 57,864 545,746 95,058
AIM High Yield Fund ............... 10,554,990 1,822,464 12,115,351 2,043,967 10,452,011 1,965,594
AIM Income Fund ................... 1,727,399 340,185 1,158,790 203,261 1,346,651 248,078
AIM Intermediate Government Fund .. 1,129,232 196,016 648,578 116,124 1.056,724 204,498
AIM Money Market Fund ............. 1,738,598 347,757 2,470,808 443,904 3,696,001 736,782
AIM Municipal Bond Fund ........... 556,829 100,100 480,346 87,434 624,162 122,269
AIM Select Growth Fund ............ 778,128 136,229 895,672 143,669 1,266,626 219,373
AIM Value Fund .................... 30,111,088 4,259,204 31,118,672 4,660,735 46,277,225 7,792,991
</TABLE>
The following chart reflects the contingent deferred sales charges paid
by Class A and Class B shareholders for the years ended December 31, 1998, 1997
and 1996, and by Class C shareholders for the year ended December 31, 1998 and
for the period from August 4, 1997 through December 31, 1997:
61
<PAGE> 220
<TABLE>
<CAPTION>
1998 1997 1996
----------- ------------- ------------
<S> <C> <C> <C>
AIM Balanced Fund............................................ $ 106,255 $ 99,075 $ 50,028
AIM Global Utilities Fund.................................... 71,709 88,250 145,184
AIM High Yield Fund.......................................... 660,651 581,549 976,702
AIM Income Fund.............................................. 99,010 45,242 65,445
AIM Intermediate Government Fund............................. 108,148 131,697 82,525
AIM Money Market Fund........................................ 905,887 344,545 211,316
AIM Municipal Bond Fund...................................... 48,077 44,830 49,906
AIM Select Growth Fund....................................... 105,783 109,547 105,215
AIM Value Fund............................................... 1,498,642 1,752,662 1,988,299
</TABLE>
SALES CHARGES AND DEALER CONCESSIONS
CATEGORY 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 Basic Value 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 Japan Growth Fund, AIM Large Cap Growth Fund, AIM
Mid Cap Equity Fund, AIM New Pacific Growth Fund, AIM Select Growth Fund, AIM
Small Cap Growth Fund, AIM Small Cap Opportunities 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>
CATEGORY 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 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 High Yield Fund II, AIM Income Fund,
AIM Intermediate Government Fund, AIM Latin American Fund, AIM Municipal Bond
Fund, AIM Strategic Income Fund and AIM Tax-Exempt Bond Fund of Connecticut.
62
<PAGE> 221
<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>
CATEGORY 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 as set forth below.
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. 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
63
<PAGE> 222
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. 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.
AIM Distributors may pay investment dealers or other financial service
firms for share purchases (measured on an annual basis) of Class A Shares of all
AIM Funds except AIM Limited Maturity Treasury Fund, AIM Tax-Free Intermediate
Fund and AIM Tax-Exempt Cash Fund sold at net asset value to an employee benefit
plan 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.
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 AIM Funds will not be taken into account in
determining whether a purchase qualifies for a reduction in initial sales
charges.
64
<PAGE> 223
The term "purchaser" means:
o 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);
o a 403(b) plan, the employer/sponsor of which is an organization
described under Section 501(c)(3) of the Internal Revenue Code of
1986, as amended (the "Code"), if:
a. the employer/sponsor must submit contributions for all
participating employees in a single contribution transmittal
(i.e., the Funds will not accept contributions submitted
with respect to individual participants);
b. each transmittal must be accompanied by a single check or
wire transfer; and
c. all new participants must be added to the 403(b) plan by
submitting an application on behalf of each new participant
with the contribution transmittal;
o a trustee or fiduciary purchasing for a single trust, estate or
single fiduciary account (including a pension, profit-sharing or
other employee benefit trust created pursuant to a plan qualified
under Section 401 of the Code) and 457 plans, although more than
one beneficiary or participant is involved;
o a Simplified Employee Pension (SEP), Salary Reduction and other
Elective Simplified Employee Pension account (SAR-SEP) or a
Savings Incentive Match Plans for Employees IRA (SIMPLE IRA),
where the employer has notified the distributor in writing that
all of its related employee SEP, SAR-SEP or SIMPLE IRA accounts
should be linked; or
o any other organized group of persons, whether incorporated or not,
provided the organization has been in existence for at least six
months and has some purpose other than the purchase at a discount
of redeemable securities of a registered investment company.
Investors or dealers seeking to qualify orders for a reduced initial
sales charge must identify such orders and, if necessary, support their
qualification for the reduced charge. AIM Distributors reserves the right to
determine whether any purchaser is entitled, by virtue of the foregoing
definition, to the reduced sales charge. No person or entity may distribute
shares of the AIM Funds without payment of the applicable sales charge other
than to persons or entities who qualify for a reduction in the sales charge as
provided herein.
1. LETTERS OF INTENT. A purchaser, as previously defined, may pay
reduced initial sales charges by completing the appropriate section of the
account application and by fulfilling a Letter of Intent ("LOI"). The LOI
privilege is also available to holders of the Connecticut General Guaranteed
Account, established for tax qualified group annuities, for contracts purchased
on or before June 30, 1992. The LOI confirms such purchaser's intention as to
the total investment to be made in shares of the AIM Funds (except for (i) Class
A shares of AIM Tax-Exempt Cash Fund, and AIM Cash Reserve Shares of AIM Money
Market Fund, (ii) Class B and Class C shares of the AIM Funds) and (iii) AIM
Floating Rate Fund 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
65
<PAGE> 224
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 AIM 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, (ii) Class B and Class C shares of the AIM
Funds) and (iii) AIM Floating Rate Fund 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.
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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; (b) exchanges of shares of certain other funds; (c) use of the
reinstatement privilege; or (d) a merger, consolidation or acquisition of assets
of a fund.
The following purchasers will not pay initial sales charges on
purchases of Class A shares because there is a reduced sales effort involved in
sales to these purchasers:
o AIM Management and its affiliates, or their clients;
o Any current or retired officer, director or employee (and members
of their immediate family) of AIM Management, its affiliates or
The AIM Family of Funds,(R) and any foundation, trust or employee
benefit plan established exclusively for the benefit of, or by,
such persons;
o Any current or retired officer, director, or employee (and
members of their immediate family), of CIGNA Corporation or its
affiliates, or of First Data Investor Services Group; and any
deferred compensation plan for directors of investment companies
sponsored by CIGNA Investments, Inc. or its affiliates;
o Sales representatives and employees (and members of their
immediate family) of selling group members or financial
institutions that have arrangements with such selling group
members;
o Purchases through approved fee-based programs;
o Employee benefit plans designated as purchasers as defined above,
and non-qualified plans offered in conjunction therewith,
provided the initial investment in the plan(s) is at least $1
million; the sponsor signs a $1 million LOI; the
employer-sponsored plan has at least 100 eligible employees; or
all plan transactions are executed through a single omnibus
account per Fund and the financial institution or service
organization has entered into the appropriate agreement with the
distributor. Section 403(b) plans sponsored by public educational
institutions are not eligible for a sales charge exception based
on the aggregate investment made by the plan or the number of
eligible employees. Purchases of AIM Small Cap Opportunities Fund
by such plans are subject to initial sales charges;
o Shareholders of record of Advisor Class shares of AIM
International Growth Fund or AIM Worldwide Growth Fund on
February 12, 1999 who have continuously owned shares of the AIM
Funds;
o Shareholders of record or discretionary advised clients of any
investment advisor holding shares of AIM Weingarten Fund or AIM
Constellation Fund on September 8, 1986, or of AIM Charter Fund
on November 17, 1986, who have continuously owned shares having a
market value of at least $500 and who purchase additional shares
of the same Fund;
o Unitholders of G/SET series unit investment trusts investing
proceeds from such trusts in shares of AIM Weingarten Fund or AIM
Constellation Fund; provided, however, prior to the termination
date of the trusts, a unitholder may invest proceeds from the
redemption or repurchase of his units only when the investment in
shares of AIM Weingarten Fund and AIM Constellation Fund is
effected within 30 days of the redemption or repurchase;
o A shareholder of a fund that merges or consolidates with an AIM
Fund or that sells its assets to an AIM Fund in exchange for
shares of an AIM Fund;
o Shareholders of the GT Global funds as of April 30, 1987 who
since that date continually have owned shares of one or more of
these funds; and
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o 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 GT Global funds
since that time.
As used above, immediate family includes an individual and his or her
spouse, children, parents and parents of spouse.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS
Former GT Global funds Class A shares that are subject to a contingent
deferred sales charge and that were purchased before June 1, 1998 are entitled
to the following waivers from the contingent deferred sales charge otherwise due
upon redemption: (1) minimum required distributions made in connection with an
IRA, Keogh Plan or custodial account under Section 403(b) of the Code or other
retirement plan following attainment of age 70 1/2; (2) total or partial
redemptions resulting from a distribution following retirement in the case of a
tax-qualified employer-sponsored retirement plan; (3) when a redemption results
from a tax-free return of an excess contribution pursuant to Section 408(d)(4)
or (5) of the Code or from the death or disability of the employee; (4)
redemptions pursuant to a Fund's right to liquidate a shareholder's account
involuntarily; (5) redemptions pursuant to distributions from a tax-qualified
employer-sponsored retirement plan, which is invested in the former GT Global
funds, which are permitted to be made without penalty pursuant to the Code,
other than tax-free rollovers or transfers of assets, and the proceeds of which
are reinvested in the former GT Global funds; (6) redemptions made in connection
with participant-directed exchanges between options in an employer-sponsored
benefit plan; (7) redemptions made for the purpose of providing cash to fund a
loan to a participant in a tax-qualified retirement plan; (8) redemptions made
in connection with a distribution from any retirement plan or account that is
permitted in accordance with the provisions of Section 72(t)(2) of the Code, and
the regulations promulgated thereunder; (9) redemptions made in connection with
a distribution from any retirement plan or account that involves the return of
an excess deferral amount pursuant to Section 401(k)(8) or Section 402(g)(2) of
the Code; (10) redemptions made in connection with a distribution from a
qualified profit-sharing or stock bonus plan described in Section 401(k) of the
Code to a participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code
upon hardship of the covered employee (determined pursuant to Treasury
Regulation Section 1.401(k)-1(d)(2)); and (11) redemptions made by or for the
benefit of certain states, counties or cities, or any instrumentalities,
departments or authorities thereof where such entities are prohibited or limited
by applicable law from paying a sales charge or commission.
Former GT Global funds Class B shares purchased before June 1, 1998 are
subject to the following waivers from the contingent deferred sales charge
otherwise due upon redemption in addition to the waivers provided for
redemptions of currently issued Class B shares as described in a Prospectus: (1)
total or partial redemptions resulting from a distribution following retirement
in the case of a tax-qualified employer-sponsored retirement; (2) minimum
required distributions made in connection with an IRA, Keogh Plan or custodial
account under Section 403(b) of the Code or other retirement plan following
attainment of age 70 1/2; (3) a one-time reinvestment in Class B shares of a
Fund within 180 days of a prior redemption; (4) redemptions pursuant to
distributions from a tax-qualified employer-sponsored retirement plan, which is
invested in the former GT Global funds, which are permitted to be made without
penalty pursuant to the Code, other than tax-free rollovers or transfers of
assets, and the proceeds of which are reinvested in the former GT Global funds;
(5) redemptions made in connection with participant-directed exchanges between
options in an employer-sponsored benefit plan; (6) redemptions made for the
purpose of providing cash to fund a loan to a participant in a tax-qualified
retirement plan; (7) redemptions made in connection with a distribution from any
retirement plan or account that is permitted in accordance with the provisions
of Section 72(t)(2) of the Code, and the regulations promulgated thereunder; (8)
redemptions made in connection with a distribution from a qualified
profit-sharing or stock bonus plan described in Section 401(k) of the Code to a
participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code upon
hardship of the covered employee (determined pursuant to Treasury Regulation
Section 1.401(k)-1(d)(2)); and (9) redemptions made by or for the benefit of
certain states, counties or cities, or any instrumentalities, departments or
authorities thereof where such entities are prohibited or limited by applicable
law from paying a sales charge or commission.
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CDSCs will not apply to the following:
o Additional purchases of Class C 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, except that shareholders whose broker-dealers
maintain a single omnibus account with AFS 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;
o Redemptions following the death or post-purchase disability of
(1) any registered shareholders on an account or (2) a settlor
of a living trust, of shares held in the account at the time
of death or initial determination of post-purchase disability;
o Certain distributions from individual retirement accounts,
Section 403(b) retirement plans, Section 457 deferred
compensation plans and Section 401 qualified plans, where
redemptions result 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 that 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 the distributor of the
transfer no later than the time the transfer occurs; (iii)
tax-free rollovers or transfers of assets to another plan of
the type described above invested in Class B or Class C shares
of one or more of the AIM Funds; (iv) tax-free returns of
excess contributions or returns of excess deferral amounts;
and (v) distributions on the death or disability (as defined
in the Internal Revenue Code of 1986, as amended) of the
participant or beneficiary;
o Amounts from a Systematic Withdrawal Plan of up to an annual
amount of 12% of the account value on a per fund basis, at the
time the withdrawal plan is established, provided the investor
reinvests his dividends;
o Liquidation by the Fund when the account value falls below the
minimum required account size of $500;
o Investment account(s) of AIM; and
o Class C shares where the investor's dealer of record notifies
the distributor prior to the time of investment that the
dealer waives the payment otherwise payable to him.
Upon the redemption of shares in Categories I and II purchased in
amounts of $1 million or more, no CDSC will be applied in the following
situations:
o Shares held more than 18 months;
o Redemptions from employee benefit plans designated as
qualified purchasers, as defined above, where the redemptions
are in connection with employee terminations or withdrawals,
provided the total amount invested in the plan is at least
$1,000,000; the sponsor signs a $1 million LOI; or the
employer-sponsored plan has at least 100 eligible employees;
provided, however, that 403(b) plans sponsored by public
educational institutions shall qualify for the CDSC waiver 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;
o Private foundations or endowment funds;
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o Redemption of shares by the investor where the investor's
dealer waives the amounts otherwise payable to it by the
distributor and notifies the distributor prior to the time of
investment; and
o Shares acquired by exchange from Class A shares in Categories
I and II unless the shares acquired by exchange are redeemed
within 18 months of the original purchase of the Class A
shares.
HOW TO PURCHASE AND REDEEM SHARES
A description of the manner in which shares of the Funds may be
purchased appears in the Prospectus under the headings "Purchasing Shares - How
to Purchase Shares."
The sales charge normally deducted on purchases of Class A shares of
the Funds 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
listed under the caption "Reductions in Initial Sales Charges - Purchases at Net
Asset Value."
Complete information concerning the method of exchanging shares of the
Funds for shares of the other mutual funds managed or advised by AIM is set
forth in each Prospectus under the caption "Exchanging Shares."
Information concerning redemption of the Funds' shares is set forth in
the Prospectuses under the caption "Redeeming Shares - 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 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 AFS, the Funds' transfer agent, of all required documents in good order. If
such documents are not received within a reasonable time after the order is
placed, the order is subject to cancellation. While there is no charge imposed
by a Fund or by AIM Distributors (other than any applicable contingent deferred
sales charge) when shares are redeemed or repurchased, dealers may charge a fair
service fee for handling the transaction.
The right of redemption may be suspended or the date of payment
postponed when (a) trading on the New York Stock Exchange ("NYSE") is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the NYSE is closed for other than customary weekend and holiday closings, (c)
the SEC has by order permitted such suspension, or (d) an emergency as
determined by the SEC exists making disposition of portfolio securities or the
valuation of the net assets of a Fund not reasonably practicable.
A Fund's net asset value is calculated by dividing the number of
outstanding shares into the net assets of the Fund. Net assets are the excess of
a Fund's assets over its liabilities.
For AIM Money Market Fund: The Fund may use the amortized cost method
to determine its net asset value so long as the Fund does not (a) purchase any
instrument with a remaining maturity greater than 397 days (for these purposes,
repurchase agreements shall not be deemed to involve the purchase by the Fund of
the
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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, 1998, AIM VALUE
FUND - Class A shares had 219,528,926 shares outstanding, net assets of
$8,823,093,519 and a net asset value per share of $40.19. The offering price,
therefore, was $42.53.
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.
BACKUP WITHHOLDING
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 generally be subject to 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
taxpayer identification number ("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
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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. 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:
o a corporation
o an organization exempt from tax under Section 501(a), an
individual retirement plan (IRA), or a custodial account under
Section 403(b)(7)
o the United States or any of its agencies or instrumentalities
o a state, the District of Columbia, a possession of the United
States, or any of their political subdivisions or
instrumentalities
o a foreign government or any of its political subdivisions,
agencies or instrumentalities
o an international organization or any of its agencies or
instrumentalities
o a foreign central bank of issue
o a dealer in securities or commodities required to register in
the U.S. or a possession of the U.S.
o a futures commission merchant registered with the Commodity
Futures Trading Commission
o a real estate investment trust
o an entity registered at all times during the tax year under
the 1940 Act
o a common trust fund operated by a bank under Section 584(a)
o a financial institution
o a middleman known in the investment community as a nominee or
listed in the most recent publication of the American Society
of Corporate Secretaries, Inc., Nominee List
o a trust exempt from tax under Section 664 or described in
Section 4947
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
IRS PENALTIES -- Investors who do not supply the AIM Funds with a
correct TIN will be subject to a $50 penalty imposed by the IRS unless such
failure is due to reasonable cause and not willful neglect. If an investor
falsifies information on this form or makes any other false statement resulting
in no backup withholding on an account which should be subject to backup
withholding, such investor may be subject to a $500 penalty imposed by the IRS
and to certain criminal penalties including fines and/or imprisonment.
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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 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.
NET ASSET VALUE DETERMINATION
For AIM Money Market Fund: The net asset value per share of the Fund
is determined daily as of 12:00 noon and the close of trading on the NYSE
(generally 4:00 p.m. Eastern time) on each business day of the Fund. In the
event the NYSE closes early (i.e., before 4:00 p.m. Eastern time) on a
particular day, the net asset value of a Fund is determined as of the close of
the NYSE on such day. Net asset value per share is determined by dividing the
value of the Fund's securities, cash and other assets (including interest
accrued but not collected) attributable to a particular class, less all its
liabilities (including accrued expenses and dividends payable) attributable to
that class, by the number of shares outstanding of that Class and rounding the
resulting per share net asset value to the nearest one cent. Determination of
the net asset value per share is made in accordance with generally accepted
accounting principles.
The securities of the Fund are valued on the basis of amortized cost.
This method values a security at its cost on the date of purchase and thereafter
assumes a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Fund would receive if the security were sold. During
such periods, the daily yield on shares of the Fund computed as described under
"Performance Information" may differ 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
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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. For purposes of determining net asset value per share, futures and options
contract closing prices which are available fifteen (15) minutes after the close
of trading on the NYSE will generally be used. 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 closing bid price 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 on the basis
of prices provided by independent pricing services. Each security reported on
the NASDAQ National Market System is valued at the last sales price on the
valuation date or absent a last sales price, at the closing bid price on that
day; option contracts are valued at the mean between the closing bid and asked
prices on the exchange where the contracts are principally traded; futures
contracts are valued at final settlement price quotations from the primary
exchange on which they are traded. 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, dividend rate, 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 for which
market quotations are not reflective of fair value 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] [at]
amortized cost, which approximates market value.
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.
Fund securities primarily traded in foreign markets may be traded in
such markets on days which are not business days of the Fund. Because the net
asset value per share of each Fund is determined only on business days of the
Fund, the net asset value per share of a Fund may be significantly affected on
days when an investor can not exchange or redeem shares of the Fund.
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Funds and their shareholders that are not
described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of each Fund or its shareholders, and the
discussion here and in the Prospectus is not intended as a substitute for
careful tax planning.
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
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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
losses) 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 may use "equalization accounting" in determining the portion
of its net investment income and capital gain net income that has been
distributed. A Fund that elects to use equalization accounting will allocate a
portion of its realized investment income and capital gains to redemptions of
Fund shares and will reduce the amount of such income and gains that it
distributes in cash. However, each Fund intends to make cash distributions for
each taxable year in an aggregate amount that is sufficient to satisfy the
Distribution Requirement without taking into account its use of equalization
accounting. The Internal Revenue Service has not published any guidance
concerning the methods to be used in allocating investment income and capital
gains to redemptions of shares. In the event that the Internal Revenue Service
determines that a Fund is using an improper method of allocation and has
underdistributed its net investment income and capital gain net income for any
taxable year, such Fund may be liable for additional federal income tax.
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.
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 to
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noncorporate shareholders 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.
For federal income tax purposes, exercise of the reinstatement
privilege with respect to Class A shares of a Fund that have not been held for
more than ninety days may increase the amount of gain or reduce the amount of
loss recognized in the original redemption transaction because the initial sales
charge will not be taken into account in determining such gain or loss to the
extent there has been a reduction in the initial sales charge that would
otherwise be imposed upon reinvestment.
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 unless the closed
transaction exception applies.
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 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. Some or all of the interest that the Fund receives from
municipal securities might become taxable by law or determined by the Internal
Revenue Service to be taxable. This statement also provides a breakdown showing
the percentage of such income that came from each state. In addition, the Fund
reports for FIT purposes any net realized capital gains and any ordinary income
from the Fund's short-term holdings. 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
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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.
DESCRIPTION OF MONEY MARKET INSTRUMENTS
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.
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.
BANKER'S 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.
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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: 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. The notes may be secured or unsecured.
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.
SHAREHOLDER INFORMATION
This information supplements the discussion in each Fund's Prospectus
under the title "Shareholder Information."
TIMING OF PURCHASE ORDERS. 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. If a check used to purchase
shares does not clear, or if any investment order must be canceled due to
nonpayment, the investor will be responsible for any resulting loss to an AIM
Fund or to AIM Distributors.
SHARE CERTIFICATES. AIM Funds will issue share certificates upon
written request to AFS. Otherwise, shares are held on the shareholder's behalf
and recorded on the Fund books. AIM Funds will not issue certificates for shares
held in prototype retirement plans.
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
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or Class C Shares of the AIM 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.
Each AIM Fund bears its share of the cost of operating the Systematic
Withdrawal Plan.
TERMS AND CONDITIONS OF EXCHANGES. If a shareholder is exchanging into
a fund paying daily dividends, 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.
EXCHANGES BY TELEPHONE. 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 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.
By signing an 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. The Transfer Agent
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.
REDEMPTIONS BY TELEPHONE. By signing an 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
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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.
SIGNATURE GUARANTEES. In addition to those circumstances listed in the
"Shareholder Information" section of each Fund's prospectus, signature
guarantees are required in the following situations: (1) requests to transfer
the registration of shares to another owner; (2) telephone exchange and
telephone redemption authorization forms; (3) changes in previously designated
wiring or electronic funds transfer instructions; and (4) 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.
AIM Funds may waive or modify any signature guarantee requirements at any time.
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 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.
DIVIDENDS AND DISTRIBUTIONS. 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.
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.
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 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.
MISCELLANEOUS INFORMATION
CHARGES FOR CERTAIN ACCOUNT INFORMATION
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.
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AUDIT REPORTS
The Board of Trustees will issue to shareholders semi-annually the
Funds' financial statements. Financial statements, audited by independent
auditors, will be issued annually. The firm of KPMG LLP, 700 Louisiana, Houston,
Texas 77002, currently serves as the auditors of each Fund.
LEGAL MATTERS
Legal matters for the Trust have been passed upon by Ballard Spahr
Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, Pennsylvania 19103.
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), P.O. Box
4739, Houston, Texas 77210-4739 acts as transfer and dividend disbursing agent
for the Funds. These services do not include any supervisory function over
management or provide any protection against any possible depreciation of
assets. The Funds pay the Custodians and the Transfer Agent such compensation as
may be agreed upon from time to time.
Chase Bank of Texas, N. A., 712 Main, Houston, Texas 77002, serves as
Sub-Custodian for retail purchases of the AIM Funds.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") has
entered into an agreement with the Company (and certain other AIM Funds), First
Data Investor Service Group and Financial Data Services, Inc., pursuant to which
MLPF&S has agreed to perform certain shareholder sub-accounting services for its
customers who beneficially own shares of the Fund(s).
DESCRIPTION OF OBLIGATIONS ISSUED OR GUARANTEED
BY U.S. GOVERNMENT AGENCIES OR INSTRUMENTALITIES
AIM INTERMEDIATE GOVERNMENT FUND may invest in "Agency Securities,"
which include 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.
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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 pool 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.
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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.
RATINGS OF SECURITIES
The following is a description of the factors underlying the
commercial paper and debt ratings of Moody's, S&P, Fitch IBCA, Inc. ("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.
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<PAGE> 243
BA: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
CAA: Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
CA: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from Aa to B. The modifier 1 indicates that the company
ranks in the higher end of its generic rating category; the 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.
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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.
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.
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<PAGE> 245
MOODY'S COMMERCIAL PAPER RATINGS
Moody's commercial paper ratings are opinions of the ability of issues
to repay punctually promissory obligations not having an original maturity in
excess of nine months.
PRIME-1: Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structures with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
PRIME-2: Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
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 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 exposure
to adverse conditions.
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S&P DUAL RATINGS
S&P assigns "dual" ratings to all debt issues that have a put option
or demand feature as part of their structure.
The first rating addresses the likelihood of repayment of principal
and interest as due, and the second rating addresses only the demand feature.
The long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols for the put option (for
example, AAA/A-1+). With short-term demand debt, the note rating symbols are
used with the commercial paper rating symbols (for example, SP-1+/A-1+).
S&P MUNICIPAL NOTE RATINGS
An S&P note rating reflects the liquidity factors and market-access
risks unique to notes. Notes maturing in three years or less will likely receive
a note rating. Notes maturing beyond three years will most likely receive a
long-term debt rating. The following criteria will be used in making that
assessment: amortization schedule (the larger the final maturity relative to
other maturities, the more likely the issue will be treated as a 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.
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D: Debt with this rating is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless it is believed that such
payments will be made during such grace period.
FITCH INVESTMENT GRADE BOND RATINGS
Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be
provided by insurance policies or financial guaranties unless otherwise
indicated.
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.
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<PAGE> 248
CONDITIONAL: A conditional rating is premised on the successful completion of a
project or the occurrence of a specific event.
SUSPENDED: A rating is suspended when Fitch deems the amount of information
available from the issuer to be inadequate for rating purposes.
WITHDRAWN: A rating will be withdrawn when an issue matures or is called or
refinanced, and, at Fitch's discretion, when an issuer fails to furnish proper
and timely information.
FITCHALERT: Ratings are placed on FitchAlert to notify investors of an
occurrence that is likely to result in a rating change and the likely direction
of such change. These are designated as "Positive," indicating a potential
upgrade, "Negative," for potential downgrade, or "Evolving," where ratings may
be raised or lowered. FitchAlert is relatively short-term, and should be
resolved within 12 months.
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.
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DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "DDD", "DD", or "D" categories.
FITCH SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
The short-term rating places greater emphasis than a long-term rating
on the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
Fitch short-term ratings are as follows:
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+."
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as for
issues assigned "F-1+" and "F-1" ratings.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse changes could cause these securities to be rated below
investment grade.
F-S: Weak Credit Quality. Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are vulnerable
to near-term adverse changes in financial and economic conditions.
D: Default. Issues assigned this rating are in actual or imminent payment
default.
LOC: The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
DUFF & PHELPS LONG-TERM RATINGS
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA AND AA-: High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.
A+, A AND A-: Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.
BBB+, BBB AND BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
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BB+, BB AND BB-: Below investment grade but deemed likely to meet obligations
when due. Present or prospective financial protection factors fluctuate
according to industry conditions or company fortunes. Overall quality may move
up or down frequently within this category.
B+, B AND B-: Below investment grade and possessing risk that obligations will
not be met when due. Financial protection factors will fluctuate widely
according to economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this category or into
a higher or lower rating grade.
CCC: Well below investment grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD: Defaulted debt obligations. Issuer failed to meet scheduled principal and/or
interest payments.
DP: Preferred stock with dividend arrearages.
DUFF & PHELPS SHORT-TERM RATINGS
D - 1+: Highest certainty of timely payment. Short-term liquidity, including
internal operating factors and/or access to alternative sources of funds, is
outstanding and safety is just below risk-free U.S. Treasury short-term
obligations.
D - 1: Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
D - 1-: High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
D - 2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
D - 3: Satisfactory liquidity and other protection factors qualify issue as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
D - 4: Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service. Operating factors and market access
may be subject to a high degree of variation.
D - 5: Issuer failed to meet scheduled principal and/or interest payments.
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FINANCIAL STATEMENTS
FS
<PAGE> 252
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, 1998, 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 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. Our procedures included confirmation of
securities owned as of December 31, 1998, 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, 1998, 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 five-year period then ended, in conformity
with generally accepted accounting principles.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
February 5, 1999
FS-1
<PAGE> 253
SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
DOMESTIC BONDS & NOTES-24.70%
AIRLINES-1.19%
Airplanes Pass Through Trust,
Sub. Bonds, 10.875%, 03/15/19 $ 500,000 $ 525,315
- ---------------------------------------------------------------
America West Airlines, Inc.,
Pass Through Ctfs., 6.86%,
07/02/04 5,867,515 5,854,020
- ---------------------------------------------------------------
American Airlines, Equipment
Trust, 9.90%, 01/15/11 2,955,000 3,817,239
- ---------------------------------------------------------------
Delta Air Lines, Inc.,
Deb., 9.00%, 05/15/16 5,000,000 5,744,950
- ---------------------------------------------------------------
Medium Term Notes, 8.52%,
01/30/04 2,000,000 2,247,440
- ---------------------------------------------------------------
Northwest Airlines Corp., Pass
Through Ctfs., 7.248%,
07/02/14 4,698,876 4,810,638
- ---------------------------------------------------------------
United Air Lines, Inc., Pass
Thru Ctfs., 9.56%, 10/19/18 3,750,000 4,602,375
- ---------------------------------------------------------------
27,601,977
- ---------------------------------------------------------------
AUTOMOBILES-0.24%
General Motors Corp., Deb.,
8.80%, 03/01/21 400,000 505,972
- ---------------------------------------------------------------
Rocs Series CHR-1998-1,
Collateral Trust, 6.50%,
08/01/18(a) (Acquired
05/19/98; Cost $4,949,750) 5,000,000 5,141,650
- ---------------------------------------------------------------
5,647,622
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.04%
Wachovia Corp., Sub. Notes,
6.375%, 02/01/09 800,000 838,544
- ---------------------------------------------------------------
BANKS (MONEY CENTER)-0.68%
Bankers Trust New York Corp.,
Unsec. Sub. Notes, 7.50%,
11/15/15 3,000,000 3,157,440
- ---------------------------------------------------------------
Chase Manhattan Corp., Unsec.
Sub Notes, 6.375%, 04/01/08 4,400,000 4,551,228
- ---------------------------------------------------------------
Deutsche Bank Financial, Gtd.
Unsec. Sub. Deb., 6.70%,
12/13/06 3,500,000 3,688,265
- ---------------------------------------------------------------
First Union Bancorp,
Sub. Deb., 7.50%, 04/15/35 3,330,000 3,654,209
- ---------------------------------------------------------------
Sub. Notes, 6.375%, 01/15/09 800,000 832,280
- ---------------------------------------------------------------
15,883,422
- ---------------------------------------------------------------
BANKS (REGIONAL)-1.64%
HSBC Americas Inc., Unsec. Sub.
Notes, 7.00%, 11/01/06 5,430,000 5,663,979
- ---------------------------------------------------------------
Marshall & Ilsley-Series D,
Medium Term Notes, 6.43%,
10/15/02 4,000,000 4,115,800
- ---------------------------------------------------------------
Mercantile Bancorp Inc.,
Sub. Notes, 6.375%, 01/15/04 700,000 716,464
- ---------------------------------------------------------------
Unsec. Sub. Notes, 7.30%,
06/15/07 7,500,000 8,219,250
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
BANKS (REGIONAL)-(CONTINUED)
Signet Banking Corp., Sub.
Notes, 7.80%, 09/15/06 $ 5,000,000 $ 5,631,700
- ---------------------------------------------------------------
Swiss Bank Corp.-NY, Sub. Deb.,
7.375%, 07/15/15 5,000,000 5,348,900
- ---------------------------------------------------------------
US Bancorp, Sub. Deb., 7.50%,
06/01/26 7,500,000 8,379,075
- ---------------------------------------------------------------
38,075,168
- ---------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-0.16%
Coca-Cola Enterprises, Inc.,
Putable Notes, 8.35%,
06/20/20(b) 15,000,000 3,846,600
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-0.97%
Comcast Cable Communications,
Notes, 8.50%, 05/01/27 3,400,000 4,266,796
- ---------------------------------------------------------------
Unsec. Unsub. Notes, 6.20%,
11/15/08 2,750,000 2,804,945
- ---------------------------------------------------------------
CSC Holdings, Inc.,
Sr. Unsec. Deb., 7.625%,
07/15/18 3,100,000 3,174,152
- ---------------------------------------------------------------
Sr. Unsec. Notes, 7.875%,
12/15/07 4,200,000 4,430,160
- ---------------------------------------------------------------
TCI Communications Inc., Sr.
Notes, 8.00%, 08/01/05 2,000,000 2,255,140
- ---------------------------------------------------------------
USA Networks, Inc., Sr. Notes,
6.75%, 11/15/05(a)
(Acquisition 11/30/98; Cost
$5,615,344) 5,600,000 5,614,896
- ---------------------------------------------------------------
22,546,089
- ---------------------------------------------------------------
CHEMICALS-0.90%
Airgas Inc., Medium Term Notes,
7.14%, 03/08/04 6,700,000 6,841,504
- ---------------------------------------------------------------
Solutia Inc., Sr. Unsec. Deb.,
6.72%, 10/15/37 7,480,000 7,599,680
- ---------------------------------------------------------------
Union Carbide Corp., Deb.,
6.79%, 06/01/25 6,500,000 6,593,470
- ---------------------------------------------------------------
21,034,654
- ---------------------------------------------------------------
CHEMICALS (DIVERSIFIED)-0.24%
Monsanto Co., Deb., 6.50%,
12/01/18(a) (Acquired
12/04/98; Cost $5,477,010) 5,500,000 5,538,335
- ---------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.21%
Millennium America Inc., Co.
Guaranty Notes, 7.00%,
11/15/06 5,000,000 4,934,550
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.38%
Comverse Technology Inc., Conv.
Unsec. Sub. Debs, 4.50%,
07/01/05 7,000,000 8,855,000
- ---------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 254
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
COMPUTERS (HARDWARE)-0.37%
Candescent Technology Corp.,
Conv. Sr. Sub. Deb., 7.00%,
05/01/03(a) (Acquisition
04/17/98-11/03/98; Cost
$9,245,000) $ 9,500,000 $ 8,550,000
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-0.81%
Network Associates Inc., Conv.
Unsec. Sub. Deb., 4.00%,
02/12/18(b) 15,000,000 9,225,000
- ---------------------------------------------------------------
Veritas Software Corp., Conv.
Unsec. Sub. Notes, 5.25%,
11/01/04 6,000,000 9,697,500
- ---------------------------------------------------------------
18,922,500
- ---------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.22%
American Greetings, Unsec.
Notes, 6.10%, 08/01/28 4,930,000 5,099,986
- ---------------------------------------------------------------
CONSUMER FINANCE-0.90%
Beneficial Corp.-Series H,
Medium Term Notes, 6.94%,
12/15/06 4,750,000 5,015,572
- ---------------------------------------------------------------
Commercial Credit Co.,
Putable Notes, 6.625%,
06/01/15 2,000,000 2,066,660
- ---------------------------------------------------------------
Putable Notes, 7.875%,
02/01/25 4,000,000 4,728,080
- ---------------------------------------------------------------
Countrywide Funding Corp., Sub.
Notes, 8.25%, 07/15/02 500,000 530,290
- ---------------------------------------------------------------
Ford Motor Credit, Notes, 6.75%,
08/15/08 800,000 862,208
- ---------------------------------------------------------------
GMAC, Notes, 9.00%, 10/15/02 4,175,000 4,659,216
- ---------------------------------------------------------------
Household Finance Corp., Notes,
7.125%, 09/01/05 3,000,000 3,192,120
- ---------------------------------------------------------------
21,054,146
- ---------------------------------------------------------------
ELECTRIC COMPANIES-2.33%
Arizona Public Service Co.,
Notes, 6.25%, 01/15/05 5,000,000 5,132,200
- ---------------------------------------------------------------
CMS Energy Corp., Sr. Unsec.
Notes, 7.375%, 11/15/00 3,500,000 3,521,980
- ---------------------------------------------------------------
Commonwealth Edison Co., First
Mortgage Notes, 7.50%,
07/01/13 7,000,000 7,915,320
- ---------------------------------------------------------------
El Paso Electric Co.,
Series D Sec. First Mortgage
Bonds, 8.90%, 02/01/06 4,750,000 5,350,875
- ---------------------------------------------------------------
Series E Sec. First Mortgage
Bonds, 9.40%, 05/01/11 4,000,000 4,542,280
- ---------------------------------------------------------------
Niagara Mohawk Power Corp.,
First Mortgage Notes, 9.25%,
10/01/01 3,630,000 3,932,923
- ---------------------------------------------------------------
First Mortgage Notes, 6.625%,
07/01/05 7,200,000 7,443,504
- ---------------------------------------------------------------
Series G Sr. Unsec. Notes,
7.75%, 10/01/08 4,300,000 4,700,330
- ---------------------------------------------------------------
UtiliCorp United, Inc., Sr.
Unsec. Notes, 6.70%, 10/15/06 3,000,000 3,117,090
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
ELECTRIC COMPANIES-(CONTINUED)
Western Resources Inc.,
Sr. Unsec. Notes, 6.25%,
08/15/03 $ 1,925,000 $ 1,963,038
- ---------------------------------------------------------------
Sr. Unsec. Notes, 7.125%,
08/01/09 6,000,000 6,531,600
- ---------------------------------------------------------------
54,151,140
- ---------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.05%
Raytheon Co., Deb., 7.20%,
08/15/27 1,000,000 1,085,900
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-0.21%
Amkor Technology, Inc., Conv.
Unsec. Sub. Notes, 5.75%,
05/01/03 5,000,000 4,950,000
- ---------------------------------------------------------------
ENGINEERING & CONSTRUCTION-0.11%
EMCOR Group, Inc., Conv. Unsec.
Sub. Notes, 5.75%, 04/01/05 3,000,000 2,568,750
- ---------------------------------------------------------------
ENTERTAINMENT-0.78%
Time Warner, Inc.,
Deb., 9.125%, 01/15/13 9,070,000 11,406,523
- ---------------------------------------------------------------
Unsec. Deb., 6.85%, 01/15/26 6,400,000 6,733,056
- ---------------------------------------------------------------
18,139,579
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.05%
Associates Corp. of North
America,
Series B Sr. Deb., 7.95%,
02/15/10 5,900,000 6,827,539
- ---------------------------------------------------------------
Sr. Deb., 6.95%, 11/01/18 3,500,000 3,724,910
- ---------------------------------------------------------------
BellSouth Capital Funding, Deb.,
6.04%, 11/15/26 4,000,000 4,124,120
- ---------------------------------------------------------------
Chrysler Financial Corp., Deb.,
8.50%, 02/01/18 150,000 155,466
- ---------------------------------------------------------------
Citigroup, Inc., Deb., 6.625%,
01/15/28 5,000,000 4,936,750
- ---------------------------------------------------------------
Finova Capital Corp., Unsec.
Notes, 7.40%, 05/06/06 3,750,000 3,945,975
- ---------------------------------------------------------------
General Electric Capital Corp.,
Deb., 8.30%, 09/20/09 500,000 609,740
- ---------------------------------------------------------------
24,324,500
- ---------------------------------------------------------------
FOODS-0.85%
ConAgra, Inc.,
Sr. Notes, 6.70%, 08/01/27 7,500,000 7,867,500
- ---------------------------------------------------------------
Sr. Unsec. Notes, 7.125%,
10/01/26 7,000,000 7,479,080
- ---------------------------------------------------------------
Grand Metro Investment, Gtd.
Bonds, 7.45%, 04/15/35 4,000,000 4,422,400
- ---------------------------------------------------------------
19,768,980
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-0.45%
Atrix Labs Inc., Conv. Sub.
Notes, 7.00%, 12/01/04(a)
(Acquired 11/21/97-03/03/98;
Cost $3,055,000) 3,000,000 2,122,500
- ---------------------------------------------------------------
Elan Finance Corp., Conv. Gtd.
Sub. Notes, 3.25%,
12/14/18(a)(b) (Acquired
12/08/98; Cost $7,834,965) 14,930,000 8,398,125
- ---------------------------------------------------------------
10,520,625
- ---------------------------------------------------------------
</TABLE>
FS-3
<PAGE> 255
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
HEALTH CARE (HOSPITAL MANAGEMENT)-0.17%
Tenet Healthcare Corp., Sr.
Unsec. Notes, 8.00%, 01/15/05 $ 3,750,000 $ 3,849,713
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.13%
Alternative Living Services,
Conv. Sub. Deb., 5.25%,
12/15/02 2,500,000 3,090,625
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-0.33%
Beckman Coulter, Sr. Unsec. Gtd.
Notes, 7.45%, 03/04/08 5,700,000 5,798,553
- ---------------------------------------------------------------
Boston Scientific, Unsec. Notes,
6.625%, 03/15/05 2,000,000 1,950,260
- ---------------------------------------------------------------
7,748,813
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.09%
Res-Care Inc., Conv. Sub. Notes,
6.00%, 12/01/04(a) (Acquired
11/18/97; Cost $1,500,000) 1,500,000 2,075,625
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.28%
Sun Life Canada Capital Trust,
Gtd. Notes, 8.526%,
05/29/49(a) (Acquired
11/05/98; Cost $2,338,097) 2,225,000 2,415,037
- ---------------------------------------------------------------
Torchmark Corp., Notes, 7.875%,
05/15/23 4,000,000 4,158,080
- ---------------------------------------------------------------
6,573,117
- ---------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-0.58%
Florida Windstorm, Sr. Notes,
6.85%, 08/25/07(a) (Acquired
09/05/97; Cost $7,498,875) 7,500,000 7,899,053
- ---------------------------------------------------------------
USF&G Corp., Gtd. Bonds, 8.47%,
01/10/27 5,000,000 5,615,550
- ---------------------------------------------------------------
13,514,603
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-0.44%
Merrill Lynch & Co., Inc.,
Unsec. Notes, 6.875%, 11/15/18 9,950,000 10,280,141
- ---------------------------------------------------------------
LODGING-HOTELS-0.24%
Hilton Hotels Corp., Sr. Unsec.
Notes, 7.20%, 12/15/09 5,000,000 4,970,550
- ---------------------------------------------------------------
ITT Corp., Unsec. Deb., 7.375%,
11/15/15 750,000 638,100
- ---------------------------------------------------------------
5,608,650
- ---------------------------------------------------------------
NATURAL GAS-1.19%
Enron Corp.,
Notes, 6.75%, 08/01/09 9,080,000 9,441,112
- ---------------------------------------------------------------
Sr. Sub. Deb., 6.75%, 07/01/05 800,000 825,880
- ---------------------------------------------------------------
Ferrellgas Partners, Series B
Sr. Sec. Gtd. Notes, 9.375%,
06/15/06 1,000,000 1,005,000
- ---------------------------------------------------------------
K N Energy, Inc., Unsec. Deb.,
7.35%, 08/01/26 6,350,000 6,700,203
- ---------------------------------------------------------------
National Fuel Gas Co., Series D
Medium Term Notes, 6.303%,
05/27/08 8,600,000 8,886,552
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
NATURAL GAS-(CONTINUED)
PanEnergy Corp., Notes, 7.875%,
08/15/04 $ 750,000 $ 823,478
- ---------------------------------------------------------------
27,682,225
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.14%
R & B Falcon Corp.,
Sr. Notes, 9.50%, 12/15/08(a)
(Acquired 12/17/98; Cost
$1,000,000) 1,000,000 1,005,000
- ---------------------------------------------------------------
Series B Sr. Unsec. Notes,
6.95%, 04/15/08 2,500,000 2,171,425
- ---------------------------------------------------------------
3,176,425
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.49%
Louis Dreyfus Natural Gas,
Notes, 6.875%, 12/01/07 5,000,000 4,839,350
- ---------------------------------------------------------------
Tennessee Gas Pipeline Co.,
Bonds, 7.00%, 03/15/27 4,000,000 4,188,480
- ---------------------------------------------------------------
Union Pacific Resources Group
Inc., Deb., 7.50%, 10/15/26 2,500,000 2,413,475
- ---------------------------------------------------------------
11,441,305
- ---------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-0.33%
Quaker State Corp., Notes,
6.625%, 10/15/05 2,840,000 2,929,971
- ---------------------------------------------------------------
Tosco Corp., Unsec. Deb., 7.80%,
01/01/27 4,450,000 4,708,723
- ---------------------------------------------------------------
7,638,694
- ---------------------------------------------------------------
PERSONAL CARE-0.18%
Alberto-Culver Corp., Unsec.
Deb., 6.375%, 06/15/28 4,000,000 4,191,520
- ---------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-0.41%
AES Corp.,
Sr. Sub. Notes, 10.25%,
07/15/06 1,000,000 1,082,500
- ---------------------------------------------------------------
Sr. Sub. Notes, 8.375%,
08/15/07 3,000,000 3,030,000
- ---------------------------------------------------------------
Indiana Michigan Power, Sec.
Lease Obligation Bonds, 9.82%,
12/07/22 1,357,348 1,842,152
- ---------------------------------------------------------------
Kincaid Generation LLC, Sec.
Bonds, 7.33%, 06/15/20(a)
(Acquired 04/30/98; Cost
$3,508,645) 3,500,000 3,495,013
- ---------------------------------------------------------------
9,449,665
- ---------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.52%
News America Holdings, Inc.,
Sr. Gtd. Deb., 9.25%, 02/01/13 4,900,000 6,116,033
- ---------------------------------------------------------------
Sr. Gtd. Putable Bonds, 7.43%,
10/01/26 5,450,000 5,924,804
- ---------------------------------------------------------------
12,040,837
- ---------------------------------------------------------------
RAILROADS-0.32%
CSX Corp.-Series C, Medium Term
Notes, 6.80%, 12/01/28 4,000,000 3,990,000
- ---------------------------------------------------------------
Norfolk Southern Corp., Putable
Bonds, 7.05%, 05/01/37 3,000,000 3,387,660
- ---------------------------------------------------------------
7,377,660
- ---------------------------------------------------------------
</TABLE>
FS-4
<PAGE> 256
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REAL ESTATE INVESTMENT
TRUST-0.30%
Health Care REIT, Inc., Sr.
Unsec. Notes, 7.625%, 03/15/08 $ 2,300,000 $ 2,219,431
- ---------------------------------------------------------------
Spieker Properties LP, Unsec.
Deb., 7.35%, 12/01/17 5,250,000 4,825,537
- ---------------------------------------------------------------
7,044,968
- ---------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-0.17%
Ingram Micro Inc., Conv. Deb.,
5.375%, 06/09/18(a)(b)
(Acquired 06/04/98; Cost
$3,981,070) 11,500,000 3,996,250
- ---------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.09%
J.C. Penney Co., Inc., Series A
Medium Term Notes, 6.50%,
06/15/02 2,015,000 2,055,219
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.24%
Sovereign Bancorp, Inc., Sub.
Notes, 8.00%, 03/15/03 5,330,000 5,607,213
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.53%
Choice Hotels International,
Inc., Sr. Unsec. Gtd. Sub.
Notes, 7.125%, 05/01/08 2,000,000 2,071,654
- ---------------------------------------------------------------
Equity Corp. International
Conv. Unsec. Sub. Deb., 4.50%,
12/31/04 1,500,000 1,798,125
- ---------------------------------------------------------------
Equity Corp. International
Conv. Unsec. Sub. Deb., 4.50%,
12/31/04(a) (Acquired
02/19/98-02/20/98; Cost
$2,501,250) 2,500,000 2,996,875
- ---------------------------------------------------------------
Protection One, Inc., Sr. Notes,
7.375%, 08/15/05(a) (Acquired
08/12/98; Cost $5,487,790) 5,500,000 5,552,470
- ---------------------------------------------------------------
12,419,124
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.41%
Affiliated Computer Services,
Conv. Sub. Notes, 4.00%,
03/15/05 3,700,000 4,516,313
- ---------------------------------------------------------------
May & Speh, Inc., Sub. Notes,
5.25%, 04/01/03 3,000,000 5,062,500
- ---------------------------------------------------------------
9,578,813
- ---------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.14%
Personnel Group of America,
Inc., Conv. Sub. Notes, 5.75%,
07/01/04(a) (Acquired
06/17/97; Cost $2,750,000) 2,750,000 3,169,375
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-1.17%
Global Telesystems Group,
Conv. Sr. Sub. Deb., 5.75%,
07/01/10 4,185,000 4,723,819
- ---------------------------------------------------------------
Sr. Sub. Notes, 8.75%,
06/30/00 2,550,000 7,184,625
- ---------------------------------------------------------------
MCI Communications Corp.,
Putable Sr. Unsec. Deb.,
7.125%, 06/15/27 5,280,000 5,615,280
- ---------------------------------------------------------------
Sr. Unsec. 6.50%, 04/15/10 5,000,000 5,257,750
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TELECOMMUNICATIONS (LONG DISTANCE)-(CONTINUED)
Sprint Capital Corp., Sr. Unsec.
Gtd. Notes, 6.875%, 11/15/28 $ 4,150,000 $ 4,324,964
- ---------------------------------------------------------------
27,106,438
- ---------------------------------------------------------------
TELEPHONE-0.80%
Alltel Corp., Unsec. Deb.,
7.00%, 03/15/16 1,500,000 1,614,585
- ---------------------------------------------------------------
GTE Florida, Inc., Unsec. Deb.,
6.86%, 02/01/28 4,750,000 5,154,842
- ---------------------------------------------------------------
GTE North Inc. Series G Unsec.
Deb., 6.73%, 02/15/28 3,000,000 3,222,930
- ---------------------------------------------------------------
SBC Communications, Inc., Deb.,
7.375%, 07/15/43 7,930,000 8,653,375
- ---------------------------------------------------------------
18,645,732
- ---------------------------------------------------------------
WASTE MANAGEMENT-0.23%
WMX Technologies, Inc., Unsec.
Putable Notes, 7.10%, 08/01/26 5,200,000 5,445,596
- ---------------------------------------------------------------
Total Domestic Bonds & Notes
(Cost $550,095,856) 574,746,413
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
DOMESTIC COMMON STOCKS-42.20%
BANKS (MONEY CENTER)-0.72%
BankAmerica Corp. 88,948 5,347,999
- ---------------------------------------------------------------
Chase Manhattan Corp. (The) 120,000 8,167,500
- ---------------------------------------------------------------
First Union Corp. 53,830 3,273,537
- ---------------------------------------------------------------
16,789,036
- ---------------------------------------------------------------
BANKS (REGIONAL)-0.86%
Bank United Corp.-Class A 110,000 4,317,500
- ---------------------------------------------------------------
CNBT Bancshares, Inc. 170,000 1,678,750
- ---------------------------------------------------------------
Colorado Business Bankshares,
Inc.(c) 150,000 1,631,250
- ---------------------------------------------------------------
Southwest Bancorp. of Texas,
Inc.(c) 270,600 4,836,975
- ---------------------------------------------------------------
Sterling Bancshares, Inc. 300,000 4,462,500
- ---------------------------------------------------------------
TCF Financial Corp. 130,000 3,144,375
- ---------------------------------------------------------------
20,071,350
- ---------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-0.31%
Coca-Cola Co. (The) 60,000 4,012,500
- ---------------------------------------------------------------
PepsiCo, Inc. 80,000 3,275,000
- ---------------------------------------------------------------
7,287,500
- ---------------------------------------------------------------
BIOTECHNOLOGY-0.64%
Biogen, Inc.(c) 75,000 6,225,000
- ---------------------------------------------------------------
Genzyme Corp.(c) 175,000 8,706,250
- ---------------------------------------------------------------
14,931,250
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-1.13%
CBS Corp.(c) 280,000 9,170,000
- ---------------------------------------------------------------
Heftel Broadcasting Corp.(c) 145,000 7,141,250
- ---------------------------------------------------------------
</TABLE>
FS-5
<PAGE> 257
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
BROADCASTING (TELEVISION, RADIO & CABLE)-(CONTINUED)
Univision Communications Inc.(c) 275,000 $ 9,951,562
- ---------------------------------------------------------------
26,262,812
- ---------------------------------------------------------------
BUILDING MATERIALS-0.17%
Group Maintenance America
Corp.(c) 325,000 3,940,625
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.29%
ADC Telecommunications, Inc.(c) 140,000 4,865,000
- ---------------------------------------------------------------
ANTEC Corp.(c) 275,000 5,534,375
- ---------------------------------------------------------------
Brightpoint, Inc.(c) 220,000 3,025,000
- ---------------------------------------------------------------
Lucent Technologies, Inc. 110,000 12,100,000
- ---------------------------------------------------------------
Tellabs, Inc.(c) 65,000 4,456,562
- ---------------------------------------------------------------
29,980,937
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-1.40%
Compaq Computer Corp. 240,000 10,065,000
- ---------------------------------------------------------------
Dell Computer Corp.(c) 160,000 11,710,000
- ---------------------------------------------------------------
International Business Machines
Corp. 37,000 6,835,750
- ---------------------------------------------------------------
Sun Microsystems, Inc.(c) 46,000 3,938,750
- ---------------------------------------------------------------
32,549,500
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-1.08%
Ascend Communications, Inc.(c) 180,000 11,835,000
- ---------------------------------------------------------------
Cisco Systems, Inc.(c) 144,000 13,365,000
- ---------------------------------------------------------------
25,200,000
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.49%
EMC Corp.(c) 135,000 11,475,000
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-3.18%
America Online, Inc.(c)(d) 194,000 31,040,000
- ---------------------------------------------------------------
Computer Associates
International, Inc. 75,000 3,196,875
- ---------------------------------------------------------------
Engineering Animation, Inc.(c) 85,000 4,590,000
- ---------------------------------------------------------------
HBO & Co. 200,000 5,737,500
- ---------------------------------------------------------------
HNC Software Inc.(c) 45,000 1,819,687
- ---------------------------------------------------------------
ISS Group, Inc.(c) 100,000 5,500,000
- ---------------------------------------------------------------
Microsoft Corp.(c) 40,000 5,547,500
- ---------------------------------------------------------------
Platinum Technology, Inc.(c) 150,000 2,868,750
- ---------------------------------------------------------------
Sterling Commerce, Inc.(c) 90,000 4,050,000
- ---------------------------------------------------------------
U.S. Web Corp.(c) 369,000 9,732,375
- ---------------------------------------------------------------
74,082,687
- ---------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.12%
Blyth Industries, Inc.(c) 87,500 2,734,375
- ---------------------------------------------------------------
CONSUMER FINANCE-0.32%
SLM Holding Corp. 155,000 7,440,000
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD &
HEALTH)-0.38%
Cardinal Health, Inc. 117,500 8,915,313
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRICAL EQUIPMENT-0.44%
General Electric Co. 100,000 $ 10,206,250
- ---------------------------------------------------------------
Sensormatic Electronics Corp. 4,392 30,469
- ---------------------------------------------------------------
10,236,719
- ---------------------------------------------------------------
ELECTRONICS
(INSTRUMENTATION)-0.27%
Quanta Services, Inc.(c) 289,500 6,387,094
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-0.45%
Applied Materials, Inc.(c) 80,000 3,415,000
- ---------------------------------------------------------------
Intel Corp. 60,000 7,113,750
- ---------------------------------------------------------------
10,528,750
- ---------------------------------------------------------------
ENTERTAINMENT-0.30%
Walt Disney Co. (The) 230,000 6,900,000
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-2.34%
American Express Co. 53,000 5,419,250
- ---------------------------------------------------------------
CIT Group, Inc. (The) 93,700 2,980,831
- ---------------------------------------------------------------
Citigroup Inc. 161,999 8,018,951
- ---------------------------------------------------------------
FINOVA Group, Inc. 50,000 2,696,875
- ---------------------------------------------------------------
Fannie Mae 160,000 11,840,000
- ---------------------------------------------------------------
Freddie Mac 130,000 8,376,875
- ---------------------------------------------------------------
Heller Financial, Inc. 170,000 4,993,750
- ---------------------------------------------------------------
Medallion Financial Corp. 350,000 5,009,375
- ---------------------------------------------------------------
MGIC Investment Corp. 50,000 1,990,625
- ---------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 45,000 3,195,000
- ---------------------------------------------------------------
54,521,532
- ---------------------------------------------------------------
FOODS-0.73%
Balance Bar Co.(c) 190,000 2,042,500
- ---------------------------------------------------------------
Keebler Foods Co.(c) 207,000 7,788,375
- ---------------------------------------------------------------
Ralston-Ralston Purina Group 220,000 7,122,500
- ---------------------------------------------------------------
16,953,375
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-1.47%
Abbott Laboratories 65,000 3,185,000
- ---------------------------------------------------------------
American Home Products Corp. 106,000 5,969,125
- ---------------------------------------------------------------
Bristol-Myers Squibb Co. 56,000 7,493,500
- ---------------------------------------------------------------
Johnson & Johnson 70,000 5,871,250
- ---------------------------------------------------------------
Warner-Lambert Co. 155,000 11,654,062
- ---------------------------------------------------------------
34,172,937
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-0.51%
Barr Laboratories, Inc.(c) 81,100 3,892,800
- ---------------------------------------------------------------
Forest Laboratories, Inc.(c) 150,000 7,978,125
- ---------------------------------------------------------------
11,870,925
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-1.31%
Lilly (Eli) & Co. 90,000 7,998,750
- ---------------------------------------------------------------
</TABLE>
FS-6
<PAGE> 258
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)-(CONTINUED)
Merck & Co., Inc. 50,500 $ 7,458,219
- ---------------------------------------------------------------
Pfizer Inc. 70,000 8,780,625
- ---------------------------------------------------------------
Schering-Plough Corp. 112,000 6,188,000
- ---------------------------------------------------------------
30,425,594
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.42%
New American Healthcare Corp.(c) 360,000 4,027,500
- ---------------------------------------------------------------
Province Healthcare Co.(c) 110,000 3,946,250
- ---------------------------------------------------------------
Tenet Healthcare Corp.(c) 65,000 1,706,250
- ---------------------------------------------------------------
9,680,000
- ---------------------------------------------------------------
HEALTH CARE (LONG TERM
CARE)-0.78%
Assisted Living Concepts,
Inc.(c) 350,000 4,593,750
- ---------------------------------------------------------------
Sunrise Assisted Living, Inc.(c) 260,000 13,487,500
- ---------------------------------------------------------------
18,081,250
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.83%
Arterial Vascular Engineering,
Inc.(c) 120,000 6,300,000
- ---------------------------------------------------------------
Baxter International Inc. 105,000 6,752,813
- ---------------------------------------------------------------
Becton, Dickinson & Co. 156,400 6,676,325
- ---------------------------------------------------------------
Guidant Corp. 55,000 6,063,750
- ---------------------------------------------------------------
Medtronic, Inc. 125,000 9,281,250
- ---------------------------------------------------------------
VISX, Inc.(c) 85,000 7,432,187
- ---------------------------------------------------------------
42,506,325
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.73%
Boron, LePore & Associates,
Inc.(c) 100,000 3,450,000
- ---------------------------------------------------------------
MAXIMUS, Inc.(c) 160,300 5,931,100
- ---------------------------------------------------------------
Omnicare, Inc. 115,000 3,996,250
- ---------------------------------------------------------------
Pentegra Dental Group, Inc.(c) 17,000 42,500
- ---------------------------------------------------------------
Quintiles Transnational Corp.(c) 68,000 3,629,500
- ---------------------------------------------------------------
17,049,350
- ---------------------------------------------------------------
HOUSEHOLD FURN. &
APPLIANCES-0.27%
Ethan Allen Interiors, Inc. 150,900 6,186,900
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.29%
Colgate-Palmolive Co. 29,000 2,693,375
- ---------------------------------------------------------------
Procter & Gamble Co. (The) 45,000 4,109,062
- ---------------------------------------------------------------
6,802,437
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.76%
Conseco, Inc. 50,000 1,528,125
- ---------------------------------------------------------------
Equitable Companies, Inc. 85,000 4,919,375
- ---------------------------------------------------------------
Nationwide Financial Services,
Inc.-Class A 140,000 7,236,250
- ---------------------------------------------------------------
ReliaStar Financial Corp. 85,000 3,920,625
- ---------------------------------------------------------------
17,604,375
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.69%
American Bankers Insurance
Group, Inc. 50,000 2,418,750
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (MULTI-LINE)-(CONTINUED)
CIGNA Corp. 54,000 $ 4,174,875
- ---------------------------------------------------------------
Lincoln National Corp. 75,000 6,135,938
- ---------------------------------------------------------------
MONY Group, Inc.(c) 107,400 3,362,962
- ---------------------------------------------------------------
16,092,525
- ---------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-0.71%
Everest Reinsurance Holdings,
Inc. 135,000 5,256,563
- ---------------------------------------------------------------
Progressive Corp. 48,000 8,130,000
- ---------------------------------------------------------------
Travelers Property Casualty
Corp.-Class A 100,000 3,100,000
- ---------------------------------------------------------------
16,486,563
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-0.23%
Merrill Lynch & Co., Inc. 80,000 5,340,000
- ---------------------------------------------------------------
INVESTMENT MANAGEMENT-0.16%
Federated Investors, Inc.-Class
B 206,400 3,741,000
- ---------------------------------------------------------------
LAND DEVELOPMENT-0.12%
Silverleaf Resorts, Inc.(c) 300,000 2,793,750
- ---------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.26%
Coach USA, Inc.(c) 174,800 6,063,375
- ---------------------------------------------------------------
LODGING-HOTELS-0.35%
Carnival Corp.-Class A 130,000 6,240,000
- ---------------------------------------------------------------
Crestline Capital Corp.(c) 12,500 182,813
- ---------------------------------------------------------------
Host Marriott Corp.(c) 125,000 1,726,563
- ---------------------------------------------------------------
8,149,376
- ---------------------------------------------------------------
MANUFACTURING
(DIVERSIFIED)-0.27%
Tyco International Ltd. 82,000 6,185,875
- ---------------------------------------------------------------
MANUFACTURING
(SPECIALIZED)-0.71%
Superior TeleCom Inc. 230,000 10,867,500
- ---------------------------------------------------------------
USEC Inc. 400,000 5,550,000
- ---------------------------------------------------------------
16,417,500
- ---------------------------------------------------------------
METAL FABRICATORS-0.10%
Metals USA(c) 229,000 2,232,750
- ---------------------------------------------------------------
NATURAL GAS-0.69%
Columbia Energy Group 37,500 2,165,625
- ---------------------------------------------------------------
Energen Corp. 137,800 2,687,100
- ---------------------------------------------------------------
Enron Corp. 85,000 4,850,313
- ---------------------------------------------------------------
Williams Companies, Inc. (The) 207,000 6,455,812
- ---------------------------------------------------------------
16,158,850
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.16%
Halliburton Co. 122,000 3,614,250
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.27%
Conoco Inc.-Class A(c) 300,000 6,262,500
- ---------------------------------------------------------------
</TABLE>
FS-7
<PAGE> 259
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL (INTERNATIONAL
INTEGRATED)-0.31%
Exxon Corp. 65,000 $ 4,753,125
- ---------------------------------------------------------------
Mobil Corp. 27,000 2,352,375
- ---------------------------------------------------------------
7,105,500
- ---------------------------------------------------------------
PERSONAL CARE-0.53%
Avon Products, Inc. 108,000 4,779,000
- ---------------------------------------------------------------
Gillette Co. 154,000 7,440,125
- ---------------------------------------------------------------
12,219,125
- ---------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-0.51%
AES Corp.(c) 156,000 7,390,500
- ---------------------------------------------------------------
CalEnergy Co., Inc.(c) 130,000 4,509,375
- ---------------------------------------------------------------
11,899,875
- ---------------------------------------------------------------
PUBLISHING-0.10%
Meredith Corp. 63,100 2,389,912
- ---------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUST-1.46%
Alexandria Real Estate Equities,
Inc. 220,000 6,806,250
- ---------------------------------------------------------------
Boston Properties, Inc. 145,000 4,422,500
- ---------------------------------------------------------------
CCA Prison Realty Trust 270,000 5,535,000
- ---------------------------------------------------------------
Corporate Office Properties
Trust, Inc. 281,100 2,002,838
- ---------------------------------------------------------------
Correctional Properties Trust 51,000 921,188
- ---------------------------------------------------------------
Crescent Real Estate Equities,
Co. 154,000 3,542,000
- ---------------------------------------------------------------
Golf Trust of America, Inc. 106,500 2,955,375
- ---------------------------------------------------------------
Mid-Atlantic Realty Trust 175,900 2,165,769
- ---------------------------------------------------------------
Starwood Hotels & Resorts 100,000 2,268,750
- ---------------------------------------------------------------
Vornado Realty Trust 100,000 3,375,000
- ---------------------------------------------------------------
33,994,670
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.73%
American Stores Co. 159,000 5,873,063
- ---------------------------------------------------------------
Safeway, Inc.(c) 184,000 11,212,500
- ---------------------------------------------------------------
17,085,563
- ---------------------------------------------------------------
RETAIL (GENERAL
MERCHANDISE)-0.45%
Dayton Hudson Corp. 195,000 10,578,750
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-0.58%
Linens 'N Things, Inc.(c) 219,200 8,685,800
- ---------------------------------------------------------------
Musicland Stores Corp.(c) 320,200 4,782,987
- ---------------------------------------------------------------
13,468,787
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.31%
Washington Mutual, Inc. 190,000 7,255,625
- ---------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.56%
Abacus Direct Corp.(c) 42,400 1,929,200
- ---------------------------------------------------------------
Outdoor Systems, Inc.(c) 262,000 7,860,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (ADVERTISING/MARKETING)-(CONTINUED)
Young & Rubicam, Inc.(c) 102,300 $ 3,311,962
- ---------------------------------------------------------------
13,101,162
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-1.66%
Apollo Group, Inc.(c) 222,000 7,520,250
- ---------------------------------------------------------------
Avis Rent A Car, Inc.(c) 148,000 3,579,750
- ---------------------------------------------------------------
Comfort Systems USA, Inc.(c) 149,200 2,666,950
- ---------------------------------------------------------------
Hertz Corp.-Class A 130,000 5,931,250
- ---------------------------------------------------------------
INSpire Insurance Solutions,
Inc.(c) 150,000 2,756,250
- ---------------------------------------------------------------
Metzler Group, Inc.(c) 166,800 8,121,075
- ---------------------------------------------------------------
Service Corp. International 80,000 3,045,000
- ---------------------------------------------------------------
SM&A Corp.(c) 165,000 3,135,000
- ---------------------------------------------------------------
Trammell Crow Co.(c) 70,400 1,971,208
- ---------------------------------------------------------------
38,726,733
- ---------------------------------------------------------------
SERVICES (COMPUTER
SYSTEMS)-0.15%
Ciber, Inc.(c) 125,000 3,492,188
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.51%
Affiliated Computer Services,
Inc.(c) 28,200 1,269,000
- ---------------------------------------------------------------
Ceridian Corp.(c) 82,100 5,731,606
- ---------------------------------------------------------------
DST Systems, Inc.(c) 86,000 4,907,375
- ---------------------------------------------------------------
11,907,981
- ---------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.39%
Administaff, Inc.(c) 110,000 2,750,000
- ---------------------------------------------------------------
Data Processing Resources
Corp.(c) 131,000 3,831,750
- ---------------------------------------------------------------
Metamor Worldwide, Inc.(c) 100,000 2,500,000
- ---------------------------------------------------------------
9,081,750
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-1.70%
AT&T Corp. 83,010 6,246,503
- ---------------------------------------------------------------
IXC Communications, Inc.(c) 200,000 6,725,000
- ---------------------------------------------------------------
MCI WorldCom, Inc.(c) 154,923 11,115,725
- ---------------------------------------------------------------
Pacific Gateway Exchange,
Inc.(c) 150,000 7,209,375
- ---------------------------------------------------------------
WinStar Communications, Inc.(c) 210,422 8,206,460
- ---------------------------------------------------------------
39,503,063
- ---------------------------------------------------------------
TELEPHONE-1.38%
Bell Atlantic Corp. 100,000 5,681,250
- ---------------------------------------------------------------
McLeodUSA Inc.-Class A(c) 117,000 3,656,250
- ---------------------------------------------------------------
NEXTLINK Communications,
Inc.-Class A(c) 64,900 1,841,537
- ---------------------------------------------------------------
Qwest Communications
International Inc.(c) 300,000 15,000,000
- ---------------------------------------------------------------
US West, Inc. 90,000 5,816,250
- ---------------------------------------------------------------
31,995,287
- ---------------------------------------------------------------
TOBACCO-0.34%
Philip Morris Companies, Inc. 150,000 8,025,000
- ---------------------------------------------------------------
</TABLE>
FS-8
<PAGE> 260
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TRUCKERS-0.17%
C.H. Robinson Worldwide, Inc. 150,000 $ 3,890,625
- ---------------------------------------------------------------
WASTE MANAGEMENT-0.65%
Allied Waste Industries, Inc.(c) 320,000 7,560,000
- ---------------------------------------------------------------
Denali Inc.(c) 314,000 4,396,000
- ---------------------------------------------------------------
Republic Services, Inc.(c) 173,800 3,204,437
- ---------------------------------------------------------------
15,160,437
- ---------------------------------------------------------------
Total Domestic Common Stocks
(Cost $662,566,106) 981,988,295
- ---------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS-2.15%
BANKS (REGIONAL)-0.13%
Westpac Banking Corp. STRYPES
Trust-$3.135 Conv. Pfd. 95,000 2,998,438
- ---------------------------------------------------------------
CHEMICALS (DIVERSIFIED)-0.28%
Monsanto Co.-$2.60 Conv. Pfd. 135,000 6,615,000
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-0.10%
McKesson Corp.-$2.50 Conv.
Pfd.(a) (Acquired 02/13/97;
Cost $1,105,000) 22,100 2,406,137
- ---------------------------------------------------------------
HOMEBUILDING-0.18%
Fleetwood Capital Trust-$3.00
Conv. Pfd.(a) (Acquired
02/04/98; Cost $4,500,000) 90,000 4,218,750
- ---------------------------------------------------------------
LODGING-HOTELS-0.40%
Lodgian Capital Trust I-$3.50
Conv. Pfd.(a) (Acquired
06/09/98; Cost $3,500,000) 70,000 1,557,500
- ---------------------------------------------------------------
Royal Caribbean Cruises
Ltd.-$3.63 Conv. Pfd. 64,475 7,640,288
- ---------------------------------------------------------------
9,197,788
- ---------------------------------------------------------------
NATURAL GAS-0.12%
KN Energy, Inc.-$3.548 Conv.
Pfd. 72,000 2,704,500
- ---------------------------------------------------------------
PERSONAL CARE-0.20%
Estee Lauder Co.-$3.805 Conv.
Pfd. 60,000 4,650,000
- ---------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUST-0.16%
Reckson Associates Realty-$1.91
Conv. Pfd. 180,000 3,802,500
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.39%
L&H Capital Trust I, $2.375
Conv. Pfd.(a) (Acquired
05/20/98; Cost $5,000,000) 100,000 3,187,500
- ---------------------------------------------------------------
United Rentals Trust I-$3.25
Conv. Pfd.(a) (Acquired
07/30/98; Cost $6,000,000) 120,000 5,775,000
- ---------------------------------------------------------------
8,962,500
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.15%
IXC Communications, Inc.-$3.375
Conv. Pfd.(a) (Acquired
03/25/98; Cost $3,500,000) 70,000 2,318,750
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (LONG DISTANCE)-(CONTINUED)
WinStar Communications,
Inc.-$3.50 Conv. Pfd. 26,100 $ 1,200,600
- ---------------------------------------------------------------
3,519,350
- ---------------------------------------------------------------
TELEPHONE-0.04%
NEXTLINK Communications-$3.25
Conv. Pfd.(a) (Acquired
03/26/98-06/02/98; Cost
$975,188) 20,800 847,600
- ---------------------------------------------------------------
Total Domestic Convertible
Preferred Stocks (Cost
$51,842,169) 49,922,563
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. DOLLAR DENOMINATED FOREIGN
BONDS & NOTES-3.32%
CANADA-2.37%
Bell Canada
(Telecommunications-Long
Distance), Yankee Deb., 9.50%,
10/15/10 $ 1,750,000 2,305,293
- ---------------------------------------------------------------
Great Atlantic & Pacific Tea
Co., Inc. (Retail-Food
Chains), Yankee Gtd. Notes,
7.78%, 11/01/00(a) (Acquired
10/18/95-04/27/98; Cost
$5,131,490) 5,000,000 5,206,800
- ---------------------------------------------------------------
Gulf Canada Resources, Ltd.
(Oil-International
Integrated), Sr. Yankee Unsec.
Notes, 8.35%, 08/01/06 4,500,000 4,532,265
- ---------------------------------------------------------------
Husky Oil Ltd.
(Oil-International
Integrated), Sr. Unsec. Yankee
Notes, 7.125%, 11/15/06 6,300,000 6,338,682
- ---------------------------------------------------------------
Laidlaw, Inc.
(Services-Commercial &
Consumer), Yankee Deb.,
6.72%, 10/1/27 3,000,000 2,978,580
- ---------------------------------------------------------------
Yankee Unsec. Deb., 6.70%,
05/01/08 6,900,000 6,747,993
- ---------------------------------------------------------------
Nova Gas Transmission Ltd.
(Chemicals), Yankee Deb.,
8.50%, 12/15/12 5,015,000 6,087,207
- ---------------------------------------------------------------
Province of Manitoba (Sovereign
Debt),
Yankee Deb., 7.75%, 07/17/16 1,500,000 1,770,690
- ---------------------------------------------------------------
Yankee Unsec. Deb., 5.50%,
10/01/08 2,000,000 2,023,420
- ---------------------------------------------------------------
Province of Quebec (Sovereign
Debt),
Yankee Notes, 5.735%, 03/02/26 2,300,000 2,591,410
- ---------------------------------------------------------------
Yankee Notes, 6.29%, 03/06/26 2,050,000 2,299,034
- ---------------------------------------------------------------
Royal Bank of Canada
(Banks-Major Regional), Yankee
Sub. Notes, 6.75%, 10/24/11 3,000,000 3,135,210
- ---------------------------------------------------------------
Talisman Energy, Inc.
(Oil-International
Integrated), Yankee Deb.,
7.125%, 06/01/07 1,500,000 1,551,060
- ---------------------------------------------------------------
Yankee Deb., 7.25%, 10/15/27 4,150,000 4,072,146
- ---------------------------------------------------------------
Trans-Canada Pipelines (Natural
Gas), Yankee Bonds, 6.49%,
01/21/09 3,400,000 3,475,310
- ---------------------------------------------------------------
55,115,100
- ---------------------------------------------------------------
</TABLE>
FS-9
<PAGE> 261
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CAYMAN ISLANDS-0.10%
Hutchison Delta Finance
(Shipping), Conv. Unsec.
Notes, 7.00%, 11/08/01 $ 2,250,000 $ 2,418,750
- ---------------------------------------------------------------
GERMANY-0.16%
Dresdner Bank A.G. (Banks-Major
Regional), Sub. Bonds, 6.00%,
11/03/08 4,000,000 3,816,896
- ---------------------------------------------------------------
NORWAY-0.22%
Petroleum Geo-Services A.S.A.
(Oil & Gas-Drilling &
Equipment), Sr. Unsec. Yankee
Notes, 7.125%, 03/30/28 5,400,000 5,097,222
- ---------------------------------------------------------------
UNITED KINGDOM-0.47%
Royal Bank of Scotland PLC
(Banks-Major Regional), Yankee
Sub. Notes, 6.375%, 02/01/11 1,500,000 1,486,695
- ---------------------------------------------------------------
Terra Nova Insurance Holdings,
(Insurance-Property/Casualty),
Sr. Unsec. Yankee Gtd. Notes,
7.20%, 08/15/07 7,000,000 7,227,850
- ---------------------------------------------------------------
Sr. Unsec. Gtd. Notes, 7.00%,
05/15/08 2,100,000 2,139,291
- ---------------------------------------------------------------
10,853,836
- ---------------------------------------------------------------
Total U.S. Dollar
Denominated Foreign Bonds
& Notes (Cost $76,378,792) 77,301,804
- ---------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED FOREIGN BONDS & NOTES(E)-2.80%
BRITISH POUNDS STERLING-0.60%
Fannie Mae
(Financial-Diversified), Sr.
Unsec. Unsub. Notes, 6.875%,
06/07/02 GBP 2,800,000 4,948,005
- ---------------------------------------------------------------
Province of Ontario (Sovereign
Debt), Notes, 11.125%,
02/14/01 1,600,000 2,923,505
- ---------------------------------------------------------------
Sutton Bridge Financial Ltd.
(Financial-Diversified), Gtd.
Bonds, 8.625%, 06/03/22(a)
(Acquired 05/29/97; Cost
$4,890,565) 3,000,000 6,008,530
- ---------------------------------------------------------------
13,880,040
- ---------------------------------------------------------------
CANADIAN DOLLARS-0.73%
Bank of Montreal (Banks-Money
Center), Sub. Deb., 7.92%,
07/31/12 CAD 1,850,000 1,401,042
- ---------------------------------------------------------------
Bell Mobility Cellular,
(Telecommunications-Cellular/Wireless),
Deb., 6.55%, 06/02/08 2,500,000 1,673,121
- ---------------------------------------------------------------
Canadian Oil Debco Inc. (Oil &
Gas-Exploration & Production),
Deb., 11.00%, 10/31/00 2,500,000 1,777,778
- ---------------------------------------------------------------
NAV Canada (Services-Commercial
& Consumer), Bonds, 7.40%,
06/01/27 3,500,000 2,802,699
- ---------------------------------------------------------------
Poco Petroleums Ltd. (Oil &
Gas-Exploration & Production),
Unsec. Deb., 6.60%, 09/11/07 5,400,000 3,462,212
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CANADIAN DOLLARS-(CONTINUED)
Province of Ontario (Sovereign
Debt), Sr. Unsub. Notes,
8.00%, 03/11/03 CAD 2,300,000 $ 1,673,375
- ---------------------------------------------------------------
Telegobe Canada, Inc.
(Telephone), Unsec. Deb., 8.35%,
06/20/03 1,000,000 730,634
- ---------------------------------------------------------------
Trans-Canada Pipelines (Natural
Gas), Series Q Deb., 10.625%,
10/20/09 1,500,000 1,351,235
- ---------------------------------------------------------------
Westcoast Energy, Inc. (Natural
Gas), Deb., 6.45%, 12/18/06 3,000,000 2,076,510
- ---------------------------------------------------------------
16,948,606
- ---------------------------------------------------------------
DUTCH GUILDERS-0.41%
Koninklijke Ahold N.V.
(Retail-Food Chains), Conv.
Sub. Notes, 3.00%, 09/30/03NLG 15,000,000 9,583,644
- ---------------------------------------------------------------
FRENCH FRANCS-0.37%
France Telecom (Telephone),
Conv. Bonds, 2.00%,
01/01/04 FRF 45,132,800 8,589,161
- ---------------------------------------------------------------
NEW ZEALAND DOLLARS-0.64%
Canadian Government (Sovereign
Debt), Bonds, 6.625%,
10/03/07 NZD 1,000,000 540,357
- ---------------------------------------------------------------
Fannie Mae (Sovereign Debt),
Notes, 7.25%, 06/20/02 11,600,000 6,334,992
- ---------------------------------------------------------------
International Bank for
Reconstruction and Development
(Banks-Money Center), Sr.
Unsec. Unsub. Notes, 5.50%,
04/15/04 8,500,000 4,368,740
- ---------------------------------------------------------------
New Zealand Government
(Sovereign Debt), Bonds,
8.00%, 11/15/06 2,750,000 1,680,036
- ---------------------------------------------------------------
Province of Ontario (Sovereign
Debt), Unsec. Unsub. Notes,
6.25%, 12/03/08 3,750,000 1,938,971
- ---------------------------------------------------------------
14,863,096
- ---------------------------------------------------------------
SWISS FRANCS-0.05%
Swiss Re (Insurance Brokers),
2.25%, 04/17/08 CHF 2,000,000 1,309,709
- ---------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Foreign Bonds
& Notes (Cost $62,481,034) 65,174,256
- ---------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-3.83%
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
Australia-0.21%
St. George Bank Ltd.
(Banks-Regional), $4.50 Conv.
Pfd.(a) (Acquired 05/21/98-
05/22/98; Cost $5,007,500) 100,000 4,787,500
- ---------------------------------------------------------------
BERMUDA-0.39%
Annuity and Life Re, Ltd.
(Insurance-Life/ Health) 47,000 1,269,000
- ---------------------------------------------------------------
Global Crossing Ltd.
(Telecommunications-Long
Distance)(c) 175,000 7,896,875
- ---------------------------------------------------------------
9,165,875
- ---------------------------------------------------------------
</TABLE>
FS-10
<PAGE> 262
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CANADA-0.62%
Cadillac Fairview Corp. (Land
Development)(c) 180,000 $ 3,363,750
- ---------------------------------------------------------------
MetroNet Communications
Corp.-Class B (Communications
Equipment)(c) 120,000 4,020,000
- ---------------------------------------------------------------
Teleglobe, Inc.
(Services-Commercial &
Consumer) 195,000 7,020,000
- ---------------------------------------------------------------
14,403,750
- ---------------------------------------------------------------
CAYMAN ISLANDS-0.21%
Scottish Annuity Life and
Holdings
(Insurance-Life/Health)(c) 350,000 4,812,500
- ---------------------------------------------------------------
FINLAND-0.78%
Fortum Corp. (Electric
Companies)(c) 517,300 3,146,532
- ---------------------------------------------------------------
Nokia Oyj A.B.-Class A-ADR
(Communications Equipment) 100,000 12,043,750
- ---------------------------------------------------------------
Sonera Group Oyj
(Telecommunications-Cellular/Wireless)(c) 169,900 3,000,294
- ---------------------------------------------------------------
18,190,576
- ---------------------------------------------------------------
FRANCE-0.43%
Alstom (Engineering &
Construction)(c) 105,000 2,460,864
- ---------------------------------------------------------------
AXA-ADR (Insurance-Multi-Line) 40,000 2,890,000
- ---------------------------------------------------------------
France Telecom S.A.-ADR
(Communications Equipment) 60,000 4,736,250
- ---------------------------------------------------------------
10,087,114
- ---------------------------------------------------------------
GERMANY-0.31%
DaimlerChrysler A.G.
(Automobiles) 74,820 7,187,396
- ---------------------------------------------------------------
NETHERLANDS-0.18%
Equant N.V.
(Computers-Networking)(c) 61,200 4,150,125
- ---------------------------------------------------------------
NORWAY-0.04%
Petroleum Geo-Services ASA-ADR
(Oil & Gas-Drilling &
Equipment)(c) 60,000 945,000
- ---------------------------------------------------------------
PORTUGAL-0.09%
Telecel-Comunicacaoes Pessoais,
S.A.
(Telecommunications-Cellular/Wireless) 10,300 2,105,527
- ---------------------------------------------------------------
SPAIN-0.13%
Corporacion Bancaria de Espana
S.A.-ADR (Banks-Regional) 56,952 2,933,028
- ---------------------------------------------------------------
UNITED KINGDOM-0.44%
Avis Europe PLC
(Services-Commercial &
Consumer) 765,450 3,192,974
- ---------------------------------------------------------------
ESG Re Limited
(Insurance-Life/Health) 116,300 2,355,075
- ---------------------------------------------------------------
SmithKline Beecham PLC-ADR
(Health Care-Drugs-Major
Pharmaceuticals) 46,000 3,197,000
- ---------------------------------------------------------------
Stolt Comex Seaway, S.A.-ADR
(Oil & Gas-Exploration &
Production)(c) 80,000 450,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Stolt Comex Seaway, S.A. (Oil &
Gas-Exploration &
Production)(c) 160,000 $ 1,080,000
- ---------------------------------------------------------------
10,275,049
- ---------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$60,639,798) 89,043,440
- ---------------------------------------------------------------
OPTIONS PURCHASED-0.03%
COMPUTERS (SOFTWARE & SERVICES)-0.03%
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXERCISE EXPIRATION
CONTRACTS PRICE DATE
<S> <C> <C> <C> <C>
America Online, Inc.(c)
(premiums paid
$752,000) 500 140 Feb 99 793,750
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY SECURITIES-12.90%
U.S. TREASURY BILLS-4.03%
Bills, 4.439%, 03/25/99 94,635,000 $ 93,664,071
- ---------------------------------------------------------------
U.S. TREASURY BONDS &
NOTES-8.87%
Notes, 6.50%, 05/31/01 17,000,000 17,734,060
- ---------------------------------------------------------------
Notes, 6.25%, 08/31/02 17,750,000 18,678,325
- ---------------------------------------------------------------
Notes, 5.625%, 12/31/02 10,000,000 10,340,200
- ---------------------------------------------------------------
Notes, 5.75%, 04/30/03 2,900,000 3,019,741
- ---------------------------------------------------------------
Notes, 7.25%, 08/15/04 7,500,000 8,434,650
- ---------------------------------------------------------------
Notes, 7.875%, 11/15/04 15,000,000 17,383,350
- ---------------------------------------------------------------
Notes, 7.50%, 02/15/05 3,000,000 3,435,210
- ---------------------------------------------------------------
Notes, 6.50%, 08/15/05 5,000,000 5,495,750
- ---------------------------------------------------------------
Notes, 6.50%, 10/15/06 12,000,000 13,314,960
- ---------------------------------------------------------------
Notes, 6.25%, 02/15/07 5,000,000 5,483,900
- ---------------------------------------------------------------
Notes, 6.625%, 05/15/07 7,000,000 7,872,480
- ---------------------------------------------------------------
Notes, 5.625%, 05/15/08 4,000,000 4,264,960
- ---------------------------------------------------------------
Bonds, 15.75%, 11/15/01 29,975,000 38,796,942
- ---------------------------------------------------------------
Bonds, 6.75%, 08/15/26 3,000,000 3,595,170
- ---------------------------------------------------------------
Bonds, 6.625%, 02/15/27 11,700,000 13,837,122
- ---------------------------------------------------------------
Bonds, 6.375%, 08/15/27 10,000,000 11,499,100
- ---------------------------------------------------------------
Bonds, 6.125%, 11/15/27 13,500,000 15,118,650
- ---------------------------------------------------------------
Bonds, 5.50%, 08/15/28 7,750,000 8,114,017
- ---------------------------------------------------------------
206,418,587
- ---------------------------------------------------------------
Total U.S. Treasury Securities (Cost
$290,283,459) 300,082,658
- ---------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-2.75%
Federal National Mortgage Association, Bonds,
7.00%, 05/01/28 23,591,060 24,070,195
- ---------------------------------------------------------------
6.50%, 11/01/28 9,746,500 9,810,437
- ---------------------------------------------------------------
</TABLE>
FS-11
<PAGE> 263
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES-(CONTINUED)
6.50%, 12/01/28 10,000,000 $ 10,065,600
- ---------------------------------------------------------------
Federal Home Loan Mortgage Corp,
Bonds, 6.50%, 12/01/28 15,000,000 15,112,500
- ---------------------------------------------------------------
Tennessee Valley Authority,
Bonds, 5.98%, 04/01/36 4,600,000 4,830,621
- ---------------------------------------------------------------
Total U.S. Government Agency
Securities (Cost
$63,524,560) 63,889,353
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENT(f)-4.50%
J.P. Morgan Securities, Inc.,
4.75%, 01/04/99 (Cost
$104,629,612)(g) 104,629,612 $ 104,629,612
- ---------------------------------------------------------------
TOTAL INVESTMENTS-99.18% 2,307,572,144
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.82% 18,985,855
- ---------------------------------------------------------------
NET ASSETS-100.00% $2,326,557,999
===============================================================
</TABLE>
(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 12/31/98 was $104,284,271
which represented 4.48% of the Fund's net assets.
(b) Zero coupon bond issued at a discount. The interest rate shown represents
the rate of original discount.
(c) Non-income producing security.
(d) A portion of this security is subject to call options written. See Note 8.
(e) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(f) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value is at least 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(g) Joint repurchase agreement entered into 12/31/98 with a maturing value
$500,263,889. Collateralized by U.S. Government agency obligations, 0% to
7.55% due 01/04/99 to 10/03/22 with an aggregate market value at 12/31/98 of
$510,001,764.
Investment abbreviations:
ADR - American Depositary Receipts
CAD - Canadian Dollars
CHF - Swiss Francs
Conv. - Convertible
Ctfs. - Certificates
Deb. - Debentures
FRF - French Francs
GBP - British Pounds Sterling
Gtd. - Guaranteed
NLG - Dutch Guilders
NZD - New Zealand Dollars
Pfd. - Preferred
Sr. - Senior
STRYPES - Structured Yield Product Exchangeable for Stock
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
See Notes to Financial Statements.
FS-12
<PAGE> 264
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$1,923,193,386) $2,307,572,144
- ---------------------------------------------------------
Receivables for:
Investments sold 8,100,350
- ---------------------------------------------------------
Fund shares sold 6,973,557
- ---------------------------------------------------------
Interest and dividends 16,480,727
- ---------------------------------------------------------
Variation margin 680,000
- ---------------------------------------------------------
Forward currency contracts 319,763
- ---------------------------------------------------------
Investment for deferred compensation plan 28,328
- ---------------------------------------------------------
Other assets 70,388
- ---------------------------------------------------------
Total assets 2,340,225,257
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 4,878,740
- ---------------------------------------------------------
Fund shares reacquired 4,619,491
- ---------------------------------------------------------
Deferred compensation plan 28,328
- ---------------------------------------------------------
Options written (Premiums received
$797,973) 862,500
- ---------------------------------------------------------
Forward currency contracts 60,135
- ---------------------------------------------------------
Accrued advisory fees 975,482
- ---------------------------------------------------------
Accrued distribution fees 1,730,654
- ---------------------------------------------------------
Accrued transfer agent fees 72,708
- ---------------------------------------------------------
Accrued operating expenses 439,220
- ---------------------------------------------------------
Total liabilities 13,667,258
- ---------------------------------------------------------
Net assets applicable to shares
outstanding $2,326,557,999
- ---------------------------------------------------------
NET ASSETS:
Class A $1,318,229,911
=========================================================
Class B $ 894,164,902
=========================================================
Class C $ 114,163,186
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 46,698,085
=========================================================
Class B 31,727,364
=========================================================
Class C 4,046,845
=========================================================
Class A:
Net asset value and redemption price
per share $ 28.23
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $28.23
divided by 95.25%) $ 29.64
=========================================================
Class B:
Net asset value and offering price per
share $ 28.18
=========================================================
Class C:
Net asset value and offering price per
share $ 28.21
=========================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 53,301,282
- ---------------------------------------------------------
Dividends (net of $42,654 foreign
withholding tax) 11,932,232
- ---------------------------------------------------------
Total investment income 65,233,514
- ---------------------------------------------------------
EXPENSES:
Advisory fees 9,043,320
- ---------------------------------------------------------
Administrative services fees 104,952
- ---------------------------------------------------------
Custodian fees 181,516
- ---------------------------------------------------------
Distribution fees-Class A 2,440,180
- ---------------------------------------------------------
Distribution fees-Class B 6,948,906
- ---------------------------------------------------------
Distribution fees-Class C 627,014
- ---------------------------------------------------------
Trustees' fees 19,242
- ---------------------------------------------------------
Transfer agent fees-Class A 1,240,251
- ---------------------------------------------------------
Transfer agent fees-Class B 1,255,480
- ---------------------------------------------------------
Transfer agent fees-Class C 95,084
- ---------------------------------------------------------
Other 662,571
- ---------------------------------------------------------
Total expenses 22,618,516
- ---------------------------------------------------------
Less: Expenses paid indirectly (36,748)
- ---------------------------------------------------------
Net expenses 22,581,768
- ---------------------------------------------------------
Net investment income 42,651,746
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FORWARD CURRENCY CONTRACTS,
FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (48,583,504)
- ---------------------------------------------------------
Foreign currencies 162,571
- ---------------------------------------------------------
Forward currency contracts 213,074
- ---------------------------------------------------------
Futures contracts 12,419,792
- ---------------------------------------------------------
Option contracts purchased 148,320
- ---------------------------------------------------------
Option contracts written 678,046
- ---------------------------------------------------------
(34,961,701)
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities 188,156,393
- ---------------------------------------------------------
Foreign currencies 13,023
- ---------------------------------------------------------
Forward currency contracts 259,592
- ---------------------------------------------------------
Future contracts 14,118,475
- ---------------------------------------------------------
Option contracts purchased 41,750
- ---------------------------------------------------------
Option contracts written (75,211)
- ---------------------------------------------------------
202,514,022
- ---------------------------------------------------------
Net gain from investment securities,
foreign currencies, forward currency
contracts, futures and option
contracts 167,552,321
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $210,204,067
=========================================================
</TABLE>
FS-13
<PAGE> 265
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 42,651,746 $ 19,016,014
- ---------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, futures and option contracts (34,961,701) 34,831,453
- ---------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currencies, forward currency contracts, futures
and option contracts 202,514,022 134,939,011
- ---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 210,204,067 188,786,478
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (25,009,619) (12,472,168)
- ---------------------------------------------------------------------------------------------
Class B (12,164,517) (5,631,570)
- ---------------------------------------------------------------------------------------------
Class C (1,261,081) (29,666)
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (2,990,460) (19,245,568)
- ---------------------------------------------------------------------------------------------
Class B (2,026,544) (13,549,718)
- ---------------------------------------------------------------------------------------------
Class C (260,076) (198,011)
- ---------------------------------------------------------------------------------------------
Net equalization credits -- 8,681,162
- ---------------------------------------------------------------------------------------------
Share transactions-net:
Class A 537,064,636 260,376,777
- ---------------------------------------------------------------------------------------------
Class B 344,386,485 192,163,146
- ---------------------------------------------------------------------------------------------
Class C 99,082,872 9,380,380
- ---------------------------------------------------------------------------------------------
Net increase in net assets 1,147,025,763 608,261,242
- ---------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,179,532,236 571,270,994
- ---------------------------------------------------------------------------------------------
End of period $2,326,557,999 $1,179,532,236
=============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,957,596,687 $ 958,373,243
- ---------------------------------------------------------------------------------------------
Undistributed net investment income 5,095,292 20,023,353
- ---------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies, futures and option
contracts (34,826,585) 4,957,057
- ---------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, forward currency contracts, futures and
option contracts 398,692,605 196,178,583
- ---------------------------------------------------------------------------------------------
$2,326,557,999 $1,179,532,236
=============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-14
<PAGE> 266
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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: Class A shares, Class B
shares and Class C 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. 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, and paid quarterly. On
December 31, 1998 additional paid-in capital was increased by $348,718,
undistributed net investment income was decreased by $803,857 and
undistributed net realized gains was increased by $455,139 as a result of
differing book/tax treatment of foreign currency transactions and
equalization credits 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. 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. The Fund has a capital loss
carryforward of $20,440,896 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2006. The Fund cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
E. Equalization -- The Fund previously followed the accounting practice known as
equalization by which a portion of the proceeds from sales and 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
net income when the transaction is recorded so that the undistributed net
investment income per share is unaffected by sales or redemptions of Fund
shares. Effective January 1, 1998, the Fund discontinued equalization
accounting and reclassified the cumulative equalization credits of
$18,340,733 from
FS-15
<PAGE> 267
undistributed net investment income to paid-in capital. This change had no
effect on the net assets, the results of operations or the net asset value
per share of the Fund.
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 denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions. The Fund does
not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
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. Outstanding forward currency contracts at December 31, 1998 were
as follows:
<TABLE>
<CAPTION>
CONTRACT TO UNREALIZED
SETTLEMENT ------------------------ APPRECIATION
DATE DELIVER RECEIVE VALUE (DEPRECIATION)
---------- ---------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
01/13/99 NZD 6,000,000 $ 3,124,500 $ 3,154,584 $(30,084)
01/14/99 GBP 7,200,000 12,137,328 11,950,315 187,013
01/15/99 DEM 1,500,000 919,811 900,836 18,975
02/04/99 CAD 12,500,000 8,203,822 8,169,690 34,132
02/04/99 NZD 12,000,000 6,379,440 6,308,521 70,919
02/26/99 DEM 600,000 353,503 361,094 (7,591)
02/26/99 GBP 700,000 1,154,559 1,157,678 (3,119)
02/26/99 NZD 1,200,000 639,540 630,816 8,724
02/26/99 NZD 7,800,000 4,080,960 4,100,301 (19,341)
----------- ----------- --------
$36,993,463 $36,733,835 $259,628
=========== =========== ========
</TABLE>
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.
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, 1998, AIM
was reimbursed $104,952 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, 1998, AFS
was paid $1,438,687 for such services.
FS-16
<PAGE> 268
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 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 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 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 year ended December 31, 1998, the Class A, Class B and Class
C shares paid AIM Distributors $2,440,180, $6,948,906 and $627,014,
respectively, as compensation under the Plans.
AIM Distributors received commissions of $1,172,743 from sales of the Class A
shares of the Fund during the year ended December 31, 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 year ended December 31, 1998,
AIM Distributors received $106,255 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, 1998, the Fund paid legal fees of $6,473
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, 1998, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $19,083 and $17,665, respectively under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $36,748 during the year ended December 31, 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.
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) $1,000,000,000 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 May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended December 31, 1998, 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, 1998 was
$1,513,656,427 and $691,078,348, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $420,949,737
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (36,578,566)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $384,371,171
=========================================================
Cost of investments for tax purposes is $1,923,200,973.
</TABLE>
NOTE 7-FUTURES CONTRACTS
On December 31, 1998, $13,503,000 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, 1998 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
NO. OF APPRECIATION
CONTRACT CONTRACTS MONTH COMMITMENT (DEPRECIATION)
- -------- --------- ----- ---------- --------------
<S> <C> <C> <C> <C>
S&P 500 Index 800 Mar. Buy $14,118,475
======================================================================
</TABLE>
NOTE 8-CALL OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1998 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- --------
<S> <C> <C>
Beginning of period 500 $ 101,622
- ----------------------------------------------------------
Written 11,913 3,596,915
- ----------------------------------------------------------
Closed (6,821) (2,140,284)
- ----------------------------------------------------------
Exercised (4,142) (650,659)
- ----------------------------------------------------------
Expired (950) (109,621)
- ----------------------------------------------------------
End of period 500 $ 797,973
==========================================================
</TABLE>
Open call option contracts written at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
NUMBER 1998
CONTRACT STRIKE OF PREMIUMS MARKET UNREALIZED
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE DEPRECIATION
----- -------- ------ --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
America Online,
Inc................ Feb 99 150 500 $797,973 $862,500 $(64,527)
===================== ======= === === ======== ======== ========
</TABLE>
FS-17
<PAGE> 269
NOTE 9-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1998 and 1997
were as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 29,663,763 $ 789,886,049 16,304,170 $ 379,544,296
- ----------------------------------------------------------------------------------------------------------------------
Class B 15,995,669 427,423,474 8,995,999 214,419,729
- ----------------------------------------------------------------------------------------------------------------------
Class C* 4,375,455 117,461,185 363,376 9,356,324
- ----------------------------------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Class A 872,547 23,134,563 1,215,553 29,691,206
- ----------------------------------------------------------------------------------------------------------------------
Class B 492,389 13,073,889 710,951 17,509,949
- ----------------------------------------------------------------------------------------------------------------------
Class C* 54,578 1,446,813 8,636 215,490
- ----------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (10,355,432) (275,955,976) (6,305,229) (148,858,725)
- ----------------------------------------------------------------------------------------------------------------------
Class B (3,657,104) (96,110,878) (1,668,675) (39,766,532)
- ----------------------------------------------------------------------------------------------------------------------
Class C* (747,879) (19,825,126) (7,321) (191,434)
- ----------------------------------------------------------------------------------------------------------------------
36,693,986 $ 980,533,993 19,617,460 $ 461,920,303
======================================================================================================================
* Class C shares commenced sales on August 4, 1997.
</TABLE>
NOTE 10-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and a share of
Class B outstanding during each of the years in the five-year period ended
December 31, 1998, and for a share of Class C outstanding during the year ended
December 31, 1998 and the period August 4, 1997 (date sales commenced) through
December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------
1998 1997 1996 1995 1994
---------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 25.78 $ 21.84 $ 19.22 $ 14.62 $ 16.10
- ------------------------------------------------------------ ---------- -------- -------- ------- -------
Income from investment operations:
Net investment income 0.71(a) 0.60 0.66 0.49 0.44
- ------------------------------------------------------------ ---------- -------- -------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) 2.45 4.66 2.99 4.57 (1.31)
- ------------------------------------------------------------ ---------- -------- -------- ------- -------
Total from investment operations 3.16 5.26 3.65 5.06 (0.87)
- ------------------------------------------------------------ ---------- -------- -------- ------- -------
Less distributions:
Dividends from net investment income (0.65) (0.55) (0.55) (0.46) (0.39)
- ------------------------------------------------------------ ---------- -------- -------- ------- -------
Distributions from net realized gains (0.06) (0.77) (0.48) -- (0.22)
- ------------------------------------------------------------ ---------- -------- -------- ------- -------
Total distributions (0.71) (1.32) (1.03) (0.46) (0.61)
- ------------------------------------------------------------ ---------- -------- -------- ------- -------
Net asset value, end of period $ 28.23 $ 25.78 $ 21.84 $ 19.22 $ 14.62
============================================================ ========== ======== ======== ======= =======
Total return(b) 12.46% 24.41% 19.25% 34.97% (5.44)%
============================================================ ========== ======== ======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,318,230 $683,633 $334,189 $92,241 $37,572
============================================================ ========== ======== ======== ======= =======
Ratio of expenses to average net assets 0.95%(c) 0.98% 1.15% 1.43%(d) 1.25%(d)
============================================================ ========== ======== ======== ======= =======
Ratio of net investment income to average net assets 2.81%(c) 2.48% 2.97% 2.81%(e) 3.07%(e)
============================================================ ========== ======== ======== ======= =======
Portfolio turnover rate 43% 66% 72% 77% 76%
============================================================ ========== ======== ======== ======= =======
</TABLE>
<TABLE>
<S> <C>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) Ratios are based on average net assets of $976,072,030.
(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.
</TABLE>
FS-18
<PAGE> 270
NOTE 10-FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------------------------- ---------------------
1998 1997 1996 1995 1994 1998 1997
-------- -------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 25.75 $ 21.83 $ 19.22 $ 14.62 $ 16.11 $ 25.76 $ 25.55
- -------------------------------------- -------- -------- -------- ------- ------- -------- -------
Income from investment operations:
Net investment income 0.42(a) 0.38 0.48 0.31 0.31 0.42(a) 0.16
- -------------------------------------- -------- -------- -------- ------- ------- -------- -------
Net gains (losses) on securities
(both realized and unrealized) 2.51 4.68 2.99 4.61 (1.31) 2.53 1.01
- -------------------------------------- -------- -------- -------- ------- ------- -------- -------
Total from investment operations 2.93 5.06 3.47 4.92 (1.00) 2.95 1.17
- -------------------------------------- -------- -------- -------- ------- ------- -------- -------
Less distributions:
Dividends from net investment income (0.44) (0.37) (0.38) (0.32) (0.27) (0.44) (0.19)
- -------------------------------------- -------- -------- -------- ------- ------- -------- -------
Distributions from net realized gains (0.06) (0.77) (0.48) -- (0.22) (0.06) (0.77)
- -------------------------------------- -------- -------- -------- ------- ------- -------- -------
Total distributions (0.50) (1.14) (0.86) (0.32) (0.49) (0.50) (0.96)
- -------------------------------------- -------- -------- -------- ------- ------- -------- -------
Net asset value, end of period $ 28.18 $ 25.75 $ 21.83 $ 19.22 $ 14.62 $ 28.21 $ 25.76
====================================== ======== ======== ======== ======= ======= ======== =======
Total return(b) 11.53% 23.42% 18.28% 33.93% (6.23)% 11.60% 4.67%
====================================== ======== ======== ======== ======= ======= ======== =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $894,165 $486,506 $237,082 $72,634 $20,245 $114,163 $ 9,394
====================================== ======== ======== ======== ======= ======= ======== =======
Ratio of expenses to average net
assets 1.76%(c) 1.79% 1.97% 2.21%(d) 1.98%(d) 1.73%(c) 1.78%(f)
====================================== ======== ======== ======== ======= ======= ======== =======
Ratio of net investment income to
average net assets 2.00%(c) 1.67% 2.15% 2.03%(e) 2.34%(e) 2.03%(c) 1.68%(f)
====================================== ======== ======== ======== ======= ======= ======== =======
Portfolio turnover rate 43% 66% 72% 77% 76% 43% 66%
====================================== ======== ======== ======== ======= ======= ======== =======
</TABLE>
<TABLE>
<S> <C>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not
annualized for periods less than one year.
(c) Ratios are based on average net assets of $694,890,554 and
$62,701,487 for Class B and Class C, respectively.
(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.
</TABLE>
FS-19
<PAGE> 271
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, 1998, 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. Our procedures included confirmation of
securities owned as of December 31, 1998, 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 Global
Utilities Fund as of December 31, 1998, 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 LLP
KPMG LLP
Houston, Texas
February 5, 1999
FS-20
<PAGE> 272
SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-50.44%
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.62%
Univision Communications Inc.(a) 53,000 $ 1,917,938
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-3.08%
ANTEC Corp.(a) 45,000 905,625
- --------------------------------------------------------------
Carrier Access Corp.(a) 49,700 1,711,544
- --------------------------------------------------------------
Lucent Technologies, Inc. 51,100 5,621,000
- --------------------------------------------------------------
Tellabs, Inc.(a) 20,000 1,371,250
- --------------------------------------------------------------
9,609,419
- --------------------------------------------------------------
ELECTRIC COMPANIES-18.03%
Allegheny Energy, Inc. 82,100 2,832,450
- --------------------------------------------------------------
BEC Energy 40,000 1,647,500
- --------------------------------------------------------------
Carolina Power & Light Co. 48,800 2,296,650
- --------------------------------------------------------------
Cinergy Corp. 57,000 1,959,375
- --------------------------------------------------------------
CMS Energy Corp. 18,000 871,875
- --------------------------------------------------------------
DQE, Inc. 76,500 3,361,219
- --------------------------------------------------------------
Edison International 133,000 3,707,375
- --------------------------------------------------------------
Energy East Corp. 75,000 4,237,500
- --------------------------------------------------------------
FPL Group, Inc. 63,000 3,882,375
- --------------------------------------------------------------
IPALCO Enterprises, Inc. 21,000 1,161,563
- --------------------------------------------------------------
New Century Energies, Inc. 52,000 2,535,000
- --------------------------------------------------------------
Niagara Mohawk Power Corp.(a) 161,000 2,596,125
- --------------------------------------------------------------
NIPSCO Industries, Inc. 134,000 4,078,625
- --------------------------------------------------------------
Pinnacle West Capital Corp. 121,000 5,127,375
- --------------------------------------------------------------
Public Service Company of New
Mexico 110,000 2,248,125
- --------------------------------------------------------------
Sierra Pacific Resources 45,500 1,729,000
- --------------------------------------------------------------
Southern Co. 130,000 3,778,125
- --------------------------------------------------------------
Teco Energy, Inc. 137,000 3,861,688
- --------------------------------------------------------------
Texas Utilities Co. 60,000 2,801,250
- --------------------------------------------------------------
Unicom Corp. 38,000 1,465,375
- --------------------------------------------------------------
56,178,570
- --------------------------------------------------------------
ELECTRONICS
(INSTRUMENTATION)-0.42%
Quanta Services, Inc.(a) 60,000 1,323,750
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-1.38%
Superior TeleCom Inc. 59,000 2,787,750
- --------------------------------------------------------------
USEC Inc. 110,000 1,526,250
- --------------------------------------------------------------
4,314,000
- --------------------------------------------------------------
NATURAL GAS-4.33%
Columbia Energy Group 33,000 1,905,750
- --------------------------------------------------------------
Energen Corp. 29,600 577,200
- --------------------------------------------------------------
Enron Corp. 25,000 1,426,563
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NATURAL GAS-(CONTINUED)
KN Energy, Inc. 54,600 $ 1,986,075
- --------------------------------------------------------------
Public Service Co. of North
Carolina, Inc. 40,000 1,040,000
- --------------------------------------------------------------
Williams Companies, Inc. (The) 209,900 6,546,256
- --------------------------------------------------------------
13,481,844
- --------------------------------------------------------------
POWER PRODUCERS
(INDEPENDENT)-1.14%
AES Corp.(a) 28,400 1,345,450
- --------------------------------------------------------------
CalEnergy Co., Inc.(a) 63,200 2,192,250
- --------------------------------------------------------------
3,537,700
- --------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUST-1.35%
Alexandria Real Estate Equities,
Inc. 52,500 1,624,219
- --------------------------------------------------------------
Boston Properties, Inc. 48,000 1,464,000
- --------------------------------------------------------------
Crescent Real Estate Equities,
Co. 26,400 607,200
- --------------------------------------------------------------
Golf Trust of America, Inc. 18,000 499,500
- --------------------------------------------------------------
4,194,919
- --------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.26%
Metzler Group, Inc.(a) 16,800 817,950
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-5.56%
AT&T Corp. 33,005 2,483,626
- --------------------------------------------------------------
Global TeleSystems Group, Inc.(a) 14,600 813,950
- --------------------------------------------------------------
IXC Communications, Inc.(a) 65,000 2,185,625
- --------------------------------------------------------------
MCI WorldCom, Inc.(a) 98,526 7,069,240
- --------------------------------------------------------------
Pacific Gateway Exchange, Inc.(a) 38,000 1,826,375
- --------------------------------------------------------------
WinStar Communications, Inc.(a) 75,731 2,953,509
- --------------------------------------------------------------
17,332,325
- --------------------------------------------------------------
TELEPHONE-14.27%
Ameritech Corp. 117,700 7,459,237
- --------------------------------------------------------------
Bell Atlantic Corp. 40,000 2,272,500
- --------------------------------------------------------------
BellSouth Corp. 110,800 5,526,150
- --------------------------------------------------------------
Century Telephone Enterprises,
Inc. 79,200 5,346,000
- --------------------------------------------------------------
Cincinnati Bell, Inc. 160,000 6,050,000
- --------------------------------------------------------------
GTE Corp. 36,600 2,468,212
- --------------------------------------------------------------
McLeodUSA Inc.-Class A(a) 40,000 1,250,000
- --------------------------------------------------------------
NEXTLINK Communications,
Inc.-Class A(a) 15,900 451,162
- --------------------------------------------------------------
Qwest Communications
International Inc.(a) 75,000 3,750,000
- --------------------------------------------------------------
SBC Communications, Inc. 148,000 7,936,500
- --------------------------------------------------------------
US West, Inc. 30,000 1,938,750
- --------------------------------------------------------------
44,448,511
- --------------------------------------------------------------
Total Domestic Common Stocks
(Cost $83,444,784) 157,156,926
- --------------------------------------------------------------
</TABLE>
FS-21
<PAGE> 273
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC CONVERTIBLE PREFERRED
STOCKS-1.44%
NATURAL GAS-1.27%
El Paso Energy Cap Trust,
Inc.-$2.375 Conv. Pfd. 74,500 $ 3,566,688
- --------------------------------------------------------------
KN Energy, Inc.-$3.548 Conv. Pfd. 10,000 375,625
- --------------------------------------------------------------
3,942,313
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.12%
WinStar Communications,
Inc.-$3.50 Conv. Pfd. 8,000 368,000
- --------------------------------------------------------------
TELEPHONE-0.05%
NEXTLINK Communications, Inc.-$3.25 Conv.
Pfd.(b)
(Acquired 03/26/98; Cost
$180,000) 3,600 146,700
- --------------------------------------------------------------
Total Domestic Convertible
Preferred Stocks (Cost
$4,934,288) 4,457,013
- --------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-24.80%
AUSTRALIA-0.30%
Telstra Corp. Ltd. (Telephone) 195,000 911,011
- --------------------------------------------------------------
AUSTRIA-0.61%
Oesterreichische
Elektrizitaetswirtschafts
A.G.-Class A (Electric
Companies) 12,500 1,910,774
- --------------------------------------------------------------
BELGIUM-0.66%
Electrabel S.A. (Electric
Companies) 4,700 2,054,125
- --------------------------------------------------------------
BERMUDA-0.43%
Global Crossing Ltd.
(Telecommunications-Long
Distance)(a) 30,000 1,353,750
- --------------------------------------------------------------
CANADA-1.93%
MetroNet Communications
Corp.-Class B
(Telecommunications)(a) 30,000 1,005,000
- --------------------------------------------------------------
Teleglobe, Inc.
(Telecommunications-Long
Distance) 43,500 1,566,000
- --------------------------------------------------------------
TELUS Corp.
(Telecommunications-Cellular &
Wireless) 95,000 2,017,975
- --------------------------------------------------------------
Westcoast Energy Inc. (Natural
Gas) 71,900 1,429,013
- --------------------------------------------------------------
6,017,988
- --------------------------------------------------------------
DENMARK-0.60%
Tele Danmark A.S.-ADR (Telephone) 27,500 1,866,562
- --------------------------------------------------------------
FINLAND-1.18%
Fortum Corp. (Electric
Companies)(a) 70,450 428,519
- --------------------------------------------------------------
Nokia Oyj A.B.-Class A-ADR
(Communications Equipment) 23,200 2,794,150
- --------------------------------------------------------------
Sonera Group OYj
(Telecommunications-Cellular/Wireless)(a)(b)
(Acquired 11/10/98; Cost
$226,839) 25,900 457,373
- --------------------------------------------------------------
3,680,042
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FRANCE-0.99%
France Telecom S.A.-ADR
(Communications Equipment) 39,000 $ 3,078,563
- --------------------------------------------------------------
GERMANY-1.04%
RWE A.G. (Electric Companies) 28,100 1,538,721
- --------------------------------------------------------------
Viag A.G.
(Manufacturing-Diversified) 2,900 1,700,253
- --------------------------------------------------------------
3,238,974
- --------------------------------------------------------------
GREECE-0.11%
Panafon Hellenic Telecom S.A.-GDR
(Telecommunications-Cellular/Wireless)(a)(b)
(Acquired 11/20/98; Cost
$244,080) 13,500 357,750
- --------------------------------------------------------------
HUNGARY-0.41%
Magyar Tavkozlesi-ADR
(Telecommunications-Long
Distance) 42,700 1,272,994
- --------------------------------------------------------------
ITALY-4.84%
AEM S.p.A. (Electric
Companies)(a)(b) (Acquired
07/17/98; Cost $610,231) 645,000 1,547,422
- --------------------------------------------------------------
Societa Nordelettrica S.p.A.
(Electric Companies) 570,000 2,521,147
- --------------------------------------------------------------
Telecom Italia Mobile S.p.A.
(Telecommunications-Cellular/Wireless) 578,300 4,268,929
- --------------------------------------------------------------
Telecom Italia S.p.A. (Telephone) 788,333 6,725,659
- --------------------------------------------------------------
15,063,157
- --------------------------------------------------------------
JAPAN-0.45%
Nippon Telegraph & Telephone
Corp. (Telecommunications-Long
Distance) 85 656,046
- --------------------------------------------------------------
Nippon Telegraph & Telephone
Corp.-ADR
(Telecommunications-Long
Distance) 20,000 750,000
- --------------------------------------------------------------
1,406,046
- --------------------------------------------------------------
NETHERLANDS-0.69%
Equant N.V.
(Computers-Networking)(a) 9,900 671,343
- --------------------------------------------------------------
Royal PTT Nederland N.V.-ADR
(Telephone) 542 27,235
- --------------------------------------------------------------
TNT Post Group N.V.-ADR (Air
Freight) 44,727 1,453,622
- --------------------------------------------------------------
2,152,200
- --------------------------------------------------------------
PORTUGAL-2.16%
Electricidade de Portugal, S.A.
(Electric Companies) 32,000 705,170
- --------------------------------------------------------------
Electricidade de Portugal,
S.A.-ADR (Electric Companies) 46,000 2,049,875
- --------------------------------------------------------------
Portugal Telecom S.A.-ADR
(Telephone) 68,100 3,038,962
- --------------------------------------------------------------
Telecel-Comunicacaoes Pessoais,
S.A.
(Telecommunications-Cellular/Wireless) 4,600 940,333
- --------------------------------------------------------------
6,734,340
- --------------------------------------------------------------
SPAIN-3.00%
Autopistas Concesionaria Espanola
S.A. (Services-Commercial &
Consumer) 77,000 1,279,087
- --------------------------------------------------------------
Iberdrola S.A. (Electric
Companies) 233,000 4,354,297
- --------------------------------------------------------------
</TABLE>
FS-22
<PAGE> 274
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SPAIN-(CONTINUED)
Telefonica S.A.-ADR (Telephone) 27,336 $ 3,700,612
- --------------------------------------------------------------
9,333,996
- --------------------------------------------------------------
SWITZERLAND-0.74%
Swisscom A. G. (Telephone)(a) 5,500 2,303,014
- --------------------------------------------------------------
UNITED KINGDOM-4.66%
Hyder PLC (Water Utilities) 54,863 688,384
- --------------------------------------------------------------
National Grid Group PLC (Electric
Companies) 131,526 1,048,652
- --------------------------------------------------------------
PowerGen PLC (Electric Companies) 136,949 1,798,004
- --------------------------------------------------------------
PowerGen PLC-ADR (Electric
Companies) 40,900 2,188,150
- --------------------------------------------------------------
Scottish & Southern Energy PLC
(Electric Companies) 124,061 1,395,817
- --------------------------------------------------------------
Scottish Power PLC (Electric
Companies) 201,550 2,068,352
- --------------------------------------------------------------
United Utilities PLC (Water
Utilities) 206,936 2,864,744
- --------------------------------------------------------------
Yorkshire Water PLC (Water
Utilities) 270,407 2,471,641
- --------------------------------------------------------------
14,523,744
- --------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$41,051,157) 77,259,030
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
DOMESTIC NON-CONVERTIBLE BONDS &
NOTES-13.56%
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.97%
Comcast Cable Communications,
Unsec. Unsub. Notes, 6.20%,
11/15/08 $ 2,000,000 2,039,960
- --------------------------------------------------------------
Comcast Corp., Sr. Sub. Deb.,
9.50%, 01/15/08 900,000 941,750
- --------------------------------------------------------------
2,981,710
- --------------------------------------------------------------
ELECTRIC COMPANIES-3.15%
Commonwealth Edison Co., First
Mortgage Notes, 7.50%, 07/01/13 1,300,000 1,469,988
- --------------------------------------------------------------
El Paso Electric Co., Sec. First Mortgage Bonds
Series D, 8.90%, 02/01/06 1,425,000 1,605,263
- --------------------------------------------------------------
Series E, 9.40%, 05/01/11 1,900,000 2,157,583
- --------------------------------------------------------------
Niagara Mohawk Power Corp.,
Series G Sr. Unsec. Notes,
7.75%, 10/01/08 1,900,000 2,076,890
- --------------------------------------------------------------
Western Resources, Inc.,
Sr. Unsec. Notes, 6.25%,
8/15/03 1,500,000 1,529,640
- --------------------------------------------------------------
Sr. Notes, 7.125%, 08/01/09 900,000 979,740
- --------------------------------------------------------------
9,819,104
- --------------------------------------------------------------
ENTERTAINMENT-0.40%
Time Warner, Inc., Deb., 9.125%,
01/15/13 1,000,000 1,257,610
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.47%
California Energy Co., Notes,
10.25%, 01/15/04 1,400,000 1,478,680
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
NATURAL GAS-3.80%
Dynegy Inc., Sr. Unsec. Deb.,
7.125%, 05/15/18 $ 1,400,000 $ 1,381,394
- --------------------------------------------------------------
Enron Corp., Sr. Sub. Deb.,
6.75%, 07/01/05 3,750,000 3,871,312
- --------------------------------------------------------------
Ferrellgas Partners, Series B Sr.
Sec. Gtd. Notes, 9.375%,
06/15/06 1,000,000 1,005,000
- --------------------------------------------------------------
KN Energy, Inc., Unsec. Deb.,
7.35%, 08/01/26 3,000,000 3,165,450
- --------------------------------------------------------------
PanEnergy Corp., Notes, 7.875%,
08/15/04 2,205,000 2,421,024
- --------------------------------------------------------------
11,844,180
- --------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-0.64%
Tennessee Gas Pipeline Co.,
Bonds, 7.00%, 03/15/27 1,900,000 1,989,528
- --------------------------------------------------------------
POWER PRODUCERS
(INDEPENDENT)-2.44%
AES Corp.
Sr. Sub. Notes, 10.25%,
07/15/06 925,000 1,011,313
- --------------------------------------------------------------
Sr. Notes, 8.00%, 12/31/08 2,500,000 2,491,775
- --------------------------------------------------------------
Indiana Michigan Power, Sec.
Lease Obligation Bonds, 9.82%,
12/07/22 3,020,986 4,099,991
- --------------------------------------------------------------
7,603,079
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-1.69%
AT&T Corp., Sr. Notes, 7.75%,
03/01/07 1,850,000 2,134,234
- --------------------------------------------------------------
Sprint Capital Corp., Sr. Unsec.
Notes, 6.875%, 11/15/28 3,000,000 3,126,480
- --------------------------------------------------------------
5,260,714
- --------------------------------------------------------------
Total Domestic
Non-Convertible Bonds &
Notes (Cost $40,474,043) 42,234,605
- --------------------------------------------------------------
DOMESTIC CONVERTIBLE BONDS &
NOTES-1.89%
COMPUTERS (HARDWARE)-1.33%
Candescent Technology Corp.,
Conv. Sr. Sub. Deb., 7.00%,
05/01/03(b) (Acquired
04/17/98-11/30/98; Cost
$4,510,988) 4,605,000 4,144,500
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.56%
Global Telesystems Group, Sr.
Sub. Notes, 8.75%, 06/30/00 620,000 1,746,850
- --------------------------------------------------------------
Total Domestic Convertible
Bonds & Notes (Cost
$5,622,901) 5,891,350
- --------------------------------------------------------------
FOREIGN NON-CONVERTIBLE BONDS &
NOTES-2.28%(C)
CANADA-2.28%
Bell Canada (Telecommunications-
Cellular/Wireless)
Unsec. Deb., 10.875%,
10/11/04 CAD 1,700,000 1,407,132
- --------------------------------------------------------------
Series EW Deb., 8.80%, 08/17/05 950,000 738,069
- --------------------------------------------------------------
Teleglobe Canada, Inc.
(Telephone), Unsec. Deb.,
8.35%, 06/20/03 2,400,000 1,753,522
- --------------------------------------------------------------
</TABLE>
FS-23
<PAGE> 275
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Trans-Canada Pipelines (Natural
Gas)
Unsec. Notes, 8.55%,
02/01/06 CAD $ 2,150,000 $ 1,638,342
- --------------------------------------------------------------
Series Q Deb., 10.625%,
10/20/09 1,750,000 1,576,441
- --------------------------------------------------------------
Total Foreign Non-Convertible
Bonds & Notes (Cost
$7,084,147) 7,113,506
- --------------------------------------------------------------
FOREIGN CONVERTIBLE BONDS &
NOTES-2.23%(c)
FRANCE-0.39%
France Telecom (Telephone), Conv.
Bonds, 2.00%, 01/01/04 FRF 6,455,040 1,228,450
- --------------------------------------------------------------
UNITED KINGDOM-1.84%
National Grid Co. PLC (Electric
Companies), Bonds, 4.25%,
02/17/08 GBP 2,760,000 $ 5,733,554
- --------------------------------------------------------------
Total Foreign Convertible
Bonds & Notes (Cost
$5,712,741) 6,962,004
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENT-3.24%(d)
Goldman, Sachs & Co., 4.40%,
01/04/99 (Cost $10,092,144)(e) $ 10,092,144 $ 10,092,144
- --------------------------------------------------------------
TOTAL INVESTMENT
SECURITIES-99.88% 311,166,578
- --------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.12% 358,946
- --------------------------------------------------------------
NET ASSETS-100.00% $311,525,524
==============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with provisions of Rule 144A under the Securities Act of 1933, as
amended. The valuation of these securities has been determined in accordance
with procedures established by the Board of Trustees. The market value of
these securities at 12/31/98 was $6,653,745 which represented 2.14% of the
Fund's net assets.
(c) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(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 is at least 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 12/31/98 with a maturing value of
$700,342,222. Collateralized by $646,494,000 U.S. Government obligations, 0%
to 11.75% due 02/15/99 to 04/15/28 with an aggregate market value at
12/31/98 at $714,694,897.
Abbreviations:
ADR - American Depositary Receipt
CAD - Canadian Dollars
Conv. - Convertible
Deb. - Debentures
FRF - French Franc
GBP - British Pound Sterling
GDR - Global Depositary Receipt
Gtd. - Guaranteed
Pfd. - Preferred
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
See Notes to Financial Statements.
FS-24
<PAGE> 276
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$198,416,205) $311,166,578
- ---------------------------------------------------------
Receivables for:
Fund shares sold 276,166
- ---------------------------------------------------------
Dividends and interest 1,569,609
- ---------------------------------------------------------
Investment for deferred compensation plan 26,670
- ---------------------------------------------------------
Other assets 12,164
- ---------------------------------------------------------
Total assets 313,051,187
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Fund shares reacquired 933,957
- ---------------------------------------------------------
Dividends 83,573
- ---------------------------------------------------------
Deferred compensation 26,670
- ---------------------------------------------------------
Accrued advisory fees 145,219
- ---------------------------------------------------------
Accrued distribution fees 250,821
- ---------------------------------------------------------
Accrued trustees' fees 2,480
- ---------------------------------------------------------
Accrued transfer agent fees 45,041
- ---------------------------------------------------------
Accrued operating expenses 37,902
- ---------------------------------------------------------
Total liabilities 1,525,663
- ---------------------------------------------------------
Net assets applicable to shares outstanding $311,525,524
=========================================================
NET ASSETS:
Class A $196,665,324
=========================================================
Class B $111,866,205
=========================================================
Class C $ 2,993,995
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 9,362,332
=========================================================
Class B 5,332,999
=========================================================
Class C 142,792
=========================================================
Class A:
Net asset value and redemption price per
share $ 21.01
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $21.01
divided by 94.50%) $ 22.23
=========================================================
Class B:
Net asset value and offering price per
share $ 20.98
=========================================================
Class C:
Net asset value and offering price per
share $ 20.97
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $318,609 foreign
withholding tax) $ 5,939,307
- ---------------------------------------------------------
Interest 4,083,371
- ---------------------------------------------------------
Total investment income 10,022,678
- ---------------------------------------------------------
EXPENSES:
Advisory fees 1,652,662
- ---------------------------------------------------------
Administrative services fees 85,383
- ---------------------------------------------------------
Custodian fees 85,708
- ---------------------------------------------------------
Trustees' fees 12,855
- ---------------------------------------------------------
Distribution fees -- Class A 467,750
- ---------------------------------------------------------
Distribution fees -- Class B 1,019,004
- ---------------------------------------------------------
Distribution fees -- Class C 15,320
- ---------------------------------------------------------
Transfer agent fees -- Class A 296,822
- ---------------------------------------------------------
Transfer agent fees -- Class B 161,294
- ---------------------------------------------------------
Transfer agent fees -- Class C 2,540
- ---------------------------------------------------------
Other 63,725
- ---------------------------------------------------------
Total expenses 3,863,063
- ---------------------------------------------------------
Less: Expenses paid indirectly (4,112)
- ---------------------------------------------------------
Net expenses 3,858,951
- ---------------------------------------------------------
Net investment income 6,163,727
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND OPTION
CONTRACTS:
Net realized gain from:
Investment securities 11,405,417
- ---------------------------------------------------------
Foreign currencies 49,691
- ---------------------------------------------------------
Option contracts written 11,841
- ---------------------------------------------------------
11,466,949
- ---------------------------------------------------------
Net unrealized appreciation of:
Investment securities 25,161,926
- ---------------------------------------------------------
Foreign currencies 5,695
- ---------------------------------------------------------
25,167,621
- ---------------------------------------------------------
Net gain from investment securities,
foreign currencies and option
contracts written 36,634,570
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $42,798,297
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-25
<PAGE> 277
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 6,163,727 $ 6,278,999
- --------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies and option contracts 11,466,949 10,202,494
- --------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currencies and option contracts 25,167,621 36,469,056
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 42,798,297 52,950,549
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (4,323,452) (4,517,536)
- --------------------------------------------------------------------------------------------
Class B (1,627,090) (1,708,856)
- --------------------------------------------------------------------------------------------
Class C (23,697) (2,079)
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (7,225,608) (99,987)
- --------------------------------------------------------------------------------------------
Class B (4,089,137) (52,584)
- --------------------------------------------------------------------------------------------
Class C (109,604) (629)
- --------------------------------------------------------------------------------------------
Share transactions-net:
Class A 865,940 (15,436,814)
- --------------------------------------------------------------------------------------------
Class B 8,749,835 (921,844)
- --------------------------------------------------------------------------------------------
Class C 1,643,746 1,124,595
- --------------------------------------------------------------------------------------------
Net increase in net assets 36,659,230 31,334,815
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 274,866,294 243,531,479
- --------------------------------------------------------------------------------------------
End of period $311,525,524 $274,866,294
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $198,796,429 $186,636,908
- --------------------------------------------------------------------------------------------
Undistributed net investment income (68,800) 78,008
- --------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies and option contracts 46,323 567,427
- --------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and option contracts 112,751,572 87,583,951
- --------------------------------------------------------------------------------------------
$311,525,524 $274,866,294
============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-26
<PAGE> 278
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
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: Class A shares,
Class B shares and Class C shares. 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 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
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, 1998 additional paid-in capital was
increased by $900,000, undistributed net investment income was decreased by
$336,296 and undistributed net realized gains was decreased by $563,704 as a
result of differing book/tax treatment of foreign currency transactions and
equalization credits 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. Bond Premiums -- It is the policy of the Fund not to amortize market
premiums on bonds for financial reporting purposes.
D. 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. The fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. such fluctuations are included with the net realized and
unrealized gain or loss from investments.
E. Foreign Currency Contracts -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an
FS-27
<PAGE> 279
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.
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.
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 25% of
the net assets of the Fund.
G. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
H. Expenses -- 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, 1998, AIM
was reimbursed $85,383 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, 1998, AFS
was paid $295,741 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 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 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 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 year ended December 31, 1998, the Class A, Class B and Class
C shares paid AIM Distributors $467,750, $1,019,004 and $15,320, respectively,
as compensation under the Plans.
AIM Distributors received commissions of $71,338 from sales of the Class A
shares of the Fund during the year ended December 31, 1998. Such commissions are
not an expense of the Fund. They are
FS-28
<PAGE> 280
deducted from, and are not included in, the proceeds from sales of Class A
shares. During the year ended December 31, 1998, AIM Distributors received
$71,709 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, 1998, the Fund paid legal fees of $3,992
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, 1998, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $3,225 and $887, respectively under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $4,112 during the year ended December 31, 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.
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) $1,000,000,000 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 May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended December 31, 1998, 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, 1998 was
$107,669,891 and $103,795,551, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $113,860,514
- ----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (1,110,165)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $112,750,349
==========================================================
</TABLE>
Cost of investments for tax purposes is $198,416,229.
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1998 and 1997
were as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 2,025,020 $ 40,729,263 2,718,197 $46,163,286
- --------------------------------------------------------------------------
Class B 1,124,804 22,635,167 765,587 13,195,278
- --------------------------------------------------------------------------
Class C* 196,103 3,960,554 62,085 1,135,211
- --------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 520,447 10,555,882 237,293 4,070,874
- --------------------------------------------------------------------------
Class B 246,404 4,994,635 87,895 1,505,898
- --------------------------------------------------------------------------
Class C* 5,787 117,358 94 1,781
- --------------------------------------------------------------------------
Reacquired:
Class A (2,500,981) (50,419,205) (3,882,294) (65,670,974)
- --------------------------------------------------------------------------
Class B (935,494) (18,879,967) (924,101) (15,623,020)
- --------------------------------------------------------------------------
Class C* (120,588) (2,434,166) (689) (12,397)
- --------------------------------------------------------------------------
561,502 $ 11,259,521 (935,933) $(15,234,063)
==========================================================================
</TABLE>
* Class C shares commenced sales on August 4, 1997.
NOTE 8-CALL OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1998 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
---------- ---------
<S> <C> <C>
Beginning of period -- $ --
- --------------------------------- ------- --------
Written 180 38,798
- --------------------------------- ------- --------
Closed (180) (38,798)
- --------------------------------- ------- --------
End of period -- $ --
================================= ======= ========
</TABLE>
FS-29
<PAGE> 281
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and a share of
Class B outstanding during each of the years in the five-year period ended
December 31, 1998; and for a share of Class C outstanding during the year ended
December 31, 1998 and the period August 4, 1997 (date sales commenced) through
December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.26 $ 16.01 $ 14.59 $ 11.85 $ 14.09
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.48 0.47 0.55 0.55 0.59
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 2.53 3.26 1.43 2.71 (2.20)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations 3.01 3.73 1.98 3.26 (1.61)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.46) (0.47) (0.56) (0.52) (0.60)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains (0.80) (0.01) -- -- --
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Returns of capital -- -- -- -- (0.03)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (1.26) (0.48) (0.56) (0.52) (0.63)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 21.01 $ 19.26 $ 16.01 $ 14.59 $ 11.85
============================================================ ======== ======== ======== ======== ========
Total return(a) 16.01% 23.70% 13.88% 28.07% (11.57)%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $196,665 $179,456 $164,001 $170,624 $150,515
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.06%(b) 1.13% 1.17% 1.21% 1.18%
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets 2.39%(b) 2.79% 3.62% 4.20% 4.67%
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 38% 26% 48% 88% 101%
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $187,100,175.
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------------ ----------------
1998 1997 1996 1995 1994 1998 1997
-------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.24 $ 16.01 $ 14.60 $ 11.84 $ 14.08 $ 19.24 $17.67
- ---------------------------------------------------------- -------- ------- ------- ------- ------- ------- ------
Income from investment operations:
Net investment income 0.33 0.34 0.42 0.44 0.47 0.33 0.13
- ---------------------------------------------------------- -------- ------- ------- ------- ------- ------- ------
Net gains (losses) on securities (both realized and
unrealized) 2.53 3.25 1.44 2.73 (2.19) 2.52 1.58
- ---------------------------------------------------------- -------- ------- ------- ------- ------- ------- ------
Total from investment operations 2.86 3.59 1.86 3.17 (1.72) 2.85 1.71
- ---------------------------------------------------------- -------- ------- ------- ------- ------- ------- ------
Less distributions:
Dividends from net investment income (0.32) (0.35) (0.45) (0.41) (0.49) (0.32) (0.13)
- ---------------------------------------------------------- -------- ------- ------- ------- ------- ------- ------
Distributions from net realized gains (0.80) (0.01) -- -- -- (0.80) (0.01)
- ---------------------------------------------------------- -------- ------- ------- ------- ------- ------- ------
Returns of capital -- -- -- -- (0.03) -- --
- ---------------------------------------------------------- -------- ------- ------- ------- ------- ------- ------
Total distributions (1.12) (0.36) (0.45) (0.41) (0.52) (1.12) (0.14)
- ---------------------------------------------------------- -------- ------- ------- ------- ------- ------- ------
Net asset value, end of period $ 20.98 $ 19.24 $ 16.01 $ 14.60 $ 11.84 $ 20.97 $19.24
========================================================== ======== ======= ======= ======= ======= ======= ======
Total return(a) 15.14% 22.74% 12.98% 27.16% (12.35)% 15.09% 9.74%
========================================================== ======== ======= ======= ======= ======= ======= ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $111,866 $94,227 $79,530 $70,693 $42,568 $2,994 $1,183
========================================================== ======== ======= ======= ======= ======= ======= ======
Ratio of expenses to average net assets 1.81%(b) 1.91% 1.96% 1.97% 2.07% 1.81%(b) 1.90%(c)
========================================================== ======== ======= ======= ======= ======= ======= ======
Ratio of net investment income to average net assets 1.64%(b) 2.01% 2.83% 3.44% 3.78% 1.64%(b) 2.02%(c)
========================================================== ======== ======= ======= ======= ======= ======= ======
Portfolio turnover rate 38% 26% 48% 88% 101% 38% 26%
========================================================== ======== ======= ======= ======= ======= ======= ======
</TABLE>
(a) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(b) Ratios are based on average net assets of $101,900,371 and $1,531,963 for
Class B and Class C, respectively.
(c) Annualized.
FS-30
<PAGE> 282
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, 1998, the related statement of operations
for the year then ended, the statement of changes in its
net assets for each of the years in the two-year period
then ended and the financial highlights for each of the
years in the 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. Our procedures included confirmation of
securities owned as of December 31, 1998, 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, 1998, 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 five-year period then ended, in conformity
with generally accepted accounting principles.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
February 5, 1999
FS-31
<PAGE> 283
SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CORPORATE BONDS & NOTES-91.49%
AEROSPACE/DEFENSE-0.32%
Earthwatch Inc., Sr. Notes,
12.50%, 03/01/01(a)(b)
(Acquired 03/14/97; Cost
$15,500,000) $ 15,500,000 $ 11,702,500
- ---------------------------------------------------------------
AIR FREIGHT-0.70%
Atlas Air, Inc., Sr. Unsec.
Notes, 10.75%, 08/01/05 23,947,000 25,264,085
- ---------------------------------------------------------------
AIRLINES-2.79%
Airplanes Pass Through Trust,
Sub. Bonds, 10.875%, 03/15/19 42,860,000 45,030,001
- ---------------------------------------------------------------
Amtran, Inc., Sr. Unsec. Gtd.
Notes, 10.50%, 08/01/04 26,750,000 27,820,000
- ---------------------------------------------------------------
Continental Airlines, Notes,
8.00%, 12/15/05 26,000,000 26,356,200
- ---------------------------------------------------------------
World Airways, Inc., Sr. Conv.
Sub. Deb., 8.00%, 08/26/04(a)
(Acquired 08/21/97; Cost
$5,000,000) 5,000,000 1,475,000
- ---------------------------------------------------------------
100,681,201
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT-1.93%
Advance Stores Co., Series B Sr.
Gtd. Sub. Notes, 10.25%,
04/15/08 21,680,000 22,113,600
- ---------------------------------------------------------------
Exide Corp.
Conv. Sr. Sub. Notes, 2.90%,
12/15/05(a) (Acquired
12/19/96-04/07/98; Cost
$12,820,500) 20,700,000 12,238,875
- ---------------------------------------------------------------
Sr. Notes, 10.00%, 04/15/05 14,000,000 14,000,000
- ---------------------------------------------------------------
Magna International, Inc., Conv.
Sub. Deb., 4.875%, 02/15/05 9,000,000 9,258,750
- ---------------------------------------------------------------
Newcor, Inc., Series B Sr. Gtd.
Sub. Notes, 9.875%, 03/01/08 12,880,000 12,042,800
- ---------------------------------------------------------------
69,654,025
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO
& CABLE)-6.73%
Chancellor Media Corp., Sr. Sub.
Notes, 9.00%, 10/01/08(a)
(Acquired 09/25/98; Cost
$50,000,000) 50,000,000 52,750,000
- ---------------------------------------------------------------
Diamond Cable Communications PLC
(United Kingdom), Sr. Yankee
Disc. Notes, 11.75%,
12/15/05(c) 32,380,000 26,956,350
- ---------------------------------------------------------------
Digital TV Services LLC, Series
B, Sr. Gtd. Sub. Notes,
12.50%, 08/01/07 17,500,000 18,987,500
- ---------------------------------------------------------------
EchoStar DBS Corp., Sr. Sec.
Gtd. Notes, 12.50%, 07/01/02 21,080,000 24,452,800
- ---------------------------------------------------------------
Fox Family Worldwide, Inc., Sr.
Unsec. Disc. Notes, 10.25%,
11/01/07(c) 32,750,000 20,632,500
- ---------------------------------------------------------------
Frontiervision Holdings LP, Sr.
Disc. Notes, 11.875%,
09/15/07(c) 27,480,000 23,151,900
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
BROADCASTING (TELEVISION, RADIO &
CABLE)-(CONTINUED)
Jacor Communications, Inc.,
Unsec. Conv. LYON, 3.99%,
02/09/18(d) $ 20,000,000 $ 9,693,000
- ---------------------------------------------------------------
Kabelmedia Holdings GmbH
(Germany), Sr. Yankee Unsec.
Disc. Notes, 13.625%,
08/01/06(c) 39,000,000 32,370,000
- ---------------------------------------------------------------
Knology Holdings, Inc., Sr.
Disc. Notes, 11.875%
10/15/07(c) 42,250,000 19,540,625
- ---------------------------------------------------------------
Park N View, Inc., Series B, Sr.
Notes, 13.00%, 05/15/08 16,400,000 14,022,000
- ---------------------------------------------------------------
242,556,675
- ---------------------------------------------------------------
BUILDING MATERIALS-1.02%
Congoleum Corp., Sr. Unsec.
Notes, 8.625%, 08/01/08 19,900,000 19,701,000
- ---------------------------------------------------------------
Imperial Home Decor Group,
Series B, Sr. Unsec. Gtd. Sub.
Notes, 11.00%, 03/15/08 19,100,000 17,094,500
- ---------------------------------------------------------------
36,795,500
- ---------------------------------------------------------------
CHEMICALS-0.48%
Sterling Chemicals, Inc., Sr.
Unsec. Sub. Notes, 11.75%,
08/15/06 19,990,000 17,291,350
- ---------------------------------------------------------------
CHEMICALS (SPECIALTY)-1.26%
Key Plastics, Inc., Series B,
Sr. Unsec. Gtd. Sub. Notes,
10.25%, 03/15/07 21,270,000 19,993,800
- ---------------------------------------------------------------
Trans-Resources, Inc.,
Series B, Sr. Unsec. Disc.
Notes, 12.00%, 03/15/08(c) 26,000,000 13,910,000
- ---------------------------------------------------------------
Series B, Sr. Unsec. Notes,
10.75%, 03/15/08 11,700,000 11,700,000
- ---------------------------------------------------------------
45,603,800
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.53%
Comverse Technology, Inc.,
Conv. Sub. Deb., 4.50%,
07/01/05(a) (Acquired
10/27/98; Cost $1,157,963) 1,269,000 1,605,285
- ---------------------------------------------------------------
Unsec. Conv. Sub. Deb., 4.50%,
07/01/05 4,481,000 5,668,465
- ---------------------------------------------------------------
Dialog Corp. PLC (United
Kingdom), Series A, Sr. Sub.
Yankee Notes, 11.00%, 11/15/07 23,000,000 23,000,000
- ---------------------------------------------------------------
ProNet, Inc., Sr. Sub. Notes,
11.875%, 06/15/05 23,640,000 25,176,600
- ---------------------------------------------------------------
55,450,350
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-0.03%
Candescent Technology Corp., Sr.
Conv. Sub. Deb., 7.00%,
05/01/03(a) (Acquired
11/09/98-11/30/98; Cost
$1,112,500) 1,250,000 1,125,000
- ---------------------------------------------------------------
</TABLE>
FS-32
<PAGE> 284
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
COMPUTERS (NETWORKING)-1.11%
Convergent Communication, Series
B, Sr. Unsec. Notes, 13.00%,
04/01/08 $ 33,500,000 $ 16,247,500
- ---------------------------------------------------------------
Exodus Communications, Sr.
Unsec. Notes, 11.25%, 07/01/08 23,660,000 23,896,600
- ---------------------------------------------------------------
40,144,100
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.37%
Metal Management, Inc., Sr.
Unsec. Gtd. Sub. Notes,
10.00%, 05/15/08 21,900,000 13,249,500
- ---------------------------------------------------------------
CONSTRUCTION (CEMENT & AGGREGATES)-0.45%
Schuff Steel Co., Sr. Unsec.
Gtd. Sub. Notes, 10.50%,
06/01/08 18,550,000 16,231,250
- ---------------------------------------------------------------
CONTAINERS & PACKAGING (PAPER)-0.74%
BPC Holding Corp., Series B, Sr.
Sec. Notes, 12.50%, 06/15/06 11,875,000 12,409,375
- ---------------------------------------------------------------
MVE, Inc., Sr. Sec. Notes,
12.50%, 02/15/02 14,570,000 14,351,450
- ---------------------------------------------------------------
26,760,825
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD &
HEALTH)-1.00%
Core-Mark International, Inc.,
Sr. Sub. Notes, 11.375%,
09/15/03 16,340,000 16,666,800
- ---------------------------------------------------------------
Fleming Companies, Inc., Sr.
Unsec. Gtd. Sub. Notes,
10.625%, 07/31/07 20,700,000 19,458,000
- ---------------------------------------------------------------
36,124,800
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.19%
Electronic Retailing Systems
International, Inc., Sr. Disc.
Notes, 13.25%, 02/01/04(c) 18,342,000 6,694,830
- ---------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-0.44%
Panda Funding Corp., Series A-1,
Pooled Project Bonds, 11.625%,
08/20/12 14,950,869 15,773,167
- ---------------------------------------------------------------
ENTERTAINMENT-1.38%
Ascent Entertainment Group, Sr.
Sec. Disc. Notes, 11.875%,
12/15/04(c) 28,812,000 17,431,260
- ---------------------------------------------------------------
Regal Cinemas, Inc., Sr. Unsec.
Sub. Notes, 9.50%, 06/01/08 20,100,000 20,803,500
- ---------------------------------------------------------------
Silver Cinemas, Inc., Sr. Sub.
Notes, 10.50%, 04/15/05 15,880,000 11,513,000
- ---------------------------------------------------------------
49,747,760
- ---------------------------------------------------------------
FOODS-1.60%
Ameriserve Food Distributors,
Sr. Unsec. Gtd. Notes, 8.875%,
10/15/06 15,500,000 14,415,000
- ---------------------------------------------------------------
Del Monte Corp./Foods Co.,
Series B, Sr. Unsec. Sub.
Notes, 12.25%, 04/15/07 14,385,000 16,398,900
- ---------------------------------------------------------------
Nebco Evans Holding Co., Sr.
Unsec. Disc. Notes, 12.375%,
07/15/07(c) 18,760,000 9,098,600
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
FOODS-(CONTINUED)
RAB Enterprise, Inc.,
Sr. Notes, 10.50%, 05/01/05(a)
(Acquired 04/28/98; Cost
$9,350,000) $ 9,350,000 $ 7,059,250
- ---------------------------------------------------------------
Sr. Notes, 13.00%, 05/01/08(a)
(Acquired 04/28/98; Cost
$15,000,000) 15,000,000 10,575,000
- ---------------------------------------------------------------
57,546,750
- ---------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-3.62%
Alliance Gaming Corp., Series B,
Sr. Unsec. Gtd. Notes, 10.00%,
08/01/07 18,400,000 16,652,000
- ---------------------------------------------------------------
Circus Circus Enterprises, Sr.
Sub. Notes, 9.25%, 12/01/05 29,000,000 30,080,250
- ---------------------------------------------------------------
Resort at Summerlin/RAS Co., Sr.
Unsec. Sub. PIK Notes, 13.00%,
12/15/07 26,970,000 25,756,350
- ---------------------------------------------------------------
Showboat Marina Casino
Partnership & Showboat Marina
Financial Corp., Series B Sec.
First Mortgage Notes, 13.50%,
03/15/03 21,600,000 24,516,000
- ---------------------------------------------------------------
Venetian Casino Resort LLC,
Sec. Gtd. Mortgage Notes,
12.25%, 11/15/04 18,300,000 17,202,000
- ---------------------------------------------------------------
Sr. Unsec. Gtd. Sub. Notes,
10.00%, 11/15/05(c) 19,100,000 16,139,500
- ---------------------------------------------------------------
130,346,100
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-0.39%
Biovail Corp., Sr. Notes,
10.875%, 11/15/05(a) (Acquired
11/10/98-11/24/98; Cost
$13,962,063) 13,875,000 14,083,125
- ---------------------------------------------------------------
HEALTH CARE (LONG TERM
CARE)-0.96%
Harborside Healthcare, Sr.
Unsec. Gtd. Disc. Sub. Notes,
11.00%, 08/01/08(c) 34,000,000 17,170,000
- ---------------------------------------------------------------
Mariner Post-Acute Network,
Inc.,
Series B, Sr. Unsec. Sub.
Notes, 9.50%, 11/01/07 14,990,000 11,617,250
- ---------------------------------------------------------------
Series B, Sr. Unsec. Disc.
Sub. Notes, 10.50%,
11/01/07(c) 13,730,000 5,972,550
- ---------------------------------------------------------------
34,759,800
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-2.38%
Alaris Medical Inc.,
Sr. Disc. Notes, 11.125%,
08/01/08(a)(c) (Acquired
07/23/98; Cost $12,675,392) 21,800,000 11,990,000
- ---------------------------------------------------------------
Sr. Unsec. Gtd. Sub. Notes,
9.75%, 12/01/06 11,545,000 11,775,900
- ---------------------------------------------------------------
Alliance Imaging, Sr. Sub.
Notes, 9.23%, 12/15/05 20,000,000 19,100,000
- ---------------------------------------------------------------
Dade International, Inc., Series
B, Sr. Sub. Notes, 11.125%,
05/01/06 15,710,000 17,477,375
- ---------------------------------------------------------------
</TABLE>
FS-33
<PAGE> 285
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-(CONTINUED)
Mediq, Inc.,
Sr. Disc. Deb., 13.00%,
06/01/09(c) $ 13,750,000 $ 6,256,250
- ---------------------------------------------------------------
Sr. Unsec. Gtd. Sub. Notes,
11.00%, 06/01/08 20,020,000 19,319,300
- ---------------------------------------------------------------
85,918,825
- ---------------------------------------------------------------
HOMEBUILDING-1.61%
D.R. Horton, Inc., Unsec. Gtd.
Notes, 10.00%, 04/15/06 16,040,000 17,082,600
- ---------------------------------------------------------------
Engle Homes, Inc., Series C, Sr.
Unsec. Gtd. Notes, 9.25%,
02/01/08 21,850,000 21,959,250
- ---------------------------------------------------------------
Schuler Homes, Sr. Unsec. Gtd.
Notes, 9.00%, 04/15/08 19,400,000 18,915,000
- ---------------------------------------------------------------
57,956,850
- ---------------------------------------------------------------
HOUSEWARES-0.56%
Decora Industries Inc., Series
B, Sr. Sec. Gtd. Notes,
11.00%, 05/01/05 21,350,000 20,175,750
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.27%
Loews Corp., Unsec. Conv. Sub.
Notes, 3.125%, 09/15/07 12,000,000 9,600,000
- ---------------------------------------------------------------
IRON & STEEL-1.44%
Acme Metal, Inc., Sr. Unsec.
Gtd. Notes, 10.875%,
12/15/07(e) 26,564,000 3,586,140
- ---------------------------------------------------------------
GS Industries, Inc.,
Sr. Gtd. Notes, 12.00%,
09/01/04 15,755,000 10,792,175
- ---------------------------------------------------------------
Sr. Notes, 12.25%, 10/01/05 14,525,000 9,804,375
- ---------------------------------------------------------------
Sheffield Steel Corp., Series B,
First Mortgage Notes, 11.50%,
12/01/05 19,100,000 16,330,500
- ---------------------------------------------------------------
WHX Corp., Sr. Unsec. Notes,
10.50%, 04/15/05 12,360,000 11,433,000
- ---------------------------------------------------------------
51,946,190
- ---------------------------------------------------------------
LODGING-HOTELS-4.73%
American Skiing Co., Series B,
Sr. Sub. Notes, 12.00%,
07/15/06 19,275,000 20,142,375
- ---------------------------------------------------------------
Booth Creek Ski Holdings, Sr.
Unsec. Gtd. Notes, 12.50%,
03/15/07 20,310,000 20,208,450
- ---------------------------------------------------------------
Coast Hotels & Casinos Inc.,
Series B, Sec. First Mortgage
Gtd. Notes, 13.00% 12/15/02 23,530,000 26,588,900
- ---------------------------------------------------------------
Hilton Hotels Corp.,
Sr. Unsec. Notes, 7.95%,
04/15/07 22,000,000 22,911,460
- ---------------------------------------------------------------
Sr. Unsec. Notes, 7.20%,
12/15/09 16,000,000 15,905,760
- ---------------------------------------------------------------
HMH Properties, Series B, Sr.
Sec. Gtd. Notes, 7.875%,
08/01/08 49,000,000 47,775,000
- ---------------------------------------------------------------
Stena Line A.B. (Sweden), Sr.
Unsec. Yankee Notes, 10.625%,
06/01/08 18,680,000 16,905,400
- ---------------------------------------------------------------
170,437,345
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
MACHINERY (DIVERSIFIED)-0.55%
National Equipment Services,
Series B, Sr. Sub. Notes,
10.00%, 11/30/04 $ 20,000,000 $ 19,900,000
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-1.97%
Anthony Crane Rentals, Sr.
Notes, 10.375%, 08/01/08(a)
(Acquired 07/15/98-09/08/98;
Cost $17,915,075) 17,960,000 17,331,400
- ---------------------------------------------------------------
Elgin National Industries,
Series B, Sr. Unsec. Gtd.
Notes, 11.00%, 11/01/07 17,640,000 17,816,400
- ---------------------------------------------------------------
Generac Portable Products, Sr.
Sub. Notes, 11.25%,
07/01/06(a) (Acquired
07/02/98; Cost $17,100,000) 17,100,000 17,185,500
- ---------------------------------------------------------------
Glenoit Corp., Sr. Unsec. Gtd.
Sub. Notes, 11.00%, 04/15/07 19,915,000 18,620,525
- ---------------------------------------------------------------
70,953,825
- ---------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-5.28%
Berry Plastics Corp., Sr. Sub.
Notes, 12.25%, 04/15/04 9,500,000 10,022,500
- ---------------------------------------------------------------
Brand Scaffold Services, Sr.
Unsec. Notes, 10.25%, 02/15/08 26,800,000 25,594,000
- ---------------------------------------------------------------
Derby Cycle Corp., Sr. Notes,
10.00%, 05/15/08(a) (Acquired
05/07/98-07/07/98; Cost
$18,951,613) 18,955,000 16,396,075
- ---------------------------------------------------------------
First Wave Marine, Inc., Sr.
Unsec. Gtd. Notes, 11.00%,
02/01/08 21,835,000 20,415,725
- ---------------------------------------------------------------
Globe Manufacturing Corp., Sr.
Sub. Notes, 10.00%,
08/01/08(a) (Acquired
07/28/98-09/23/98; Cost
$16,818,250) 17,050,000 15,515,500
- ---------------------------------------------------------------
MMI Products, Inc., Sr. Unsec.
Sub. Notes, 11.25%, 04/15/07 19,140,000 20,766,900
- ---------------------------------------------------------------
Neenah Corp.,
Series B, Sr. Sub. Notes,
11.125%, 05/01/07 4,000,000 4,130,000
- ---------------------------------------------------------------
Series D, Sr. Sub. Notes,
11.125%, 05/01/07 15,000,000 15,487,500
- ---------------------------------------------------------------
Omega Cabinets, Sr. Sub. Notes,
10.50%, 06/15/07 26,990,000 26,585,150
- ---------------------------------------------------------------
Precise Technology, Inc., Series
B, Sr. Unsec. Gtd. Sub. Notes,
11.125%, 06/15/07 15,900,000 15,423,000
- ---------------------------------------------------------------
SF Holdings Group, Inc., Series
B, Sr. Sec. Disc. Notes,
12.75%, 03/15/08(c) 27,000,000 8,775,000
- ---------------------------------------------------------------
Steel Heddle Manufacturing Co.,
Series B, Sr. Unsec. Gtd. Sub.
Notes, 10.625%, 06/01/08 15,700,000 11,068,500
- ---------------------------------------------------------------
190,179,850
- ---------------------------------------------------------------
METALS MINING-1.20%
Centaur Mining & Exploration,
Ltd. (Australia), Sr. Yankee
Gtd. Notes, 11.00%, 12/01/07 27,800,000 25,437,000
- ---------------------------------------------------------------
</TABLE>
FS-34
<PAGE> 286
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
METALS MINING-(CONTINUED)
Doe Run Resources Corp.,
Series B, Sr. Unsec. Gtd. Sub.
Notes, 11.70%, 03/15/03 $ 10,000,000 $ 7,750,000
- ---------------------------------------------------------------
Series B, Sr. Unsec. Gtd. Sub.
Notes, 11.25%, 03/15/05 12,790,000 9,912,250
- ---------------------------------------------------------------
43,099,250
- ---------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.59%
United Stationer Supply Co., Sr.
Sub. Notes, 12.75%, 05/01/05 19,021,000 21,303,520
- ---------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-0.58%
Rutherford-Moran Oil Corp., Sr.
Unsec. Gtd. Sub. Notes,
10.75%, 10/01/04 18,200,000 20,839,000
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-2.50%
Abraxas Petroleum Corp., Series
D, Sr. Unsec. Gtd. Notes,
11.50%, 11/01/04 18,290,000 13,991,850
- ---------------------------------------------------------------
Canadian Forest Oil Ltd.
(Canada), Sr. Unsec. Yankee
Gtd. Sub. Notes, 8.75%,
09/15/07 21,356,000 19,647,520
- ---------------------------------------------------------------
Chesapeake Energy Corp., Series
B, Sr. Unsec. Gtd. Notes,
9.625%, 05/01/05 19,330,000 15,174,050
- ---------------------------------------------------------------
Kelley Oil & Gas Corp., Series
B, Sr. Gtd. Sub. Notes,
10.375%, 10/15/06 20,150,000 15,011,750
- ---------------------------------------------------------------
Lodestar Holdings, Inc., Sr.
Unsec. Gtd. Notes, 11.50%,
05/15/05 14,235,000 11,459,175
- ---------------------------------------------------------------
Queen Sand Resources, Inc., Sr.
Unsec. Gtd. Notes, 12.50%,
07/01/08 20,950,000 14,769,750
- ---------------------------------------------------------------
90,054,095
- ---------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-0.75%
Texas Petrochemical Corp.,
Sr. Unsec. Sub. Notes,
11.125%, 07/01/06 13,000,000 12,870,000
- ---------------------------------------------------------------
Sr. Unsec. Sub. Notes,
11.125%, 07/01/06 14,480,000 14,335,200
- ---------------------------------------------------------------
27,205,200
- ---------------------------------------------------------------
POWER PRODUCER (INDEPENDENT)-0.12%
Panda Global Energy Co. (China);
Sr. Yankee Gtd. Sec. Notes,
12.50%, 04/15/04 9,662,000 4,396,210
- ---------------------------------------------------------------
PUBLISHING-0.41%
Liberty Group Publishing Inc.,
Sr. Unsec. Disc. Deb.,
11.625%, 02/01/09(c) 26,350,000 14,624,250
- ---------------------------------------------------------------
RAILROADS-0.84%
TFM SA de CV (Mexico),
Sr. Yankee Gtd. Disc. Notes,
11.75%, 06/15/09(c) 42,000,000 22,470,000
- ---------------------------------------------------------------
Sr. Yankee Gtd. Notes, 10.25%,
06/15/07 9,130,000 7,760,500
- ---------------------------------------------------------------
30,230,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
RESTAURANTS-0.53%
AFC Enterprises, Sr. Unsec. Sub.
Notes, 10.25%, 05/15/07 $ 18,240,000 $ 19,152,000
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-1.83%
Carr-Gottstein Foods Co., Sr.
Sub. Notes, 12.00%, 11/15/05 27,105,000 31,441,800
- ---------------------------------------------------------------
Cumberland Farms, Inc., Sec.
Notes, 10.50%, 10/01/03 16,972,000 16,717,420
- ---------------------------------------------------------------
Jitney-Jungle Stores of America
Inc., Sr. Gtd. Notes, 12.00%,
03/01/06 15,905,000 17,813,600
- ---------------------------------------------------------------
65,972,820
- ---------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.55%
Plainwell, Inc., Series B Sr.
Unsec. Sub. Notes, 11.00%,
03/01/08 25,030,000 19,648,550
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-4.17%
Cabot Safety Corp., Sr. Sub.
Notes, 12.50%, 07/15/05 18,975,000 20,777,625
- ---------------------------------------------------------------
CEX Holdings, Inc., Series B,
Sr. Unsec. Gtd. Sub. Notes,
9.625%, 06/01/08 20,155,000 18,240,275
- ---------------------------------------------------------------
CSK Auto Inc., Sr. Gtd. Sub.
Notes, 11.00%, 11/01/06 15,245,000 16,083,475
- ---------------------------------------------------------------
National Vision Associates, Sr.
Notes, 12.75%, 10/15/05(a)
(Acquired 10/05/98; Cost
$19,476,208) 19,700,000 20,980,500
- ---------------------------------------------------------------
Neff Corp, Sr. Sub. Notes,
10.25%, 06/01/08(a) (Acquired
12/02/98; Cost $11,969,694) 12,150,000 11,785,500
- ---------------------------------------------------------------
Sr. Unsec. Gtd. Sub. Notes,
10.25%, 06/01/08 18,500,000 17,945,000
- ---------------------------------------------------------------
Office Depot, Inc., Conv. LYON,
5.00%, 12/11/07(d) 5,000,000 5,493,750
- ---------------------------------------------------------------
Renters Choice, Inc., Sr. Sub.
Notes, 11.00%, 08/15/08(a)
(Acquired 08/13/98-10/01/98;
Cost $22,924,900) 23,060,000 23,521,200
- ---------------------------------------------------------------
Wilsons-The Leather Experts
Inc., Series B, Sr. Unsec.
Gtd. Notes, 11.25%, 08/15/04 15,840,000 15,602,400
- ---------------------------------------------------------------
150,429,725
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-2.08%
Big 5 Corp., Series B, Sr.
Unsec. Notes, 10.875%,
11/15/07 19,890,000 20,188,350
- ---------------------------------------------------------------
Corporate Express, Inc., Conv.
Notes, 4.50%, 07/01/00 8,000,000 6,782,880
- ---------------------------------------------------------------
GFSI Holdings, Inc., Series B,
Sr. Disc. Notes, 11.375%,
09/15/09(c) 20,000,000 17,100,000
- ---------------------------------------------------------------
J Crew Operating Corp., Sr. Sub.
Notes, 10.375%, 10/15/07 18,245,000 15,781,925
- ---------------------------------------------------------------
Worldwide Fiber, Inc. (Canada),
Sr. Notes, 12.50%, 12/15/05(a)
(Acquired 12/18/98; Cost
$15,000,000) 15,000,000 15,150,000
- ---------------------------------------------------------------
75,003,155
- ---------------------------------------------------------------
</TABLE>
FS-35
<PAGE> 287
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
SERVICES (ADVERTISING/MARKETING)-1.48%
Dimac Corporation, Sr. Sub.
Notes, 12.50%, 10/01/08(a)
(Acquired 10/16/98; Cost
$24,308,250) $ 25,000,000 $ 25,125,000
- ---------------------------------------------------------------
MDC Communications Corp.
(Canada),
Series B, Sr. Sub. Notes,
10.50%, 12/01/06(a)
(Acquired 11/13/98; Cost
$9,801,500) 10,000,000 10,250,000
- ---------------------------------------------------------------
Sr. Yankee Unsec. Sub. Notes,
10.50%, 12/01/06 17,470,000 17,906,750
- ---------------------------------------------------------------
53,281,750
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-1.42%
Coinmach Corp., Series D, Sr.
Unsec. Notes, 11.75%, 11/15/05 27,750,000 30,733,125
- ---------------------------------------------------------------
Hydrochem Industrial Service,
Series B, Sr. Sec. Gtd. Sub.
Notes, 10.375%, 08/01/07 21,300,000 20,554,500
- ---------------------------------------------------------------
51,287,625
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.47%
Affiliated Computer Services,
Conv. Sub. Notes, 4.00%,
03/15/05 8,500,000 10,375,313
- ---------------------------------------------------------------
DecisionOne Holdings Corp., Sr.
Disc. Deb., 11.50%,
08/01/08(c)(f) 32,085,000 6,577,425
- ---------------------------------------------------------------
16,952,738
- ---------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.48%
MSX International, Inc., Sr.
Unsec. Gtd. Sub. Notes,
11.375%, 01/15/08 18,130,000 17,359,475
- ---------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL)-0.05%
ATC Group Services, Inc., Sr.
Unsec. Gtd. Sub. Notes,
12.00%, 01/15/08(e) 17,850,000 1,695,750
- ---------------------------------------------------------------
SHIPPING-1.94%
American Reefer Co. Ltd., Series
A First Pfd. Ship Mortgage
Notes, 10.25%, 03/01/08 4,700,000 2,843,500
- ---------------------------------------------------------------
Millenium Seacarriers, First
Priority Ship Mortgage Notes,
12.00%, 07/15/05(a) (Acquired
07/20/98; Cost $19,222,007) 19,900,000 16,019,500
- ---------------------------------------------------------------
Navigator Gas Transport PLC
(United Kingdom), Notes,
10.50%, 06/30/07(a) (Acquired
07/31/97-09/04/97; Cost
$17,716,250) 17,520,000 15,505,200
- ---------------------------------------------------------------
Pacific & Atlantic Holdings,
First Pfd. Ship Mortgage
Notes, 11.50%, 05/30/08 20,980,000 16,259,500
- ---------------------------------------------------------------
Pegasus Shipping Hellas Co.
(Bermuda), Series A, Sr. Sec.
Gtd. Mortgage Notes, 11.875%,
11/15/04 22,500,000 19,462,500
- ---------------------------------------------------------------
70,090,200
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-6.39%
Clearnet Communications, Inc.
(Canada), Sr. Yankee Disc.
Notes, 14.75%, 12/15/05(c) 22,320,000 19,306,800
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TELECOMMUNICATIONS
(CELLULAR/WIRELESS)-(CONTINUED)
Metrocall Inc., Sr. Sub. Notes,
11.00%, 09/15/08(a) (Acquired
12/17/98; Cost $15,203,442) $ 15,310,000 $ 15,463,100
- ---------------------------------------------------------------
Microcell Telecommunications,
Inc., Series B, Sr. Disc.
Yankee Notes, 14.00%,
06/01/06(c) 29,500,000 21,977,500
- ---------------------------------------------------------------
Nextel Communications, Inc.,
Sr. Disc. Notes, 10.65%,
09/15/07(c) 45,600,000 29,640,000
- ---------------------------------------------------------------
Sr. Notes, 12.00%, 11/01/08(a)
(Acquired 10/28/98-11/02/98;
Cost $43,711,200) 44,000,000 48,400,000
- ---------------------------------------------------------------
Orion Network Systems, Inc.,
Sr. Gtd. Disc. Notes,
12.50%, 01/15/07(c) 23,980,000 15,227,300
- ---------------------------------------------------------------
Sr. Gtd. Notes, 11.25%,
01/15/07 17,750,000 17,661,250
- ---------------------------------------------------------------
PageMart Wireless, Inc., Sr.
Sub. Disc. Notes, 11.25%,
02/01/08(c) 43,640,000 21,165,400
- ---------------------------------------------------------------
Powertel, Inc., Sr. Unsec.
Notes, 11.125%, 06/01/07 26,000,000 25,870,000
- ---------------------------------------------------------------
Spectrasite Holdings, Inc., Sr.
Disc. Notes, 12.00%,
07/15/08(a)(c) (Acquired
06/23/98; Cost $16,815,591) 30,300,000 15,604,500
- ---------------------------------------------------------------
230,315,850
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-7.12%
Call-Net Enterprises, Inc.
(Canada), Sr. Unsec. Disc.
Yankee Notes, 8.94%,
08/15/08(c) 43,000,000 25,477,500
- ---------------------------------------------------------------
Econophone, Inc., Sr. Unsec.
Notes, 13.50%, 07/15/07 23,250,000 23,656,875
- ---------------------------------------------------------------
ESAT Telecom Group, PLC
(Ireland), Sr. Notes, 11.875%,
12/01/08(a) (Acquired
11/20/98; Cost $11,300,000) 11,300,000 11,356,500
- ---------------------------------------------------------------
Esprit Telecom Group PLC (United
Kingdom), Sr. Unsec. Yankee
Notes, 11.50%, 12/15/07 22,500,000 23,400,000
- ---------------------------------------------------------------
Firstcom Corp., Sr. Notes,
14.00%, 10/27/07(a) (Acquired
10/21/97-12/03/97; Cost
$23,200,600) 22,990,000 15,863,100
- ---------------------------------------------------------------
Global Telesystems Group, Conv.
Sr. Sub. Deb., 5.75%, 07/01/10 10,250,000 11,569,688
- ---------------------------------------------------------------
Long Distance Direct, Inc., Sr.
Notes, 12.25%, 04/15/08(a)
(Acquired 04/07/98-05/05/98;
Cost $25,619,550) 25,610,000 22,088,625
- ---------------------------------------------------------------
Primus Telecommunications Group,
Inc., Sr. Sec. Notes, 11.75%,
08/01/04 20,000,000 20,800,000
- ---------------------------------------------------------------
RSL Communications, Ltd. (United
Kingdom),
Bonds, 12.00%,
11/01/08(a)(Acquired
11/02/98; Cost $13,700,905) 14,500,000 15,007,500
- ---------------------------------------------------------------
Sr. Yankee Gtd. Notes, 12.25%,
11/15/06 20,484,000 21,713,040
- ---------------------------------------------------------------
</TABLE>
FS-36
<PAGE> 288
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TELECOMMUNICATIONS (LONG DISTANCE)-(CONTINUED)
Versatel Telecom B.V.
(Netherlands),
Sr. Notes, 13.25%, 05/15/08 $ 20,230,000 $ 20,634,600
- ---------------------------------------------------------------
Sr. Notes, 13.25%,
05/15/08(a)(g) (Acquired
11/17/98; Cost $14,208,000) 14,800,000 15,096,000
- ---------------------------------------------------------------
Viatel, Inc., Sr. Notes, 11.25%,
04/15/08 30,000,000 30,150,000
- ---------------------------------------------------------------
256,813,428
- ---------------------------------------------------------------
TELEPHONE-6.52%
Esat Holdings Ltd. (Ireland),
Sr. Yankee Notes, 12.50%,
02/01/07(c) 25,530,000 16,977,450
- ---------------------------------------------------------------
ICG Services, Inc., Sr. Unsec.
Disc. Notes, 10.00%,
02/15/08(c) 101,300,000 54,955,250
- ---------------------------------------------------------------
Logix Communications, Sr. Unsec.
Notes, 12.25%, 06/15/08 47,750,000 44,288,125
- ---------------------------------------------------------------
Nextlink Communications, Inc.,
Sr. Notes, 10.75%, 11/15/08(a)
(Acquired 11/04/98; Cost
$20,000,000) 20,000,000 20,500,000
- ---------------------------------------------------------------
NTL Inc.,
Conv. Sub. Notes, 7.00%,
12/15/08(a) (Acquired
12/11/98; Cost $5,002,650) 5,000,000 5,412,500
- ---------------------------------------------------------------
Sr. Notes, 11.50%, 10/01/08(a)
(Acquired 10/26/98; Cost
$16,035,000) 16,035,000 17,558,325
- ---------------------------------------------------------------
Qwest Communications Int'l, Sr.
Notes, 7.50%, 11/01/08(a)
(Acquired 10/27/98-11/23/98;
Cost $49,870,739) 50,200,000 52,710,000
- ---------------------------------------------------------------
U.S. Xchange LLC, Sr. Unsec.
Notes, 15.00%, 07/01/08 21,400,000 22,523,500
- ---------------------------------------------------------------
234,925,150
- ---------------------------------------------------------------
TRUCKERS-0.49%
Travelcenters of America, Inc.,
Sr. Unsec. Gtd. Sub. Deb.,
10.25%, 04/01/07 17,530,000 17,530,000
- ---------------------------------------------------------------
TRUCKS & PARTS-1.01%
Blue Bird Body Co., Series B,
Sr. Sub. Notes, 10.75%,
11/15/06 15,425,000 15,964,875
- ---------------------------------------------------------------
HDA Parts System, Inc., Sr. Sub.
Notes, 12.00%, 08/01/05(a)
(Acquired 07/28/98-09/08/98;
Cost $22,127,500) 22,400,000 20,272,000
- ---------------------------------------------------------------
36,236,875
- ---------------------------------------------------------------
WASTE MANAGEMENT-0.14%
WMX Technologies, Conv. Sub.
Notes, 2.00%, 01/24/05 5,230,000 5,138,475
- ---------------------------------------------------------------
Total Corporate Bonds &
Notes (Cost
$3,528,028,823) 3,298,240,719
- ---------------------------------------------------------------
SHARES
COMMON STOCKS & OTHER EQUITY
INTERESTS-0.36%
MANUFACTURING (SPECIALIZED)-0.01%
SF Holdings Group-Class C(a)(h)
(Acquired 03/05/98-05/05/98;
Cost $0) 69,540 260,775
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
REAL ESTATE INVESTMENT TRUST-0.04%
Meditrust Companies(h) 89,908 $ 1,359,855
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.29%
Celcaribe S.A., Ordinary Trust
Certificates(a)(h) (Acquired
05/17/94-01/23/97; Cost $0) 2,276,400 9,105,600
- ---------------------------------------------------------------
Nextel Communications,
Inc.-Class A(h) 52,195 1,233,107
- ---------------------------------------------------------------
10,338,707
- ---------------------------------------------------------------
TELEPHONE-0.02%
Intermedia Communications
Inc.(h) 51,515 888,640
- ---------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$2,590,294) 12,847,977
- ---------------------------------------------------------------
PREFERRED STOCKS-3.49%
BROADCASTING (TELEVISION, RADIO
& CABLE)-0.83%
Benedek Communications, 11.50%
PIK Pfd.(h) 28,702 23,392,130
- ---------------------------------------------------------------
Mediaone Group Inc., 6.25% Conv.
Pfd. 100,000 6,650,000
- ---------------------------------------------------------------
30,042,130
- ---------------------------------------------------------------
CHEMICALS (DIVERSIFIED)-0.10%
Monsanto Co., 6.50% Conv. Pfd. 75,000 3,675,000
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.16%
Conseco Finance Trust IV-Series
F, 3.50% Conv. Pfd. 150,000 5,793,750
- ---------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.33%
Brand Scaffold Services, Inc.,
3.625% Pfd. 330,000 9,900,000
- ---------------------------------------------------------------
SF Holdings Group, Series B,
13.75% PIK Pfd.(h) 420 1,816,500
- ---------------------------------------------------------------
11,716,500
- ---------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-0.13%
Tosco Financing Trust, 5.75%
Conv. Pfd. 100,000 4,812,500
- ---------------------------------------------------------------
RETAIL (DRUG STORES)-0.31%
CVS Auto Exchange TR, 4.23%
Conv. Pfd. 110,000 11,020,625
- ---------------------------------------------------------------
SHIPPING-0.20%
Pegasus Shipping Ltd. (Bermuda),
12.75% PIK Pfd.(a)(h)
(Acquired 06/24/98; Cost
$7,461,000) 15,000 7,275,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-1.07%
Dobson Communications, 12.25%
Sr. PIK Pfd.(h) 30,059 26,902,927
- ---------------------------------------------------------------
Loral Space & Communications
Ltd., 6.00% Conv. Pfd. 125,000 6,640,625
- ---------------------------------------------------------------
Nextel Communications, Conv.
Pfd.(a)(h) (Acquired 12/17/98;
Cost $4,997,398) 19,700 5,126,925
- ---------------------------------------------------------------
38,670,477
- ---------------------------------------------------------------
</TABLE>
FS-37
<PAGE> 289
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (LONG DISTANCE)-0.04%
Viatel Inc., Series A, 10.00%
PIK Pfd.(h) 15,252 $ 1,437,543
- ---------------------------------------------------------------
TELEPHONE-0.32%
Intermedia Communications Inc.,
7.00% Series E, Conv. Pfd. 50,000 912,500
- ---------------------------------------------------------------
7.00%, Conv. Pfd.(a) (Acquired
10/24/97-10/23/98; Cost
$13,256,285) 580,000 10,585,000
- ---------------------------------------------------------------
11,497,500
- ---------------------------------------------------------------
Total Preferred Stocks (Cost
$133,704,206) 125,941,025
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
RIGHTS & WARRANTS-0.36%
BROADCASTING (TELEVISION, RADIO
& CABLE)-0.04%
Knology Holdings, Inc., expiring
10/15/07(a)(h)(Acquired
03/12/98, Cost $0) 47,250 106,312
- ---------------------------------------------------------------
Park N View, Inc., expiring
05/15/08 (United Kingdom)(h) 16,400 1,016,800
- ---------------------------------------------------------------
United International Holdings,
expiring 11/15/99(h) 9,250 139,906
- ---------------------------------------------------------------
1,263,018
- ---------------------------------------------------------------
CHEMICALS-0.00%
Sterling Chemicals Holdings,
expiring 08/15/08(h) 7,500 112,500
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-0.00%
Convergent Communications,
expiring 04/01/08(h) 132,800 1,327
- ---------------------------------------------------------------
CONTAINERS & PACKAGING (PAPER)-0.00%
MVE, Inc., expiring 02/15/02(h) 6,750 67,500
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.00%
Electronic Retailing Systems
International, Inc., expiring
02/01/04(h) 18,802 94,010
- ---------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-0.00%
Resort At Summerlin/RAS Co.,
expiring 12/15/07(h) 23,900 239
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.01%
Republic Health Corp., expiring
04/03/00(h) 17,500 315,000
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-0.00%
Mediq, Inc., expiring
06/01/09(a)(h) (Acquired
05/21/98; Cost $7,893,001) 13,750 138
- ---------------------------------------------------------------
IRON & STEEL-0.01%
Bar Technologies Inc., expiring
04/01/01(h) 6,000 330,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
METAL FABRICATORS-0.00%
Gulf States Steel, Inc.,
expiring 04/15/03(h) 15,990 $ 160
- ---------------------------------------------------------------
PERSONAL CARE-0.00%
IHF Capital Inc.,
Series H, expiring
11/14/99(a)(h) (Acquired
11/04/94, Cost $0) 8,000 80
- ---------------------------------------------------------------
Series I, expiring
11/14/99(a)(h) (Acquired
11/04/94-03/01/95, Cost $0) 7,250 3,625
- ---------------------------------------------------------------
3,705
- ---------------------------------------------------------------
SHIPPING-0.00%
Millenium Seacarriers, expiring
07/15/03(h) 19,900 124,375
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.09%
Cellnet Data System, expiring
10/01/07(a)(h) (Acquired
09/24/97-10/15/97; Cost $0) 10,000 77,500
- ---------------------------------------------------------------
Clearnet Communications, Inc.
(Canada), expiring 09/15/05(h) 100,716 705,012
- ---------------------------------------------------------------
McCaw Intl. Ltd., expiring
04/15/07(h) 39,500 128,375
- ---------------------------------------------------------------
Microcell Telecommunications,
Inc., expiring 06/01/06(a)(h)
(Acquired 12/18/96; Cost $0) 118,000 1,519,840
- ---------------------------------------------------------------
Loral Space & Communications,
Ltd.,
expiring 01/15/07(h) 43,600 436,300
- ---------------------------------------------------------------
Powertel, Inc., expiring
02/01/06(h) 42,656 330,584
- ---------------------------------------------------------------
3,197,611
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.14%
Long Distance Direct, Inc.,
expiring 04/13/08(h) 25,610 64,025
- ---------------------------------------------------------------
Primus Telecommunications Group,
Inc., expiring 08/01/04(h) 20,000 255,000
- ---------------------------------------------------------------
RSL Communications, Ltd. (United
Kingdom), expiring 11/15/06(h) 45,145 4,514,500
- ---------------------------------------------------------------
Versatel Telecom B.V.
(Netherlands), expiring
05/15/08(h) 20,230 204,829
- ---------------------------------------------------------------
5,038,354
- ---------------------------------------------------------------
TELEPHONE-0.07%
ESAT Holdings Ltd., expiring
02/01/07(a)(h) (Acquired
06/16/97; Cost $0) 25,530 1,793,483
- ---------------------------------------------------------------
ICG Communications, Inc.,
expiring 10/15/05(h) 39,600 732,600
- ---------------------------------------------------------------
Intermedia Communications, Inc.,
expiring 06/01/00(h) 1,500 64,110
- ---------------------------------------------------------------
2,590,193
- ---------------------------------------------------------------
Total Rights & Warrants
(Cost $3,790,185) 13,138,130
- ---------------------------------------------------------------
</TABLE>
FS-38
<PAGE> 290
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENT-2.90%(i)
J.P. Morgan Securities, Inc.,
4.75%, 01/04/99(j) (Cost
$104,260,142) $104,260,142 $ 104,260,142
- ---------------------------------------------------------------
TOTAL INVESTMENTS-98.60% 3,554,427,993
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-1.40% 50,581,142
- ---------------------------------------------------------------
NET ASSETS-100.00% $3,605,009,135
===============================================================
</TABLE>
Abbreviations:
Conv. - Convertible
Deb. - Debentures
Disc. - Discounted
Gtd. - Guaranteed
LYON - Liquid Yield Option Note
Pfd. - Preferred
PIK - Payment in Kind
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
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 12/31/98 was $640,555,838
which represented 17.77% 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) Step bond issued at a discount. Interest rate shown represents coupon rate
at which the bond will accrue at a specified future date.
(d) Zero coupon bonds. Interest rate shown represents the rate of original issue
discount.
(e) Defaulted security. Currently, the issuer is partially in default with
respect to interest payments.
(f) Issued as a unit. This unit also includes 32,085 warrants to purchase 1.9
shares of common stock per warrant.
(g) Issued as a unit. This unit also includes 14,800 warrants to buy 6.667
shares of common stock per warrant.
(h) Non-income producing security.
(i) Collateral on repurchase agreements, including the Funds 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 is at least 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 12/31/98 with a maturing value of
$500,263,889. Collateralized by U.S. Government agency obligations, 0% to
7.55% due 01/04/99 to 10/03/22 with an aggregate market value at 12/31/98 of
$510,001,764.
See Notes to Financial Statements.
FS-39
<PAGE> 291
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$3,772,373,650) $3,554,427,993
- ----------------------------------------------------------
Receivables for:
Investments sold 7,159,056
- ----------------------------------------------------------
Fund shares sold 14,066,599
- ----------------------------------------------------------
Dividends and interest 70,249,884
- ----------------------------------------------------------
Investment for deferred compensation plan 72,678
- ----------------------------------------------------------
Other assets 109,656
- ----------------------------------------------------------
Total assets 3,646,085,866
- ----------------------------------------------------------
LIABILITIES:
Payables for:
Investment purchased 904,456
- ----------------------------------------------------------
Fund shares reacquired 17,674,577
- ----------------------------------------------------------
Dividends 17,585,211
- ----------------------------------------------------------
Deferred compensation plan 72,678
- ----------------------------------------------------------
Accrued advisory fees 1,464,160
- ----------------------------------------------------------
Accrued distribution fees 3,196,900
- ----------------------------------------------------------
Accrued operating expenses 178,749
- ----------------------------------------------------------
Total liabilities 41,076,731
- ----------------------------------------------------------
Net assets applicable to shares
outstanding $3,605,009,135
- ----------------------------------------------------------
NET ASSETS:
Class A $1,670,863,444
==========================================================
Class B $1,820,899,289
==========================================================
Class C $ 113,246,402
==========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 190,557,692
==========================================================
Class B 207,800,386
==========================================================
Class C 12,950,122
==========================================================
Class A:
Net asset value and redemption price per
share $ 8.77
- ----------------------------------------------------------
Offering price per share:
(Net asset value of $8.77 divided
by 95.25%) $ 9.21
==========================================================
Class B:
Net asset value and offering price per
share $ 8.76
==========================================================
Class C:
Net asset value and offering price per
share $ 8.74
==========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 380,935,260
- ---------------------------------------------------------
Dividends 1,259,674
- ---------------------------------------------------------
Total investment income 382,194,934
- ---------------------------------------------------------
EXPENSES:
Advisory fees 17,600,312
- ---------------------------------------------------------
Administrative services fees 135,537
- ---------------------------------------------------------
Custodian fees 231,456
- ---------------------------------------------------------
Transfer agent fees -- Class A 2,117,299
- ---------------------------------------------------------
Transfer agent fees -- Class B 2,220,773
- ---------------------------------------------------------
Transfer agent fees -- Class C 99,858
- ---------------------------------------------------------
Trustees' fees 31,422
- ---------------------------------------------------------
Distribution fees -- Class A 4,521,613
- ---------------------------------------------------------
Distribution fees -- Class B 18,264,587
- ---------------------------------------------------------
Distribution fees -- Class C 760,766
- ---------------------------------------------------------
Other 172,153
- ---------------------------------------------------------
Total expenses 46,155,776
- ---------------------------------------------------------
Less: Expenses paid indirectly (217,075)
- ---------------------------------------------------------
Net expenses 45,938,701
- ---------------------------------------------------------
Net investment income 336,256,233
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities (188,884,753)
- ---------------------------------------------------------
Foreign currencies (2,879)
- ---------------------------------------------------------
(188,887,632)
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities (359,473,146)
- ---------------------------------------------------------
Net gain (loss) from investment
securities and foreign currencies (548,360,778)
- ---------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $(212,104,545)
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-40
<PAGE> 292
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 336,256,233 $ 247,013,864
- ----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (188,887,632) 62,942,651
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities (359,473,146) 18,112,537
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (212,104,545) 328,069,052
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (170,021,135) (133,510,208)
- ----------------------------------------------------------------------------------------------
Class B (158,792,161) (111,521,456)
- ----------------------------------------------------------------------------------------------
Class C (6,792,770) (357,582)
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 142,435,247 469,620,256
- ----------------------------------------------------------------------------------------------
Class B 448,570,951 540,779,350
- ----------------------------------------------------------------------------------------------
Class C 101,384,122 26,215,648
- ----------------------------------------------------------------------------------------------
Net increase in net assets 144,679,709 1,119,295,060
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 3,460,329,426 2,341,034,366
- ----------------------------------------------------------------------------------------------
End of period $3,605,009,135 $3,460,329,426
==============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $4,011,736,919 $3,332,603,649
- ----------------------------------------------------------------------------------------------
Undistributed net investment income 5,490,138 4,691,600
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies (194,272,265) (18,493,312)
- ----------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (217,945,657) 141,527,489
- ----------------------------------------------------------------------------------------------
$3,605,009,135 $3,460,329,426
==============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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: Class A shares, Class B
shares, and Class C shares. 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
FS-41
<PAGE> 293
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, 1998 additional paid-in capital was decreased by $13,257,050,
undistributed net investment income was increased by $148,371 and
undistributed net realized gains was increased by $13,108,679 as a result of
differing book/tax treatment of foreign currency transactions, market
discount reclassifications and expirations of capital loss carryforwards 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 $118,664,039 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2006. The Fund cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
D. Foreign Currency Translation -- 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. The
Fund does not separately account for that portion of the results of
operations resulting from changes in foreign exchange rates on investments
and the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and unrealized
gain or loss from investments.
E. 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 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.
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 0.625% 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, 1998, AIM
was reimbursed $135,537 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, 1998, the
Fund paid AFS $2,794,049 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 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 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 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 year ended December 31, 1998, the Class A, Class B and Class
C shares paid AIM Distributors $4,521,613, $18,264,587 and $760,766,
respectively, as compensation under the Plans.
AIM Distributors received commissions of $1,822,464 from sales of the Class A
shares of the Fund during the year ended December 31, 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 year ended
FS-42
<PAGE> 294
December 31, 1998, AIM Distributors received $660,651 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, 1998, the Fund paid legal fees of $10,514
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, 1998, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $41,157 and $175,918, respectively under expense offset arrangements.
The effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $217,075 during the year ended December 31, 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.
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) $1,000,000,000 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 May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended December 31, 1998, 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, 1998 was
$3,378,593,550 and $2,715,129,275, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 101,120,172
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (322,770,884)
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities $(221,650,712)
=========================================================
Cost of investments for tax purposes is
$3,776,078,705.
</TABLE>
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1998 and 1997
were as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------------ -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 113,312,954 $ 1,099,027,598 93,715,770 $ 935,998,102
- --------------------- ------------------------------ -----------------------------
Class B 81,983,594 793,346,240 74,428,033 739,555,783
- --------------------- ------------------------------ -----------------------------
Class C* 31,084,188 309,774,327 2,840,747 28,847,843
- --------------------- ------------------------------ -----------------------------
Issued as
reinvestment of
dividends:
Class A 11,706,241 112,173,341 8,409,927 83,983,856
- --------------------- ------------------------------ -----------------------------
Class B 8,418,057 80,427,189 5,178,022 54,019,940
- --------------------- ------------------------------ -----------------------------
Class C* 480,845 4,500,556 19,254 195,246
- --------------------- ------------------------------ -----------------------------
Reacquired:
Class A (110,296,515) (1,068,765,692) (55,082,159) (550,361,702)
- --------------------- ------------------------------ -----------------------------
Class B (44,848,230) (425,202,478) (25,424,400) (252,796,373)
- --------------------- ------------------------------ -----------------------------
Class C* (21,196,339) (212,890,761) (278,573) (2,827,441)
- --------------------- ------------------------------ -----------------------------
70,644,795 $ 692,390,320 103,806,621 $ 1,036,615,254
===================== ============================== =============================
</TABLE>
* Class C shares commenced sales on August 4, 1997.
FS-43
<PAGE> 295
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and a share of
Class B outstanding during each of the years in the five-year period ended
December 31, 1998; and for a share of Class C outstanding during the year ended
December 31, 1998 and the period August 4, 1997 (date sales commenced) through
December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.16 $ 9.88 $ 9.43 $ 8.93 $ 10.05
- ------------------------------------------------------------ ---------- ---------- ---------- -------- --------
Income from investment operations:
Net investment income 0.92 0.90 0.92 0.93 0.96
- ------------------------------------------------------------ ---------- ---------- ---------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) (1.40) 0.28 0.46 0.52 (1.12)
- ------------------------------------------------------------ ---------- ---------- ---------- -------- --------
Total from investment operations (0.48) 1.18 1.38 1.45 (0.16)
- ------------------------------------------------------------ ---------- ---------- ---------- -------- --------
Less distributions:
Dividends from net investment income (0.91) (0.90) (0.93) (0.95) (0.96)
- ------------------------------------------------------------ ---------- ---------- ---------- -------- --------
Net asset value, end of period $ 8.77 $ 10.16 $ 9.88 $ 9.43 $ 8.93
============================================================ ========== ========== ========== ======== ========
Total return(a) (5.10)% 12.52% 15.44% 16.86% (1.67)%
============================================================ ========== ========== ========== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,670,863 $1,786,352 $1,272,974 $886,106 $578,959
============================================================ ========== ========== ========== ======== ========
Ratio of expenses to average net assets 0.85%(b) 0.90% 0.97% 0.96% 1.00%
============================================================ ========== ========== ========== ======== ========
Ratio of net investment income to average net assets 9.45%(b) 9.08% 9.67% 9.95% 10.07%
============================================================ ========== ========== ========== ======== ========
Portfolio turnover rate 76% 80% 77% 61% 53%
============================================================ ========== ========== ========== ======== ========
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $1,808,645,166.
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------------------------------------------- ---------------------
1998 1997 1996 1995 1994 1998 1997
---------- ---------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 10.16 $ 9.88 $ 9.42 $ 8.92 $ 10.04 $ 10.14 $ 10.04
- ----------------------------------- ---------- ---------- ---------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.84 0.83 0.85 0.85 0.87 0.82(a) 0.35
- ----------------------------------- ---------- ---------- ---------- -------- -------- -------- --------
Net gains (losses) on securities
(both realized and unrealized) (1.40) 0.28 0.47 0.52 (1.10) (1.38) 0.10
- ----------------------------------- ---------- ---------- ---------- -------- -------- -------- --------
Total from investment
operations (0.56) 1.11 1.32 1.37 (0.23) (0.56) 0.45
- ----------------------------------- ---------- ---------- ---------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income (0.84) (0.83) (0.86) (0.87) (0.89) (0.84) (0.35)
- ----------------------------------- ---------- ---------- ---------- -------- -------- -------- --------
Net asset value, end of period $ 8.76 $ 10.16 $ 9.88 $ 9.42 $ 8.92 $ 8.74 $ 10.14
=================================== ========== ========== ========== ======== ======== ======== ========
Total return(b) (5.90)% 11.71% 14.68% 15.91% (2.48)% (5.92)% 4.49%
=================================== ========== ========== ========== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $1,820,899 $1,647,801 $1,068,060 $557,926 $191,338 $113,246 $ 26,177
=================================== ========== ========== ========== ======== ======== ======== ========
Ratio of expenses to average net
assets 1.61%(c) 1.65% 1.68% 1.73% 1.80% 1.61%(c) 1.68%(d)
=================================== ========== ========== ========== ======== ======== ======== ========
Ratio of net investment income to
average net assets 8.69%(c) 8.33% 8.95% 9.18% 9.27% 8.69%(c) 8.30%(d)
=================================== ========== ========== ========== ======== ======== ======== ========
Portfolio turnover rate 76% 80% 77% 61% 53% 76% 80%
=================================== ========== ========== ========== ======== ======== ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and for periods less than
one year is not annualized.
(c) Ratios are based on average net assets of $1,826,458,676 and $76,076,559,
for Class B and Class C respectively.
(d) Annualized.
FS-44
<PAGE> 296
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, 1998, 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 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. Our procedures included confirmation of
securities owned as of December 31, 1998, 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, 1998, 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 five-year period then ended, in conformity
with generally accepted accounting principles.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
February 5, 1999
FS-45
<PAGE> 297
SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED NON-CONVERTIBLE BONDS & NOTES-70.64%
AEROSPACE/DEFENSE-0.21%
Pacific Aerospace & Electronics,
Sr. Sub Notes, 11.25%, 08/01/05
(Acquired 07/24/98; Cost
$1,750,000)(b) $ 1,750,000 $ 1,321,250
- --------------------------------------------------------------
AIR FREIGHT-0.28%
Atlas Air, Inc., Sr. Notes,
10.75%, 08/01/05 1,720,000 1,814,600
- --------------------------------------------------------------
AIRLINES-1.88%
Airplanes Pass Through Trust,
Series D Gtd. Sub. Bonds,
10.875%, 03/15/19 1,810,000 1,901,640
- --------------------------------------------------------------
Delta Air Lines, Inc.,
Deb., 9.00%, 05/15/16 500,000 574,495
- --------------------------------------------------------------
Equipment Trust Certificates,
10.50%, 04/30/16 5,000,000 6,683,300
- --------------------------------------------------------------
United Air Lines, Inc., Pass
Through Certificates, 9.56%,
10/19/18 2,325,000 2,853,472
- --------------------------------------------------------------
12,012,907
- --------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.32%
Advance Stores Co. Inc., Series B
Sr. Unsec. Gtd. Sub. Notes,
10.25%, 04/15/08 2,000,000 2,040,000
- --------------------------------------------------------------
AUTOMOBILES-1.33%
General Motors Corp., Deb., 8.80%,
03/01/21 6,700,000 8,475,031
- --------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.66%
Regions Financial Corp., Sub.
Notes, 7.75%, 09/15/24 3,650,000 4,204,909
- --------------------------------------------------------------
BANKS (MONEY CENTER)-0.91%
First Union Bancorp, Sub. Deb.,
7.50%, 04/15/35 5,300,000 5,816,008
- --------------------------------------------------------------
BANKS (REGIONAL)-1.24%
Mercantile Bancorp Inc., Unsec.
Sub. Notes, 7.30%, 06/15/07 5,000,000 5,479,500
- --------------------------------------------------------------
US Bancorp, Sub. Deb., 7.50%,
06/01/26 2,200,000 2,457,862
- --------------------------------------------------------------
7,937,362
- --------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-2.97%
Coca-Cola Enterprises, Inc.,
Putable Notes, 7.24%,
06/20/20(c) 74,000,000 18,976,560
- --------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-3.18%
CSC Holdings Inc., Series B Sr.
Unsec. Deb., 7.625%, 07/15/18 3,000,000 3,071,760
- --------------------------------------------------------------
EchoStar DBS Corp., Sr. Sec. Gtd.
Notes, 12.50%, 07/01/02 2,340,000 2,714,400
- --------------------------------------------------------------
Kabelmedia Holdings GmbH
(Germany), Sr. Yankee Unsec
Disc. Notes, 13.625%,
08/01/06(d) 1,400,000 1,162,000
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
BROADCASTING (TELEVISION, RADIO & CABLE)-(CONTINUED)
Knology Holdings, Inc., Sr. Disc.
Notes, 11.875% 10/15/07(d) $ 4,100,000 $ 1,896,250
- --------------------------------------------------------------
TCI Communications Inc., Deb.,
8.75%, 08/01/15 6,000,000 7,442,760
- --------------------------------------------------------------
USA Networks, Inc., Sr. Notes,
6.75%, 11/15/05 (Acquired
11/18/98-11/30/98; Cost
$3,988,340)(b) 4,000,000 4,010,640
- --------------------------------------------------------------
20,297,810
- --------------------------------------------------------------
BUILDING MATERIALS-0.51%
Owens Corning, Unsec. Bonds,
7.50%, 08/01/18 3,250,000 3,232,515
- --------------------------------------------------------------
CHEMICALS-1.77%
Nova Gas Transmission Ltd.
(Canada), Yankee Deb., 8.50%,
12/15/12 3,000,000 3,641,400
- --------------------------------------------------------------
Solutia Inc., Bonds, 6.72%,
10/15/37 5,000,000 5,080,000
- --------------------------------------------------------------
Sterling Chemicals, Inc., Sr.
Unsec. Sub. Notes, 11.75%,
08/15/06 3,000,000 2,595,000
- --------------------------------------------------------------
11,316,400
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.40%
Dialog Corp. PLC (United Kingdom),
Series A Sr. Sub. Notes, 11.00%,
11/15/07 1,500,000 1,500,000
- --------------------------------------------------------------
ProNet, Inc., Sr. Sub. Notes,
11.875%, 06/15/05 1,000,000 1,065,000
- --------------------------------------------------------------
2,565,000
- --------------------------------------------------------------
COMPUTERS (NETWORKING)-0.41%
Exodus Communications, Sr. Unsec.
Notes, 11.25%, 07/01/08 2,600,000 2,626,000
- --------------------------------------------------------------
CONSUMER FINANCE-0.26%
Commercial Credit Co., Putable
Notes, 7.875%, 02/01/25 1,400,000 1,654,828
- --------------------------------------------------------------
CONTAINERS & PACKAGING (PAPER)-0.24%
BPC Holding Corp., Series B Sr.
Sec. Notes, 12.50%, 06/15/06 785,000 820,325
- --------------------------------------------------------------
MVE Inc., Sr. Sec. Notes, 12.50%,
02/15/02 750,000 738,750
- --------------------------------------------------------------
1,559,075
- --------------------------------------------------------------
ELECTRIC COMPANIES-4.52%
Cleveland Electric Illumination,
Series D Sr. Sec. Notes, 7.88%,
11/01/17 3,800,000 4,011,249
- --------------------------------------------------------------
El Paso Electric Co.,
Series D Sec. First Mortgage
Bonds, 8.90%,
02/01/06 2,500,000 2,816,250
- --------------------------------------------------------------
Series E Sec. First Mortgage
Bonds, 9.40%,
05/01/11 4,600,000 5,223,622
- --------------------------------------------------------------
</TABLE>
FS-46
<PAGE> 298
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
ELECTRIC COMPANIES-(CONTINUED)
Niagara Mohawk Power Corp.,
First Mortgage Notes, 7.75%,
05/15/06 $ 4,300,000 $ 4,765,002
- --------------------------------------------------------------
Sr. Unsec. Disc. Notes, 8.50%,
07/01/10(d) 8,000,000 6,221,040
- --------------------------------------------------------------
Western Resources Inc., Sr. Notes,
7.125%, 08/01/09 5,352,000 5,826,187
- --------------------------------------------------------------
28,863,350
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.21%
Electronic Retailing Systems
International, Inc., Sr. Disc.
Notes, 13.25%, 02/01/04(d) 3,630,000 1,324,950
- --------------------------------------------------------------
ENTERTAINMENT-2.71%
Ascent Entertainment Group, Sr.
Sec. Disc. Notes, 11.875%,
12/15/04(d) 1,460,000 883,300
- --------------------------------------------------------------
Time Warner, Inc.,
Deb., 9.15%, 02/01/23 8,500,000 11,140,355
- --------------------------------------------------------------
Unsec. Deb., 6.85%, 01/15/26 5,000,000 5,260,200
- --------------------------------------------------------------
17,283,855
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.59%
Associates Corp. of North America,
Bonds, 6.95%, 11/01/18 3,000,000 3,192,780
- --------------------------------------------------------------
Series B Sr. Deb., 7.95%,
02/15/10 6,000,000 6,943,260
- --------------------------------------------------------------
10,136,040
- --------------------------------------------------------------
FOODS-2.41%
AmeriServ Food Co., Gtd. Notes,
10.125%, 07/15/07 1,750,000 1,531,250
- --------------------------------------------------------------
ConAgra Inc., Sr. Unsec. Notes,
7.125%, 10/01/26 6,100,000 6,517,484
- --------------------------------------------------------------
Del Monte Corp./Foods Co., Sr.
Unsec. Sub. Notes, 12.25%,
04/15/07 1,600,000 1,824,000
- --------------------------------------------------------------
Grand Metro Investment, Gtd.
Bonds, 7.45%, 04/15/35 5,000,000 5,528,000
- --------------------------------------------------------------
15,400,734
- --------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES-0.44%
Venetian Casino Resort LLC, Gtd.
Mortgage Notes, 12.25%, 11/15/04 3,000,000 2,820,000
- --------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-0.16%
Watson Pharmaceuticals Inc., Sr.
Notes, 7.125%, 05/15/08 1,000,000 1,016,890
- --------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.64%
Tenet Healthcare Corp., Sr. Notes,
8.00%, 01/15/05 4,000,000 4,106,360
- --------------------------------------------------------------
HEALTH CARE (LONG TERM CARE)-0.31%
Mariner Post-Acute Network, Inc.,
Series B Sr. Unsec. Disc. Sub.
Notes, 10.50%, 11/01/07(d) 1,580,000 687,300
- --------------------------------------------------------------
Series B Sr. Unsec. Sub. Notes,
9.50%, 11/01/07 1,630,000 1,263,250
- --------------------------------------------------------------
1,950,550
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-1.04%
Beckman Coulter, Sr. Unsec. Gtd.
Notes, 7.45%, 03/04/08 $ 3,500,000 $ 3,560,515
- --------------------------------------------------------------
Dade International Inc., Series B
Sr. Sub. Notes, 11.125%,
05/01/06 1,000,000 1,112,500
- --------------------------------------------------------------
Mediq, Inc., Sr. Unsec. Gtd. Sub.
Notes, 11.00%, 06/01/08 2,060,000 1,987,900
- --------------------------------------------------------------
6,660,915
- --------------------------------------------------------------
HOMEBUILDING-0.12%
D.R. Horton, Inc., Unsec. Gtd.
Notes, 10.00%, 04/15/06 745,000 793,425
- --------------------------------------------------------------
HOUSEWARES-0.37%
Decora Industries, Inc., Series B
Sr. Sec. Gtd. Notes, 11.00%,
05/01/05 2,500,000 2,362,500
- --------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-1.38%
Americo Life Inc., Sr. Sub. Notes,
9.25%, 06/01/05 1,000,000 1,030,000
- --------------------------------------------------------------
Sun Life Canada Capital Trust,
Gtd. Notes, 8.526%, 05/29/49
(Acquired 11/05/98; Cost
$3,152,490)(b) 3,000,000 3,256,230
- --------------------------------------------------------------
Torchmark Corp., Notes, 7.875%,
05/15/23 4,350,000 4,521,912
- --------------------------------------------------------------
8,808,142
- --------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-2.10%
Orion Capital Trust II, Gtd.
Notes, 7.701%, 04/15/28 3,800,000 3,491,516
- --------------------------------------------------------------
Terra Nova Holdings, Co. (United
Kingdom),
Sr. Unsec. Gtd. Notes, 7.00%,
05/15/08 2,000,000 2,037,420
- --------------------------------------------------------------
Sr. Yankee Sec. Gtd. Notes,
7.20%, 08/15/07 2,200,000 2,271,610
- --------------------------------------------------------------
USF&G Corp., Gtd. Bonds, 8.47%,
01/10/27 5,000,000 5,615,550
- --------------------------------------------------------------
13,416,096
- --------------------------------------------------------------
IRON & STEEL-0.18%
Acme Metal Inc., Sr. Unsec. Gtd.
Deb., 10.875%, 12/15/07(e) 3,240,000 437,400
- --------------------------------------------------------------
GS Industries, Inc., Sr. Gtd.
Notes, 12.00%, 09/01/04 1,000,000 685,000
- --------------------------------------------------------------
1,122,400
- --------------------------------------------------------------
LODGING-HOTELS-2.05%
Coast Hotels & Casinos Inc.,
Series B Sec. First Mortgage
Gtd. Notes, 13.00%, 12/15/02 1,160,000 1,310,800
- --------------------------------------------------------------
Hilton Hotels Corp., Notes, 7.20%,
12/15/09 5,000,000 4,970,550
- --------------------------------------------------------------
ITT Corp., Unsec. Gtd. Deb.,
7.375%, 11/15/15 3,350,000 2,850,180
- --------------------------------------------------------------
John Q. Hammons Hotels Inc., Sec.
First Mortgage Notes, 9.75%,
10/01/05 2,000,000 1,880,000
- --------------------------------------------------------------
Stena Line A.B. (Sweden), Sr.
Yankee Notes, 10.625%, 06/01/08 2,300,000 2,081,500
- --------------------------------------------------------------
13,093,030
- --------------------------------------------------------------
</TABLE>
FS-47
<PAGE> 299
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
MACHINERY (DIVERSIFIED)-1.01%
Caterpillar Inc., Deb., 9.375%,
08/15/11 $ 5,000,000 $ 6,431,850
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-0.50%
Anthony Crane Rentals, Sr. Notes,
10.375%, 08/01/08 (Acquired
09/08/98; Cost $1,396,820)(b) 1,500,000 1,447,500
- --------------------------------------------------------------
Elgin National Industries, Sr.
Unsec. Gtd. Sub. Notes, 11.00%,
11/01/07 1,690,000 1,706,900
- --------------------------------------------------------------
3,154,400
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.59%
Brand Scaffold Services, Sr.
Unsec. Notes, 10.25%, 02/15/08 1,600,000 1,528,000
- --------------------------------------------------------------
MMI Products Inc., Sr. Unsec. Sub.
Notes, 11.25%, 04/15/07 2,070,000 2,245,950
- --------------------------------------------------------------
3,773,950
- --------------------------------------------------------------
METAL MINING-0.96%
Centaur Mining & Exploration Ltd.
(Australia), Sr. Yankee Sec.
Gtd. Notes, 11.00%, 12/01/07 2,500,000 2,287,500
- --------------------------------------------------------------
Rio Algom Ltd. (Canada), Yankee
Unsec. Deb., 7.05%, 11/01/05 3,500,000 3,804,780
- --------------------------------------------------------------
6,092,280
- --------------------------------------------------------------
NATURAL GAS-2.51%
Dynegy Inc., Sr. Unsec. Deb.,
7.125%, 05/15/18 4,000,000 3,946,840
- --------------------------------------------------------------
Enron Corp., Sr. Sub. Deb., 8.25%,
09/15/12 4,100,000 4,654,033
- --------------------------------------------------------------
Ferrellgas Partners, Series B Sr.
Sec. Gtd. Notes, 9.375%,
06/15/06 2,100,000 2,110,500
- --------------------------------------------------------------
K N Energy, Inc., Unsec. Deb.,
7.35%, 08/01/26 5,000,000 5,275,750
- --------------------------------------------------------------
15,987,123
- --------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.21%
United Stationer Supply, Sr. Sub.
Notes, 12.75%, 05/01/05 1,170,000 1,310,400
- --------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-1.12%
Gulf Canada Resources, Ltd.
(Canada), Sr. Yankee Unsec.
Notes, 8.35%, 08/01/06 5,100,000 5,136,567
- --------------------------------------------------------------
Husky Oil Ltd., Sr. Yankee Notes,
7.125%, 11/15/06 2,000,000 2,012,280
- --------------------------------------------------------------
7,148,847
- --------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-1.18%
Petroleum Geo-Services A.S.A.
(Norway), Sr. Yankee Unsec.
Notes, 7.125%, 03/30/28 3,500,000 3,303,755
- --------------------------------------------------------------
R & B Falcon Corp., Sr. Notes,
9.50%, 12/15/08 (Acquired
12/17/98; Cost $1,425,000)(b) 1,425,000 1,432,125
- --------------------------------------------------------------
Series B Sr. Unsec. Notes,
6.95%, 04/15/08 3,225,000 2,801,138
- --------------------------------------------------------------
7,537,018
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
OIL & GAS (EXPLORATION & PRODUCTION)-2.77%
Abraxas Petroleum Corp., Series D
Sr. Unsec. Gtd. Notes, 11.50%,
11/01/04 $ 900,000 $ 688,500
- --------------------------------------------------------------
Anadarko Petroleum Corp., Deb.,
7.25%, 03/15/25 5,395,000 5,615,440
- --------------------------------------------------------------
Chesapeake Energy Corp., Series B
Unsec. Sr. Notes, 9.625%,
05/01/05 1,200,000 942,000
- --------------------------------------------------------------
Kelley Oil & Gas Corp., Series B
Sr. Gtd. Sub. Notes, 10.375%,
10/15/06 1,500,000 1,117,500
- --------------------------------------------------------------
Louis Dreyfus Natural Gas, Sr.
Sub. Notes, 9.25%, 06/15/04 3,700,000 3,992,929
- --------------------------------------------------------------
Queen Sand Resources, Inc., Sr.
Unsec. Gtd. Notes, 12.50%,
07/01/08 2,000,000 1,410,000
- --------------------------------------------------------------
Talisman Energy, Inc. (Canada),
Yankee Deb., 7.125%, 06/01/07 3,750,000 3,877,650
- --------------------------------------------------------------
17,644,019
- --------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-1.63%
Sun Co., Inc., Deb., 9.00%,
11/01/24 4,000,000 4,778,520
- --------------------------------------------------------------
Texas Petrochemical Corp., Sr.
Unsec. Sub. Notes, 11.125%,
07/01/06 2,010,000 1,989,900
- --------------------------------------------------------------
Tosco Corp., Deb., 7.80%, 01/01/27 3,400,000 3,597,676
- --------------------------------------------------------------
10,366,096
- --------------------------------------------------------------
PERSONAL CARE-0.66%
Alberto-Culver Corp., Notes,
6.375%, 06/15/28 4,000,000 4,191,520
- --------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-1.60%
AES Corp., Sr. Sub. Notes, 10.25%,
07/15/06 1,000,000 1,082,500
- --------------------------------------------------------------
Indiana Michigan Power, Sec. Lease
Obligation Bonds, 9.82%,
12/07/22 4,969,144 6,743,973
- --------------------------------------------------------------
Kincaid Generation LLC, Sec.
Bonds, 7.33%, 06/15/20 (Acquired
04/30/98; Cost $2,004,940)(b) 2,000,000 1,997,150
- --------------------------------------------------------------
Panda Global Energy Co. (China),
Sr. Yankee Sec. Gtd. Notes,
12.50%, 04/15/04 850,000 386,750
- --------------------------------------------------------------
10,210,373
- --------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-1.56%
News America Holdings, Inc.,
Sr. Gtd. Deb., 9.25%, 02/01/13 7,100,000 8,862,007
- --------------------------------------------------------------
Sr. Gtd. Putable Bonds, 7.43%,
10/01/26 1,000,000 1,087,120
- --------------------------------------------------------------
9,949,127
- --------------------------------------------------------------
RAILROADS-0.93%
CSX Corp., Series C Medium Term
Notes, 6.80%, 12/01/28 2,850,000 2,842,875
- --------------------------------------------------------------
Norfolk Southern Corp., Putable
Bonds, 7.05%, 05/01/37 2,750,000 3,105,355
- --------------------------------------------------------------
5,948,230
- --------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS-1.47%
Glenborough Properties, Series B
Sr. Unsec. Notes, 7.625%,
03/15/05 3,400,000 3,258,893
- --------------------------------------------------------------
</TABLE>
FS-48
<PAGE> 300
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS-(CONTINUED)
Health Care REIT, Inc., Sr. Unsec.
Notes, 7.625%, 03/15/08 $ 3,000,000 $ 2,894,910
- --------------------------------------------------------------
Spieker Properties LP, Unsec.
Deb., 7.35%, 12/01/17 3,500,000 3,217,025
- --------------------------------------------------------------
9,370,828
- --------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.58%
Fred Meyer, Inc., Sr. Notes,
7.45%, 03/01/08 2,200,000 2,374,922
- --------------------------------------------------------------
Plainwell, Inc., Series B Sr.
Unsec. Sub. Notes, 11.00%,
03/01/08 1,710,000 1,342,350
- --------------------------------------------------------------
3,717,272
- --------------------------------------------------------------
RETAIL (SPECIALTY)-1.14%
CEX Holdings, Inc., Series B Sr.
Unsec. Gtd. Sub. Notes, 9.625%,
06/01/08 1,810,000 1,638,050
- --------------------------------------------------------------
CSK Auto Inc., Sr. Gtd. Sub. Deb.,
11.00%, 11/01/06 715,000 754,325
- --------------------------------------------------------------
Neff Corp., Sr. Sub. Notes,
10.25%, 06/01/08 (Acquired
12/02/98; Cost $1,980,172)(b) 2,010,000 1,949,700
- --------------------------------------------------------------
Renters Choice Inc., Sr. Sub.
Notes, 11.00%, 08/15/08
(Acquired 08/13/98; Cost
$2,500,000)(b) 2,500,000 2,550,000
- --------------------------------------------------------------
Wilson's-The Leather Experts,
Inc., Sr. Notes, 11.25%,
08/15/04 360,000 354,600
- --------------------------------------------------------------
7,246,675
- --------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.49%
Big 5 Corp., Sr. Unsec. Notes,
10.875%, 11/15/07 2,000,000 2,030,000
- --------------------------------------------------------------
J Crew Operating Corp., Sr. Sub.
Notes, 10.375%, 10/15/07 1,255,000 1,085,575
- --------------------------------------------------------------
3,115,575
- --------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.83%
Sovereign Bancorp, Inc., Sub.
Notes, 8.00%, 03/15/03 5,050,000 5,312,650
- --------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-2.24%
Choice Hotels International, Inc.,
Sr. Unsec. Gtd. Sub. Notes,
7.125%, 05/01/08 2,250,000 2,330,611
- --------------------------------------------------------------
Laidlaw Inc. (Canada),
Yankee Deb., 6.72%, 10/01/27 2,000,000 1,985,720
- --------------------------------------------------------------
Yankee Unsec. Deb., 6.70%,
05/01/08 3,550,000 3,471,794
- --------------------------------------------------------------
Pegasus Shipping Hellas Co.
(Bermuda), Series A Sr. Yankee
Sec. Gtd. Mortgage Notes,
11.875%, 11/15/04 2,850,000 2,465,250
- --------------------------------------------------------------
Protection One, Inc., Sr. Notes,
7.375%, 08/15/05 (Acquired
08/12/98; Cost $3,991,120)(b) 4,000,000 4,038,160
- --------------------------------------------------------------
14,291,535
- --------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.30%
MSX International Inc., Sr. Unsec.
Gtd. Sub. Notes, 11.375%,
01/15/08 1,980,000 1,895,850
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
SERVICES (FACILITIES & ENVIRONMENTAL)-0.02%
ATC Group Services Inc., Sr.
Unsec. Gtd. Sub. Notes, 12.00%,
01/15/08 $ 1,150,000 $ 109,250
- --------------------------------------------------------------
SHIPPING-0.34%
Pacific & Atlantic Holdings
(Liberia), Yankee First Mortgage
Notes, 11.50%, 05/30/08 2,800,000 2,170,000
- --------------------------------------------------------------
SOVEREIGN DEBT-2.62%
Province of Manitoba (Canada),
Yankee Bonds, 7.75%, 07/17/16 7,500,000 8,853,450
- --------------------------------------------------------------
Province of Quebec (Canada),
Series A Yankee Notes, 5.735%,
03/02/26 3,500,000 3,943,450
- --------------------------------------------------------------
Medium Term Notes, 6.29%,
03/06/26 3,500,000 3,925,180
- --------------------------------------------------------------
16,722,080
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-1.34%
Clearnet Communications Inc.
(Canada), Sr. Yankee Unsec Disc.
Notes, 14.75%, 12/15/05(d) 920,000 795,800
- --------------------------------------------------------------
Metrocall Inc., Sr. Sub. Notes,
11.00%, 09/15/08 (Acquired
12/17/98; Cost $2,482,600)(b) 2,500,000 2,525,000
- --------------------------------------------------------------
Nextel Communications, Inc., Sr.
Notes, 12.00%, 11/01/08
(Acquired 10/28/98; Cost
$3,327,008)(b) 3,375,000 3,712,500
- --------------------------------------------------------------
PageMart Wireless, Inc., Sr. Sub.
Disc. Notes, 11.25%, 02/01/08(d) 3,110,000 1,508,350
- --------------------------------------------------------------
8,541,650
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-2.06%
Centel Capital, Deb., 9.00%,
10/15/19 3,800,000 4,888,852
- --------------------------------------------------------------
Esprit Telecom Group PLC (United
Kingdom), Sr. Yankee Notes,
11.50%, 12/15/07 1,500,000 1,560,000
- --------------------------------------------------------------
MCI Communications Corp., Sr.
Putable Sr. Unsec. Deb., 7.125%,
06/15/27 5,000,000 5,317,500
- --------------------------------------------------------------
Versatel Telecom BV (Netherlands),
Sr. Notes, 13.25%, 05/15/08(f) 1,370,000 1,397,400
- --------------------------------------------------------------
13,163,752
- --------------------------------------------------------------
TELEPHONE-1.51%
Cable & Wireless Communications
PLC (United Kingdom), Yankee
Notes, 6.75%, 03/06/08 1,250,000 1,279,425
- --------------------------------------------------------------
ICG Services Inc., Sr. Unsec.
Disc. Notes, 10.00%, 02/15/08(d) 4,000,000 2,170,000
- --------------------------------------------------------------
NTL Inc., Sr. Notes, 11.50%,
10/01/08 (Acquired 10/26/98;
Cost $2,655,000)(b) 2,655,000 2,907,225
- --------------------------------------------------------------
SBC Communications Inc., Deb.,
7.375%, 07/15/43 3,000,000 3,273,660
- --------------------------------------------------------------
9,630,310
- --------------------------------------------------------------
TEXTILES (APPAREL)-0.51%
Fruit of the Loom, Notes, 6.50%,
11/15/03 3,450,000 3,278,052
- --------------------------------------------------------------
</TABLE>
FS-49
<PAGE> 301
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
TRUCKERS-0.34%
Travelcenters of America Inc., Sr.
Unsec. Gtd. Sub. Deb., 10.25%,
04/01/07 $ 2,180,000 $ 2,180,000
- --------------------------------------------------------------
WASTE MANAGEMENT-0.82%
WMX Technologies, Inc., Unsec.
Notes, 7.10%, 08/01/26 5,000,000 5,236,150
- --------------------------------------------------------------
Total U.S. Dollar Denominated
Non-Convertible Bonds &
Notes (Cost $441,982,500) 450,736,354
- --------------------------------------------------------------
U.S. DOLLAR DENOMINATED CONVERTIBLE BONDS & NOTES-1.55%
COMPUTERS (HARDWARE)-0.28%
Candescent Technology Corp., Conv.
Sr. Sub. Deb., 7.00%, 05/01/03
(Acquired 04/20/98; Cost
$2,000,000)(b) 2,000,000 1,800,000
- --------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.59%
EMC Corp., Conv. Sub. Notes,
3.25%, 03/15/02 (Acquired
03/06/97; Cost $1,000,000)(b) 1,000,000 3,770,000
- --------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.34%
Omnicare, Inc., Conv. Sub. Deb.,
5.00%, 12/01/07 (Acquired
12/04/97; Cost $2,000,000)(b) 2,000,000 2,172,500
- --------------------------------------------------------------
SHIPPING-0.34%
Hutchison Delta Finance (Cayman
Islands), Conv. Unsec. Notes,
7.00%, 11/08/01 2,000,000 2,150,000
- --------------------------------------------------------------
Total U.S. Dollar Denominated
Convertible Bonds & Notes
(Cost $7,110,000) 9,892,500
- --------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED NON- CONVERTIBLE BONDS
& NOTES(g)-7.98%
CANADA-4.31%
Bank of Montreal (Banks-Money
Center), Sub. Deb., 7.92%,
07/31/12 CAD 4,000,000 3,029,281
- --------------------------------------------------------------
Bell Canada
(Telecommunications-Cellular/
Wireless), Unsec. Deb., 10.875%,
10/11/04 3,000,000 2,483,175
- --------------------------------------------------------------
Bell Mobility Cellular Inc.
(Telecommunications-Cellular/Wireless),
Deb., 6.55%, 06/02/08 2,250,000 1,505,808
- --------------------------------------------------------------
Clearnet Communications Inc.
(Telecommunications-Cellular/Wireless),
Sr. Disc. Notes, 11.75%,
08/13/07(d) 8,200,000 3,229,085
- --------------------------------------------------------------
Sr. Disc. Notes, 10.40%,
05/15/08(d) 9,050,000 3,149,755
- --------------------------------------------------------------
Microcell Telecommunications Inc.
(Telecommunications-Cellular/Wireless),
Sr. Disc. Notes, 11.125%,
10/15/07(d) 3,500,000 1,263,888
- --------------------------------------------------------------
NAV Canada (Services-Commercial &
Consumer), Bonds, 7.40%,
06/01/27 2,500,000 2,001,928
- --------------------------------------------------------------
Poco Petroleums Ltd. (Oil & Gas-
Exploration & Production),
Unsec. Deb., 6.60%, 09/11/07 4,150,000 2,660,774
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Telegobe Canada, Inc. (Telephone),
Unsec. Deb., 8.35%, 06/20/03 $ 5,000,000 $ 3,653,170
- --------------------------------------------------------------
Trans-Canada Pipelines (Natural
Gas),
Series Q Deb., 10.625%, 10/20/09 1,750,000 1,576,441
- --------------------------------------------------------------
Unsec. Notes, 8.55%, 02/01/06 3,000,000 2,286,059
- --------------------------------------------------------------
Westcoast Energy, Inc. (Natural
Gas), Deb., 6.45%,12/18/06 1,000,000 692,170
- --------------------------------------------------------------
27,531,534
- --------------------------------------------------------------
GERMANY-0.35%
LKB Global
(Financial-Diversified), Gtd.
Notes, 6.00%, 01/25/06 DEM 3,300,000 2,218,290
- --------------------------------------------------------------
NEW ZEALAND-1.90%
International Bank of
Reconstruction & Development
(Banks-Money Center),
Sr. Unsec. Notes, 6.77%,
08/20/07(c) NZD 8,000,000 2,428,375
- --------------------------------------------------------------
Sr. Unsub., 5.50%, 11/03/08 8,750,000 4,388,857
- --------------------------------------------------------------
Sr. Unsub. Notes, 7.25%,
05/27/03 9,600,000 5,286,106
- --------------------------------------------------------------
12,103,338
- --------------------------------------------------------------
UNITED KINGDOM-1.42%
International Bank for
Reconstruction & Development
(Banks-Money Center), Sr. Unsec.
Notes, 6.875%, 07/14/00 GBP 3,000,000 5,079,480
- --------------------------------------------------------------
Sutton Bridge Financial Ltd.
(Financial- Diversified), Gtd.
Eurobonds 8.625%, 06/03/22 2,000,000 4,005,687
- --------------------------------------------------------------
9,085,167
- --------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Non-Convertible
Bonds & Notes (Cost
$52,220,928) 50,938,329
- --------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED CONVERTIBLE BONDS & NOTES-2.60%
GERMANY-1.10%
Daimler-Benz A.G. (Automobiles),
Conv. Gtd. Unsub. Eurobonds,
4.125%, 07/05/03 DEM 6,440,000 6,994,959
- --------------------------------------------------------------
UNITED KINGDOM-1.50%
Airtours PLC (Services-Commercial
& Consumer), Conv. Sub. Notes,
5.75%, 01/05/04 (Acquired
12/09/98; Cost $3,091,887)(b)GBP 1,869,000 3,191,508
- --------------------------------------------------------------
COLT Telecom Group PLC
(Telephone), Conv. Notes, 2.00%,
08/06/05 DEM 2,750,000 1,712,149
- --------------------------------------------------------------
National Grid Co. PLC (Electric
Companies), Conv. Bonds, 4.25%,
02/17/08 (Acquired 02/05/98;
Cost $3,729,375)(b) GBP 2,250,000 4,674,093
- --------------------------------------------------------------
9,577,750
- --------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Convertible
Bonds & Notes (Cost
$13,523,177) 16,572,709
- --------------------------------------------------------------
</TABLE>
FS-50
<PAGE> 302
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED GOVERNMENT BONDS & NOTES(g)-6.51%
BRITISH POUND STERLING-3.04%
Federal National Mortgage
Association, Sr. Unsec. Notes,
6.875%, 06/07/02 GBP $ 2,400,000 $ 4,241,147
- --------------------------------------------------------------
Ontario Province, Deb., 11.125%,
02/14/01 2,000,000 3,654,381
- --------------------------------------------------------------
United Kingdom Treasury,
Bonds, 8.00%, 12/07/00 1,500,000 2,634,561
- --------------------------------------------------------------
Bonds, 7.50%, 12/07/06 3,100,000 6,195,858
- --------------------------------------------------------------
Gtd. Notes, 7.00%, 11/06/01 1,500,000 2,644,532
- --------------------------------------------------------------
19,370,479
- --------------------------------------------------------------
CANADIAN DOLLARS-0.94%
Ontario Province, Sr. Unsec.
Unsub. Global Bonds, 8.00%,
03/11/03 CAD 5,350,000 3,892,415
- --------------------------------------------------------------
Ontario Hydro, Deb., 8.47%,
02/06/20(c) 10,750,000 2,109,810
- --------------------------------------------------------------
6,002,225
- --------------------------------------------------------------
NEW ZEALAND DOLLARS-1.20%
Canadian Government, Bonds,
6.625%, 10/03/07 NZD 6,300,000 3,404,250
- --------------------------------------------------------------
Federal National Mortgage
Association, Notes, 7.25%,
06/20/02 5,400,000 2,949,048
- --------------------------------------------------------------
Ontario Province, Unsec. Unsub.
Notes, 6.25%, 12/03/08 2,500,000 1,292,648
- --------------------------------------------------------------
7,645,946
- --------------------------------------------------------------
SWEDISH KRONA-1.33%
Swedish Government,
Bonds, 6.00%, 02/09/05 SEK 20,000,000 2,739,862
- --------------------------------------------------------------
Bonds, 6.50%, 10/25/06 20,000,000 2,867,709
- --------------------------------------------------------------
Bonds, 5.00%, 01/28/09 22,000,000 2,884,910
- --------------------------------------------------------------
8,492,481
- --------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Government Bonds
& Notes (Cost $39,246,462) 41,511,131
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
DOMESTIC COMMON STOCKS-0.18%
MANUFACTURING (SPECIALIZED)-0.16%
US Filter Corp.(a) 43,636 998,185
- --------------------------------------------------------------
TELECOMMUNICATION (CELLULAR/WIRELESS)-0.02%
Nextel Communications, Inc.-Class
A(h) 4,601 108,699
- --------------------------------------------------------------
Total Domestic Common Stocks
(Cost $1,467,047) 1,106,884
- --------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS-1.86%
BANKS (REGIONAL)-0.47%
Westpac Banking Corp. STRYPES
Trust-$3.135 Conv. Pfd. 95,000 2,998,438
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-0.27%
Microsoft Corp., Series A-$2.196
Conv. Pfd. 18,000 $ 1,759,500
- --------------------------------------------------------------
ELECTRIC COMPANIES-0.37%
Houston Industries Inc.-$3.22
Conv. Pfd. 22,000 2,340,250
- --------------------------------------------------------------
FOODS-0.19%
Ralston Purina Co.-$4.34 Conv.
Pfd. 23,000 1,201,750
- --------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-0.15%
Tosco Financing Trust-$2.875 Conv.
Pfd. (Acquired
12/10/96-12/11/96; Cost
$1,006,950)(b) 20,000 962,500
- --------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.41%
Cendant Corp.-$3.75 Conv. PRIDES 78,000 2,603,250
- --------------------------------------------------------------
Total Domestic Convertible
Preferred Stocks (Cost
$11,290,537) 11,865,688
- --------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-0.12%
CANADA-0.12%
PowerGen PLC-ADR (Electric
Companies) 14,000 749,000
- --------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$467,674) 749,000
- --------------------------------------------------------------
WARRANTS-0.01%
BROADCASTING (TELEVISION, RADIO & CABLE)-0.00%
Knology Holdings, Inc., expiring
10/15/07(b)(i) (Acquired
03/12/98; Cost $0) 4,100 9,225
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.00%
Electronic Retailing Systems
International, expiring
02/01/04(i) 3,630 18,150
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-0.00%
MVE Inc., expiring 02/15/02(i) 1,000 10,000
- --------------------------------------------------------------
METAL FABRICATORS-0.00%
Gulf States Steel, Inc., expiring
04/15/03(i)() 1,650 17
- --------------------------------------------------------------
PERSONAL CARE-0.00%
IHF Capital Inc., Series I,
expiring 11/14/99(i)() 1,200 600
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.01%
Clearnet Communications Inc.
(Canada), expiring 09/15/05(i)() 5,874 41,118
- --------------------------------------------------------------
Loral Space & Communications Ltd.
expiring 01/15/07(i)() 3,400 36,550
- --------------------------------------------------------------
77,668
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.00%
Versatel Telecom BV (Netherlands),
expiring 05/15/08(i)() 1,370 13,871
- --------------------------------------------------------------
Total Warrants (Cost $50,050) 129,531
- --------------------------------------------------------------
</TABLE>
FS-51
<PAGE> 303
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. GOVERNMENT SECURITIES-4.24%
U.S. GOVERNMENT AGENCY-2.34%
Federal National Mortgage
Association, STRIPS, 5.899%,
10/09/19(j) $50,000,000 $ 14,950,500
- --------------------------------------------------------------
U.S. TREASURY BONDS-1.90%
U.S. Treasury Bonds, 6.125%,
11/15/27 5,950,000 6,663,405
- --------------------------------------------------------------
U.S. Treasury Bonds, 6.375%,
08/15/27 3,000,000 3,449,730
- --------------------------------------------------------------
U.S. Treasury Bonds, 5.50%,
08/15/28 1,900,000 1,989,243
- --------------------------------------------------------------
12,102,378
- --------------------------------------------------------------
Total U.S. Government
Securities (Cost
$26,742,820) 27,052,878
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENT(k)-2.60%
Goldman, Sachs & Co., 4.40%,
01/04/99 (Cost $16,570,735)(l) $16,570,735 $ 16,570,735
- --------------------------------------------------------------
TOTAL INVESTMENTS-98.29% 627,125,739
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.71% 10,939,773
- --------------------------------------------------------------
NET ASSETS-100.00% $638,065,512
==============================================================
</TABLE>
Abbreviations:
ADR - American Depositary Receipts
CAD - Canadian Dollar
Conv. - Convertible
Deb. - Debentures
DEM - German Deutsche Mark
Disc. - Discounted
Pfd. - Preferred
GBP - British Pound Sterling
Gtd. - Guaranteed
PRIDES - Preferred Redemption Increase Dividend Equity Security
NZD - New Zealand Dollar
REIT - Real Estate Investment Trust
Sec. - Secured
SEK - Swedish Krona
Sr. - Senior
STRIPS - Separately Traded Registered Interest and Principal Security
STRYPES - Structured Yield Product Exchangeable Per Stock
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
(a) Principal amount is in U.S. Dollars, except as indicated by note (f).
(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 12/31/98 was $47,727,306 which
represented 7.48% of the Fund's net assets.
(c) Zero coupon bond issued at a discount. The interest rate shown represents
the rate of original issue discount.
(d) Discounted bond at purchase. The interest rate represents the coupon rate at
which the bond will accrue at a specified future date.
(e) Defaulted security. Currently, the issuer is partially in default with
respect to interest payments.
(f) Issued as a unit. This unit includes 1 Sr. Note plus one warrant to purchase
6.667 shares of common stock.
(g) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(h) Non-income producing security.
(i) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(j) 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.
(k) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value is at least 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.
(l) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$700,342,222. Collateralized by $646,494,000 U.S. Government obligations, 0%
to 11.75% due 02/15/99 to 04/15/28 with an aggregate market value at
12/31/98 of $714,694,897.
See Notes to Financial Statements.
FS-52
<PAGE> 304
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$610,671,930) $627,125,739
- ---------------------------------------------------------
Foreign currencies, at value (cost
$272,798) 275,091
- ---------------------------------------------------------
Receivables for:
Forward currency contracts 699,230
- ---------------------------------------------------------
Fund shares sold 2,918,110
- ---------------------------------------------------------
Interest and dividends 10,629,596
- ---------------------------------------------------------
Investment for deferred compensation plan 74,658
- ---------------------------------------------------------
Other assets 40,884
- ---------------------------------------------------------
Total assets 641,763,308
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Forward currency contracts 313,693
- ---------------------------------------------------------
Fund shares reacquired 1,569,160
- ---------------------------------------------------------
Dividends 790,765
- ---------------------------------------------------------
Deferred compensation plan 74,658
- ---------------------------------------------------------
Accrued advisory fees 225,704
- ---------------------------------------------------------
Accrued distribution fees 497,683
- ---------------------------------------------------------
Accrued transfer agent fees 74,377
- ---------------------------------------------------------
Accrued operating expenses 151,756
- ---------------------------------------------------------
Total liabilities 3,697,796
- ---------------------------------------------------------
Net assets applicable to shares outstanding $638,065,512
- ---------------------------------------------------------
NET ASSETS:
Class A $399,701,085
=========================================================
Class B $219,032,588
=========================================================
Class C $ 19,331,839
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 47,685,072
=========================================================
Class B 26,168,120
=========================================================
Class C 2,313,165
=========================================================
Class A:
Net asset value and redemption price per
share $ 8.38
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $8.38
divided by 95.25%) $ 8.80
=========================================================
Class B:
Net asset value and offering price per
share $ 8.37
=========================================================
Class C:
Net asset value and offering price per
share $ 8.36
=========================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 40,914,357
- ---------------------------------------------------------
Dividends (net of $5,002 foreign
withholding tax) 905,180
- ---------------------------------------------------------
Total investment income 41,819,537
- ---------------------------------------------------------
EXPENSES:
Advisory fees 2,375,487
- ---------------------------------------------------------
Administrative services fees 87,349
- ---------------------------------------------------------
Custodian fees 94,813
- ---------------------------------------------------------
Trustees' fees 12,447
- ---------------------------------------------------------
Distribution fees -- Class A 932,865
- ---------------------------------------------------------
Distribution fees -- Class B 1,670,317
- ---------------------------------------------------------
Distribution fees -- Class C 99,616
- ---------------------------------------------------------
Transfer agent fees -- Class A 561,090
- ---------------------------------------------------------
Transfer agent fees -- Class B 261,052
- ---------------------------------------------------------
Transfer agent fees -- Class C 15,569
- ---------------------------------------------------------
Other 235,343
- ---------------------------------------------------------
Total expenses 6,345,948
- ---------------------------------------------------------
Less: Expenses paid indirectly (10,506)
- ---------------------------------------------------------
Net expenses 6,335,442
- ---------------------------------------------------------
Net investment income 35,484,095
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES
AND FORWARD CURRENCY CONTRACTS:
Net realized gain (loss) from:
Investment securities (4,575,354)
- ---------------------------------------------------------
Foreign currencies 168,901
- ---------------------------------------------------------
Forward currency contracts 1,735,917
- ---------------------------------------------------------
(2,670,536)
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities (6,318,544)
- ---------------------------------------------------------
Foreign currencies 41,984
- ---------------------------------------------------------
Forward currency contracts (2,117,169)
- ---------------------------------------------------------
(8,393,729)
- ---------------------------------------------------------
Net gain (loss) from investment
securities, foreign currencies and
forward currency contracts (11,064,265)
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $ 24,419,830
- ---------------------------------------------------------
</TABLE>
FS-53
<PAGE> 305
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 35,484,095 $ 25,483,371
- --------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, forward currency contracts and
futures contracts (2,670,536) 10,912,543
- --------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities, foreign currencies and forward currency
contracts (8,393,729) 8,736,614
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 24,419,830 45,132,528
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (24,056,371) (18,740,017)
- --------------------------------------------------------------------------------------------
Class B (9,376,348) (5,379,787)
- --------------------------------------------------------------------------------------------
Class C (561,222) (8,381)
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (2,510,957) (3,481,635)
- --------------------------------------------------------------------------------------------
Class B (1,354,867) (1,280,178)
- --------------------------------------------------------------------------------------------
Class C (120,997) (19,105)
- --------------------------------------------------------------------------------------------
Share transactions-net:
Class A 67,975,662 42,455,896
- --------------------------------------------------------------------------------------------
Class B 97,469,590 36,284,875
- --------------------------------------------------------------------------------------------
Class C 17,151,361 2,539,241
- --------------------------------------------------------------------------------------------
Net increase in net assets 169,035,681 97,503,437
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 469,029,831 371,526,394
- --------------------------------------------------------------------------------------------
End of period $638,065,512 $469,029,831
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $624,536,057 $441,939,444
- --------------------------------------------------------------------------------------------
Undistributed net investment income 68,804 (57,239)
- --------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies, forward currency
contracts and futures contracts (3,384,384) 1,908,862
- --------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and forward currency contracts 16,845,035 25,238,764
- --------------------------------------------------------------------------------------------
$638,065,512 $469,029,831
============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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: Class A shares, Class B
shares and Class C shares. 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 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-54
<PAGE> 306
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. Bond Premiums-It is the policy of the Fund not to amortize market premiums
on bonds for financial reporting purposes.
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. The
Fund does not separately account for that portion of the results of
operations resulting from changes in foreign exchange rates on investments
and the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and unrealized
gain or loss from investments.
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. Outstanding forward currency contracts at December 31, 1998
were as follows:
<TABLE>
<CAPTION>
Contract to Unrealized
Settlement ------------------------- Appreciation
Date Deliver Receive Value (Depreciation)
- ---------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
2/4/99 CAD 24,000,000 $15,751,339 $15,685,805 $ 65,534
1/15/99 DEM 2,100,000 1,249,026 1,261,170 (12,144)
2/26/99 DEM 14,500,000 8,542,980 8,726,439 (183,459)
1/14/99 GBP 6,000,000 10,114,440 9,958,596 155,844
2/26/99 GBP 13,000,000 21,441,810 21,499,732 (57,922)
1/13/99 NZD 12,000,000 6,249,000 6,309,168 (60,168)
2/4/99 NZD 8,000,000 4,252,960 4,205,681 47,279
2/26/99 NZD 16,000,000 8,527,200 8,410,874 116,326
1/29/99 SEK 65,500,000 8,391,519 8,077,272 314,247
----------- ----------- ---------
$84,520,274 $84,134,737 $ 385,537
=========== =========== =========
</TABLE>
E. 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, 1998 undistributed net investment
income was decreased by $1,364,111 and undistributed net realized gains was
increased by $1,364,111 as a result of differing book/tax treatment of
foreign currency transactions and market discount reclassifications 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.
F. Federal Income Taxes-The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed
to shareholders. Therefore, no provision for federal income taxes is
recorded in the financial statements. The Fund has a capital
FS-55
<PAGE> 307
loss carryforward of $1,419,489 (which may be carried forward to offset
future taxable capital gains, if any) which expires, if not previously
utilized, through the year 2006. The fund cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
G. 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, 1998, AIM
was reimbursed $87,349 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, 1998, the
Fund paid AFS $491,433 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 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 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 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 year ended December 31, 1998, the Class A, Class B and Class
C shares paid AIM Distributors $932,865, $1,670,317 and $99,616, respectively,
as compensation under the Plans.
AIM Distributors received commissions of $340,185 from sales of the Class A
shares of the Fund during the year ended December 31, 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 year ended December 31, 1998,
AIM Distributors received $99,010 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, 1998, the Fund paid legal fees of $4,444
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, 1998, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $6,082 and $4,424, respectively, under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $10,506 during the year ended December 31, 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.
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) $1,000,000,000 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 May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended December 31, 1998 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, 1998 was
$383,577,456 and $220,008,587, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 36,616,733
- ------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (20,171,779)
- ------------------------------------------------------------
Net unrealized appreciation of investment
securities $ 16,444,954
============================================================
Cost of investments for tax purposes is $610,680,785.
</TABLE>
FS-56
<PAGE> 308
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1998 and 1997
were as follows:
<TABLE>
<CAPTION>
1998 1997
-------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 18,358,462 $156,866,536 12,161,983 101,688,372
- ------------------------------------------------------------------------------------------------------------------
Class B 15,156,529 128,945,810 6,428,479 53,514,758
- ------------------------------------------------------------------------------------------------------------------
Class C* 2,530,069 21,507,916 309,134 2,628,227
- ------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 2,575,274 21,978,433 1,967,802 16,363,229
- ------------------------------------------------------------------------------------------------------------------
Class B 956,975 8,134,643 490,120 4,073,672
- ------------------------------------------------------------------------------------------------------------------
Class C* 65,508 553,356 1,676 14,278
- ------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (12,996,807) (110,869,307) (9,099,096) (75,595,705)
- ------------------------------------------------------------------------------------------------------------------
Class B (4,664,899) (39,610,863) (2,573,466) (21,303,555)
- ------------------------------------------------------------------------------------------------------------------
Class C* (581,112) (4,909,911) (12,110) (103,264)
- ------------------------------------------------------------------------------------------------------------------
21,399,999 $182,596,613 9,674,522 $81,280,012
==================================================================================================================
</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 and a share of
Class B outstanding during each of the years in the five-year period ended
December 31, 1998; and for a share of Class C outstanding during the year ended
December 31, 1998 and the period August 4, 1997 (date sales commenced) through
December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.57 $ 8.24 $ 8.17 $ 7.20 $ 8.45
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.57 0.55 0.57 0.58 0.58
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) (0.16) 0.39 0.09 1.00 (1.22)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations 0.41 0.94 0.66 1.58 (0.64)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.55) (0.52) (0.59) (0.61) (0.49)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains (0.05) (0.09) -- -- (0.01)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Return of capital -- -- -- -- (0.11)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (0.60) (0.61) (0.59) (0.61) (0.61)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 8.38 $ 8.57 $ 8.24 $ 8.17 $ 7.20
============================================================ ======== ======== ======== ======== ========
Total return(a) 4.94% 11.92% 8.58% 22.77% (7.65)%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $399,701 $340,608 $286,183 $251,280 $201,677
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.91%(b) 0.94% 0.98% 0.98% 0.98%
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets 6.69%(b) 6.55% 7.13% 7.52% 7.53%
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 41% 54% 80% 227% 185%
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $373,145,874.
FS-57
<PAGE> 309
NOTE 8-FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------------------- -----------------------
1998 1997 1996 1995 1994 1998 1997
-------- -------- ------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.55 $ 8.23 $ 8.15 $ 7.18 $ 8.43 $ 8.54 $ 8.38
- -------------------------------------------- -------- -------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.50 0.48 0.50 0.53 0.52 0.50 0.19
- -------------------------------------------- -------- -------- ------- ------- ------- ------- -------
Net gains (losses) on securities (both
realized and unrealized) (0.15) 0.38 0.11 0.98 (1.23) (0.15) 0.22
- -------------------------------------------- -------- -------- ------- ------- ------- ------- -------
Total from investment operations 0.35 0.86 0.61 1.51 (0.71) 0.35 0.41
- -------------------------------------------- -------- -------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.48) (0.45) (0.53) (0.54) (0.42) (0.48) (0.16)
- -------------------------------------------- -------- -------- ------- ------- ------- ------- -------
Distributions from net realized gains (0.05) (0.09) -- -- (0.01) (0.05) (0.09)
- -------------------------------------------- -------- -------- ------- ------- ------- ------- -------
Return of capital -- -- -- -- (0.11) -- --
- -------------------------------------------- -------- -------- ------- ------- ------- ------- -------
Total distributions (0.53) (0.54) (0.53) (0.54) (0.54) (0.53) (0.25)
- -------------------------------------------- -------- -------- ------- ------- ------- ------- -------
Net asset value, end of period $ 8.37 $ 8.55 $ 8.23 $ 8.15 $ 7.18 $ 8.36 $ 8.54
- -------------------------------------------- -------- -------- ------- ------- ------- ------- -------
Total return(a) 4.20% 10.89% 7.87% 21.72% (8.46)% 4.21% 4.96%
- -------------------------------------------- -------- -------- ------- ------- ------- ------- -------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $219,033 $125,871 $85,343 $44,304 $12,321 $19,332 $ 2,552
- -------------------------------------------- -------- -------- ------- ------- ------- ------- -------
Ratio of expenses to average net assets 1.66%(b) 1.69% 1.80% 1.79% 1.83%(c) 1.66%(b) 1.69%(d)
- -------------------------------------------- -------- -------- ------- ------- ------- ------- -------
Ratio of net investment income to average
net assets 5.94%(b) 5.80% 6.30% 6.71% 6.69%(e) 5.94%(b) 5.80%(d)
- -------------------------------------------- -------- -------- ------- ------- ------- ------- -------
Portfolio turnover rate 41% 54% 80% 227% 185% 41% 54%
- -------------------------------------------- -------- -------- ------- ------- ------- ------- -------
</TABLE>
(a) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(b) Ratios are based on average net assets of $167,031,738 and $9,961,552 for
Class B and Class C, respectively.
(c) 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% for 1994.
(d) Annualized.
(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 6.48% for 1994.
FS-58
<PAGE> 310
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, 1998, 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 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. Our procedures included confirmation of
securities owned as of December 31, 1998, 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, 1998, 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 five-year period then ended,
in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
February 5, 1999
FS-59
<PAGE> 311
SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. GOVERNMENT AGENCY
SECURITIES-89.92%
FEDERAL FARM CREDIT BANK-1.02%
Debentures
6.15%, 09/01/00 $ 700,000 $ 714,007
- --------------------------------------------------------------
6.22%, 06/17/08 4,500,000 4,592,070
- --------------------------------------------------------------
5,306,077
- --------------------------------------------------------------
FEDERAL HOME LOAN BANK-1.40%
Debentures
7.31%, 07/06/01 4,000,000 4,226,240
- --------------------------------------------------------------
7.36%, 07/01/04 2,800,000 3,083,276
- --------------------------------------------------------------
7,309,516
- --------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.
("FHLMC")-16.08%
Pass through certificates
12.00%, 04/01/00 to 02/01/13 21,385 24,304
- --------------------------------------------------------------
6.50%, 07/01/01 to 11/01/28 28,103,205 28,385,142
- --------------------------------------------------------------
6.50%, 01/01/29 TBA(a) 5,000,000 5,037,500
- --------------------------------------------------------------
9.00%, 12/01/05 to 04/01/25 5,234,953 5,532,144
- --------------------------------------------------------------
8.00%, 07/01/06 to 10/01/10 407,206 419,717
- --------------------------------------------------------------
8.50%, 07/01/07 to 12/01/26 6,786,107 7,127,059
- --------------------------------------------------------------
7.00%, 11/01/10 to 04/01/11 1,389,914 1,426,275
- --------------------------------------------------------------
10.00%, 11/01/11 to 04/01/20 11,301,740 12,534,120
- --------------------------------------------------------------
6.00%, 12/01/13 9,950,000 9,984,228
- --------------------------------------------------------------
10.50%, 08/01/19 to 01/01/21 1,994,761 2,200,924
- --------------------------------------------------------------
9.50%, 11/01/20 to 04/01/25 10,342,546 11,186,033
- --------------------------------------------------------------
83,857,446
- --------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION ("FNMA")-43.88%
Debentures
8.25%, 12/18/00 5,000,000 5,310,600
- --------------------------------------------------------------
7.50%, 02/01/02 9,000,000 9,638,370
- --------------------------------------------------------------
8.50%, 02/01/05 4,500,000 4,651,603
- --------------------------------------------------------------
5.875, 02/02/06 8,000,000 8,286,640
- --------------------------------------------------------------
Medium term notes
6.40%, 09/27/05 4,610,000 4,910,987
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION
("FNMA")-(CONTINUED)
Pass through certificates
8.50%, 01/01/07 to 03/01/07 $ 24,386 $ 25,400
- --------------------------------------------------------------
6.00%, 01/01/09 to 04/01/24 23,018,376 23,096,981
- --------------------------------------------------------------
7.50%, 06/01/10 to 03/01/27 20,529,246 21,176,306
- --------------------------------------------------------------
7.00%, 05/01/11 to 10/01/12 8,741,914 8,957,681
- --------------------------------------------------------------
5.50%, 01/20/14 40,000,000 39,542,614
- --------------------------------------------------------------
9.50%, 07/01/16 to 08/01/22 2,065,040 2,219,696
- --------------------------------------------------------------
10.00%, 12/01/19 to 12/01/21 10,184,521 11,260,162
- --------------------------------------------------------------
8.00%, 04/01/25 to 07/01/26 7,497,739 7,795,250
- --------------------------------------------------------------
6.50%, 05/01/13 to 11/01/28 28,272,652 28,544,543
- --------------------------------------------------------------
6.50%, 01/01/29 TBA(a) 5,000,000 5,034,375
- --------------------------------------------------------------
6.50%, 01/14/29 48,000,000 48,394,054
- --------------------------------------------------------------
228,845,262
- --------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION ("GNMA")-27.54%
Pass through certificates
6.00%, 10/15/08 to 1/21/29 78,536,178 77,967,762
- --------------------------------------------------------------
6.50%, 10/15/08 510,612 522,897
- --------------------------------------------------------------
9.00%, 10/15/08 to 04/15/21 1,482,663 1,600,516
- --------------------------------------------------------------
9.50%, 06/15/09 to 03/15/23 5,554,078 6,008,989
- --------------------------------------------------------------
10.00%, 11/15/09 to 10/15/19 12,115,087 13,278,238
- --------------------------------------------------------------
11.00%, 12/15/09 to 09/15/15 117,928 131,104
- --------------------------------------------------------------
12.50%, 11/15/10 151,379 175,599
- --------------------------------------------------------------
13.00%, 01/15/11 to 05/15/15 347,109 403,871
- --------------------------------------------------------------
12.00%, 01/15/13 to 07/15/15 512,453 583,753
- --------------------------------------------------------------
10.50%, 07/15/13 to 02/15/16 215,242 237,035
- --------------------------------------------------------------
13.50%, 07/15/10 to 04/15/15 288,034 339,171
- --------------------------------------------------------------
8.00%, 01/15/22 to 06/15/27 15,176,291 15,859,602
- --------------------------------------------------------------
7.50%, 03/15/26 to 08/15/28 8,038,391 8,299,071
- --------------------------------------------------------------
7.00%, 10/15/08 to 07/15/28 17,808,840 18,255,191
- --------------------------------------------------------------
143,662,799
- --------------------------------------------------------------
Total U.S. Government Agency
Securities (Cost
$464,842,643) 468,981,100
- --------------------------------------------------------------
</TABLE>
FS-60
<PAGE> 312
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES-28.04%
U.S. TREASURY NOTES &
BONDS-26.47%
11.75%, 02/15/01 $26,375,000 $ 30,154,274
- --------------------------------------------------------------
6.125%, 12/31/01 5,000,000 5,208,400
- --------------------------------------------------------------
6.00%, 07/31/02 5,000,000 5,217,100
- --------------------------------------------------------------
5.25%, 08/15/03 to 11/15/28 21,000,000 21,532,270
- --------------------------------------------------------------
4.25%, 11/15/03 5,000,000 4,937,200
- --------------------------------------------------------------
5.625%, 05/15/08 10,000,000 10,662,400
- --------------------------------------------------------------
4.75%, 11/15/08 5,000,000 5,035,950
- --------------------------------------------------------------
7.50%, 11/15/16 5,500,000 6,833,750
- --------------------------------------------------------------
7.25%, 08/15/22 1,100,000 1,369,797
- --------------------------------------------------------------
5.50%, 08/15/28 45,000,000 47,113,650
- --------------------------------------------------------------
138,064,791
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY STRIPS-1.57%(b)
5.38% to 6.85%, 05/15/06 to
11/15/18 (8,000,000)(c) $15,750,000 $ 8,197,513
- --------------------------------------------------------------
Total U.S. Treasury
Securities (Cost
$143,967,245) 146,262,304
- --------------------------------------------------------------
Total Investments (excluding
Repurchase Agreements) 615,243,404
- --------------------------------------------------------------
REPURCHASE AGREEMENT-14.38%(d)
Greenwich Capital Markets, Inc.,
5.10% 01/04/99(e) 4,556,250 4,556,250
- --------------------------------------------------------------
SBC Warburg Dillon Read, Inc.,
4.75% 01/04/99(f) 70,460,703 70,460,703
- --------------------------------------------------------------
Total Repurchase Agreements
(Cost $75,016,953) 75,016,953
- --------------------------------------------------------------
TOTAL INVESTMENTS-132.34% 690,260,357
- --------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(32.34%) (168,702,843)
- --------------------------------------------------------------
NET ASSETS-100.00% $ 521,557,514
==============================================================
</TABLE>
Notes to Schedule of Investments:
(a) At 12/31/98, cost of securities purchased on a when-issued basis totaled
$175,422,691. These securities are also subject to dollar roll transactions.
See Note 1.B. of Notes to Financial Statements.
(b) STRIPS are traded on a discount basis. In such cases the interest rate shown
represents the rate of discount paid or received at the time of purchase by
the Fund.
(c) Amount in parenthesis represents principal amount deposited in escrow with
custodian as collateral for reverse repurchase agreements outstanding at
12/31/98.
(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 is at least 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 12/31/98 with a maturing value of
$300,170,000. Collateralized by $383,443,653 U.S. Government obligations,
5.50% to 10.00%, due 10/01/01 to 01/01/29 with an aggregate market value at
12/31/98 of $306,003,501.
(f) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$1,000,527,778. Collateralized by $2,207,068,000 U.S. Government
obligations, 0% to 6.75%, due 06/30/99 to 11/15/21 with an aggregate market
value at 12/31/98 of $1,020,001,079.
Abbreviation:
TBA - To Be Announced
STRIPS - Separately Traded Registered Interest and Principal Security
See Notes to Financial Statements.
FS-61
<PAGE> 313
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$608,809,888) $615,243,404
- ---------------------------------------------------------
Repurchase agreements (cost $75,016,953) 75,016,953
- ---------------------------------------------------------
Cash 3,598
- ---------------------------------------------------------
Receivables for:
Fund shares sold 8,516,934
- ---------------------------------------------------------
Interest 5,821,191
- ---------------------------------------------------------
Principal paydowns 1,059,791
- ---------------------------------------------------------
Investment for deferred compensation plan 34,753
- ---------------------------------------------------------
Other assets 58,901
- ---------------------------------------------------------
Total assets 705,755,525
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased (on when issued or
delayed delivery basis) 175,422,691
- ---------------------------------------------------------
Fund shares reacquired 2,183,727
- ---------------------------------------------------------
Dividends 952,047
- ---------------------------------------------------------
Reverse repurchase agreements (Note 5) 4,556,250
- ---------------------------------------------------------
Interest expense (Note 5) 410
- ---------------------------------------------------------
Deferred compensation plan 34,753
- ---------------------------------------------------------
Accrued advisory fees 190,150
- ---------------------------------------------------------
Accrued administrative services fees 6,276
- ---------------------------------------------------------
Accrued distribution fees 485,806
- ---------------------------------------------------------
Accrued transfer agent fees 54,720
- ---------------------------------------------------------
Accrued operating expenses 311,181
- ---------------------------------------------------------
Total liabilities 184,198,011
- ---------------------------------------------------------
Net assets applicable to shares outstanding $521,557,514
- ---------------------------------------------------------
NET ASSETS:
Class A $245,612,558
=========================================================
Class B $237,918,779
=========================================================
Class C $ 38,026,177
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 25,647,222
=========================================================
Class B 24,816,721
=========================================================
Class C 3,977,986
=========================================================
Class A:
Net asset value and redemption price per
share $ 9.58
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $9.58
divided by 95.25%) $ 10.06
=========================================================
Class B:
Net asset value and offering price per
share $ 9.59
=========================================================
Class C:
Net asset value and offering price per
share $ 9.56
=========================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $26,948,269
- ---------------------------------------------------------
EXPENSES:
Advisory fees 1,611,515
- ---------------------------------------------------------
Administrative services fees 80,271
- ---------------------------------------------------------
Custodian fees 64,754
- ---------------------------------------------------------
Distribution fees - Class A 478,781
- ---------------------------------------------------------
Distribution fees - Class B 1,359,570
- ---------------------------------------------------------
Distribution fees - Class C 248,197
- ---------------------------------------------------------
Interest (Note 5) 851,004
- ---------------------------------------------------------
Transfer agent fees - Class A 311,166
- ---------------------------------------------------------
Transfer agent fees - Class B 170,992
- ---------------------------------------------------------
Transfer agent fees - Class C 30,268
- ---------------------------------------------------------
Trustees' fees 10,622
- ---------------------------------------------------------
Other 254,001
- ---------------------------------------------------------
Total expenses 5,471,141
- ---------------------------------------------------------
Less: Expenses paid indirectly (3,953)
- ---------------------------------------------------------
Net expenses 5,467,188
- ---------------------------------------------------------
Net investment income 21,481,081
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES:
Net realized gain from investment securities 6,570,449
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities (2,570,929)
- ---------------------------------------------------------
Net gain on investment securities 3,999,520
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $25,480,601
=========================================================
</TABLE>
FS-62
<PAGE> 314
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 21,481,081 $ 15,863,224
- --------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities 6,570,449 (73,291)
- --------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities (2,570,929) 4,443,700
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 25,480,601 20,233,633
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (12,395,672) (10,575,295)
- --------------------------------------------------------------------------------------------
Class B (7,690,274) (4,595,241)
- --------------------------------------------------------------------------------------------
Class C (1,395,135) (19,501)
- --------------------------------------------------------------------------------------------
Distributions in excess of net investment income:
Class A (247,750) --
- --------------------------------------------------------------------------------------------
Class B (176,643) --
- --------------------------------------------------------------------------------------------
Class C (32,108) --
- --------------------------------------------------------------------------------------------
Return of capital:
Class A -- (430,314)
- --------------------------------------------------------------------------------------------
Class B -- (214,788)
- --------------------------------------------------------------------------------------------
Class C -- (713)
- --------------------------------------------------------------------------------------------
Share transactions-net:
Class A 76,269,628 (9,731,599)
- --------------------------------------------------------------------------------------------
Class B 147,670,216 8,255,456
- --------------------------------------------------------------------------------------------
Class C 35,531,445 1,834,127
- --------------------------------------------------------------------------------------------
Net increase in net assets 263,014,308 4,755,765
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 258,543,206 253,787,441
- --------------------------------------------------------------------------------------------
End of period $521,557,514 $258,543,206
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $524,340,223 $264,984,880
- --------------------------------------------------------------------------------------------
Undistributed net investment income (42,488) (32,484)
- --------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities (9,173,737) (15,413,635)
- --------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 6,433,516 9,004,445
- --------------------------------------------------------------------------------------------
$521,557,514 $258,543,206
============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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: Class A shares,
Class B shares, and Class C shares. 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.
FS-63
<PAGE> 315
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. The Fund may engage in
dollar roll transactions with respect to mortgage backed securities issued
by GNMA, FNMA and FHLMC. In a dollar roll transaction, the Fund sells a
mortgage backed security held in the Fund 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 backed
securities that are repurchased will bear the same interest rate as those
sold, but generally will be collateralized by different pools of mortgages
with different prepayment histories. During the period between the sale and
repurchase, the Fund will not be entitled to receive interest and principal
payments on the securities sold. Proceeds of the sale will be invested in
short-term instruments, and the income from these investments, together with
any additional fee income received on the sale, could generate income for
the Fund exceeding the yield on the security sold.
Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the securities
that the Fund has sold but is obligated to repurchase under the agreement. In
the event the buyer of securities in a dollar roll transaction files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale
of the securities may be restricted pending a determination by the other
party, or its trustee or receiver, whether to enforce the Fund's obligation
to repurchase the securities.
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 "C". On December 31, 1998, $720,772
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. Also, undistributed net investment income was
increased by $1,167,269, undistributed net realized gain (loss) was decreased
by $1,051,323 and paid-in-capital was decreased by $115,946 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 $8,696,199 (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.
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 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, 1998, AIM
was reimbursed $80,271 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, 1998, the
Fund paid AFS $286,864 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 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 or Class C shares to selected dealers
FS-64
<PAGE> 316
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 year ended December 31, 1998, the Class A, Class B and Class
C shares paid AIM Distributors $478,781, $1,359,570 and $248,197 respectively,
as compensation under the Plans.
AIM Distributors received commissions of $196,016 from sales of the Class A
shares of the Fund during the year ended December 31, 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 year ended December 31, 1998,
AIM Distributors received $108,148 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, 1998, the Fund paid legal fees of $3,924
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, 1998, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $3,885 and $68, respectively under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $3,953 during the year ended December 31, 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.
NOTE 5-BORROWINGS
Reverse repurchase agreements involve 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, 1998 was $85,146,250 while
borrowings averaged $25,733,082 per day with a weighted average interest rate of
3.31%.
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.
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) $1,000,000,000 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 May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended December 31, 1998, 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, 1998 was
$694,080,621 and $477,249,743, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 7,766,451
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (1,807,868)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $ 5,958,583
=========================================================
Cost of investments for tax purposes is $609,284,821.
</TABLE>
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1998 and 1997
were as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 29,655,462 $ 283,586,927 6,693,588 $ 62,348,371
- -------------------------------------------------------------------------------
Class B 27,535,042 264,070,374 4,448,136 41,365,183
- -------------------------------------------------------------------------------
Class C* 6,742,689 63,813,508 734,169 6,890,070
- -------------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 1,069,069 10,191,327 953,629 8,857,846
- -------------------------------------------------------------------------------
Class B 568,105 5,430,298 349,182 3,245,433
- -------------------------------------------------------------------------------
Class C* 143,118 1,253,716 1,978 18,637
- -------------------------------------------------------------------------------
Reacquired:
Class A (22,783,533) (217,508,626) (8,720,230) (80,937,816)
- -------------------------------------------------------------------------------
Class B (12,722,862) (121,830,456) (3,920,140) (36,355,160)
- -------------------------------------------------------------------------------
Class C* (3,103,831) (29,535,779) (540,137) (5,074,580)
- -------------------------------------------------------------------------------
27,103,259 $ 259,471,289 175 $ 357,984
===============================================================================
</TABLE>
* Class C shares commenced sales on August 4, 1997.
FS-65
<PAGE> 317
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and a share of
Class B outstanding during each of the years in the five-year period ended
December 31, 1998 and for a share of Class C outstanding during the year ended
December 31, 1998 and the period August 4, 1997 (date sales commenced) through
December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.46 $ 9.28 $ 9.70 $ 8.99 $ 10.05
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.62 0.63 0.63 0.69 0.68
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 0.13 0.18 (0.42) 0.73 (1.02)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations 0.75 0.81 0.21 1.42 (0.34)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.63) (0.61) (0.59) (0.67) (0.58)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains -- -- -- -- (0.04)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Return of capital -- (0.02) (0.04) (0.04) (0.10)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (0.63) (0.63) (0.63) (0.71) (0.72)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 9.58 $ 9.46 $ 9.28 $ 9.70 $ 8.99
============================================================ ======== ======== ======== ======== ========
Total return(a) 8.17% 9.07% 2.35% 16.28% (3.44)%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $245,613 $167,427 $174,344 $176,318 $158,341
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets (exclusive of
interest expense) 0.96%(b) 1.00% 1.00% 1.08% 1.04%(c)
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets 6.43%(b) 6.77% 6.76% 7.36% 7.34%(d)
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 147% 99% 134% 140% 109%
============================================================ ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<S> <C>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $191,512,442.
(c) After fee waivers and/or expense reimbursements. Ratio of
expenses to average net assets prior to fee waivers and/or
expense reimbursements was 1.05% for 1994.
(d) After fee waivers and/or expense reimbursements. Ratio of
net investment income to average net assets prior to fee
waivers and/or expense reimbursements was 7.32% for 1994.
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
-------------------------------------------------- ------------------
1998 1997 1996 1995 1994 1998 1997
-------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.46 $ 9.28 $ 9.69 $ 8.99 $ 10.04 $ 9.44 $ 9.33
- ----------------------------------------------------- -------- ------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.55 0.56 0.55 0.63 0.61 0.56 0.24
- ----------------------------------------------------- -------- ------- ------- ------- ------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) 0.13 0.17 (0.41) 0.70 (1.02) 0.11 0.10
- ----------------------------------------------------- -------- ------- ------- ------- ------- ------- -------
Total from investment operations 0.68 0.73 0.14 1.33 (0.41) 0.67 0.34
- ----------------------------------------------------- -------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.55) (0.53) (0.51) (0.59) (0.50) (0.55) (0.22)
- ----------------------------------------------------- -------- ------- ------- ------- ------- ------- -------
Distributions from net realized gains -- -- -- -- (0.04) -- --
- ----------------------------------------------------- -------- ------- ------- ------- ------- ------- -------
Return of capital -- (0.02) (0.04) (0.04) (0.10) -- (0.01)
- ----------------------------------------------------- -------- ------- ------- ------- ------- ------- -------
Total distributions (0.55) (0.55) (0.55) (0.63) (0.64) (0.55) (0.23)
- ----------------------------------------------------- -------- ------- ------- ------- ------- ------- -------
Net asset value, end of period $ 9.59 $ 9.46 $ 9.28 $ 9.69 $ 8.99 $ 9.56 $ 9.44
==================================================== ======= ======= ======= ======= ======= ======= =======
Total return(a) 7.40% 8.16% 1.61% 15.22% (4.13)% 7.31% 3.64%
==================================================== ======= ======= ======= ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $237,919 $89,265 $79,443 $61,300 $23,415 $38,026 $ 1,851
==================================================== ======= ======= ======= ======= ======= ======= =======
Ratio of expenses to average net assets (exclusive of
interest expense) 1.72%(b) 1.76% 1.76% 1.86% 1.82%(c) 1.72%(b) 1.76%(d)
==================================================== ======= ======= ======= ======= ======= ======= =======
Ratio of net investment income to average net
assets(e) 5.68%(b) 6.01% 6.00% 6.58% 6.56%(e) 5.68%(b) 6.01%(d)
==================================================== ======= ======= ======= ======= ======= ======= =======
Portfolio turnover rate 147% 99% 134% 140% 109% 147% 99%
==================================================== ======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<S> <C>
(a) Does not deduct contingent deferred sales charges and is not
annualized for periods less than one year.
(b) Ratios are based on average net assets of $136,546,632 and
$24,819,682 for Class B and Class C, respectively.
(c) After fee waivers and/or expense reimbursements. Ratio of
expenses to average net assets prior to fee waivers and/or
expense reimbursements was 1.87% for 1994.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratio of
net investment income to average net assets prior to fee
waivers and/or expense reimbursements was 6.50% for 1994.
</TABLE>
FS-66
<PAGE> 318
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, 1998, 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 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. Our procedures included confirmation of
securities owned as of December 31, 1998, 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, 1998, the results of its
operations for the year then ended, the changes in net
assets for each of the years in the two-year period then
ended and the financial highlights for each of the years
in the five-year period then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
February 5, 1999
FS-67
<PAGE> 319
SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
BANK NOTES-1.32%
BANKS-DOMESTIC-1.32%
Harris Trust & Savings Bank
5.64%(a) 02/01/99 $ 10,000 $ 10,000,000
- ------------------------------------------------------------------
Wachovia Bank, N.A.
5.50% (a) 01/29/99 10,000 10,000,000
- ------------------------------------------------------------------
Total Bank Notes 20,000,000
- ------------------------------------------------------------------
COMMERCIAL PAPER-31.51%(B)
ASSET-BACKED
SECURITIES-15.06%
Centric Capital Corp.
5.12% 01/13/99 9,800 9,783,275
- ------------------------------------------------------------------
5.06% 03/05/99 25,000 24,778,625
- ------------------------------------------------------------------
Ciesco L.P.
5.35% 01/11/99 5,000 4,992,570
- ------------------------------------------------------------------
Corporate Asset Funding Co.
5.20% 02/17/99 14,000 13,904,955
- ------------------------------------------------------------------
Delaware Funding Corp.
5.15% 03/11/99 14,000 13,861,808
- ------------------------------------------------------------------
Edison Asset
Securitization, L.L.C.
5.17% 03/19/99 25,000 24,723,550
- ------------------------------------------------------------------
Falcon Asset Securitization
Corp.
5.26% 02/04/99 3,551 3,533,358
- ------------------------------------------------------------------
Monte Rosa Capital Corp.
5.35% 01/11/99 25,000 24,962,847
- ------------------------------------------------------------------
5.32% 01/21/99 7,000 6,979,310
- ------------------------------------------------------------------
5.43% 02/16/99 10,000 9,930,617
- ------------------------------------------------------------------
Preferred Receivables
Funding Corp.
5.33% 01/13/99 5,000 4,991,117
- ------------------------------------------------------------------
5.50% 01/13/99 6,000 5,989,000
- ------------------------------------------------------------------
5.25% 03/11/99 15,000 14,849,062
- ------------------------------------------------------------------
5.06% 04/21/99 25,750 25,351,876
- ------------------------------------------------------------------
Variable Funding Capital
5.10% 01/20/99 40,000 39,892,334
- ------------------------------------------------------------------
228,524,304
- ------------------------------------------------------------------
AUTOMOBILES-1.12%
Ford Motor Credit Co.
5.625% 01/15/99 16,995 16,996,194
- ------------------------------------------------------------------
BANKS (DOMESTIC)-1.18%
First Chicago Financial
Corp.
5.26% 02/19/99 18,000 17,871,130
- ------------------------------------------------------------------
BANKS (FOREIGN)-1.95%
UBS Finance (Delaware) Inc.
4.85% 04/05/99 30,000 29,620,083
- ------------------------------------------------------------------
BROADCAST MEDIA-0.91%
Scripps (E.W.) Co.
4.98% 04/13/99 14,000 13,802,460
- ------------------------------------------------------------------
BUSINESS CREDIT-1.62%
National Rural Utilities
Cooperative Finance Corp.
4.80% 04/27/99 25,000 24,613,333
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
CHEMICALS-0.33%
Du Pont (E.I.) de Nemours
and Co.
5.08% 02/05/99 $ 5,000 $ 4,975,306
- ------------------------------------------------------------------
FOOD PROCESSING-2.58%
Campbell Soup Co.
5.45% 01/14/99 10,000 9,980,319
- ------------------------------------------------------------------
5.17% 02/10/99 10,000 9,942,555
- ------------------------------------------------------------------
Cargill Inc.
4.98% 04/01/99 19,500 19,257,225
- ------------------------------------------------------------------
39,180,099
- ------------------------------------------------------------------
HOUSEHOLD PRODUCTS-0.40%
Colgate-Palmolive Co.
4.85% 04/22/99 6,200 6,107,284
- ------------------------------------------------------------------
INSURANCE (LIFE)-1.25%
Hancock (John) Capital
Corp.
5.35% 01/22/99 19,000 18,940,704
- ------------------------------------------------------------------
INSURANCE (OTHER)-0.91%
Marsh & McLennan Companies,
Inc.
5.10% 03/22/99 14,000 13,841,333
- ------------------------------------------------------------------
MACHINERY-0.33%
Caterpillar Financial
Services Corp.
5.10% 02/04/99 5,000 4,975,917
- ------------------------------------------------------------------
MULTIPLE INDUSTRIES-1.64%
General Electric Capital
Corp.
5.05% 04/06/99 25,000 24,666,840
- ------------------------------------------------------------------
OIL & GAS
(INTEGRATED)-1.64%
Petrofina Delaware, Inc.
5.36% 01/22/99 25,000 24,921,833
- ------------------------------------------------------------------
TELEPHONE-0.59%
Bellsouth Capital Funding
Corp.
5.38% 01/22/99 9,000 8,971,755
- ------------------------------------------------------------------
Total Commercial Paper 478,008,575
- ------------------------------------------------------------------
MASTER NOTE
AGREEMENTS-9.23%
Citicorp Securities,
Inc.(c)
5.75% 01/25/99 33,000 33,000,000
- ------------------------------------------------------------------
Merrill Lynch Mortgage
Capital, Inc.(d)
5.78% 08/16/99 52,000 52,000,000
- ------------------------------------------------------------------
Morgan Stanley, Dean
Witter, Discover & Co.(e)
5.60% 05/24/99 55,000 55,000,000
- ------------------------------------------------------------------
Total Master Note
Agreements 140,000,000
- ------------------------------------------------------------------
TAXABLE MUNICIPAL
BONDS-3.35%
HEALTH CARE-0.66%
Jacksonville Florida Health
Facilities; Hospital
Series Revenue Bonds
5.65%(f) 08/15/19 10,000 10,000,000
- ------------------------------------------------------------------
</TABLE>
FS-68
<PAGE> 320
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
HOSPITAL MANAGEMENT-2.03%
BMC Special Care
Facilities; Revenue Bonds
5.55%(f) 11/15/29 $ 20,000 $ 20,000,000
- ------------------------------------------------------------------
Illinois Health Facilities
Authority (Loyola
University Health
Systems); Revenue Bonds
5.65%(f) 07/01/24 10,800 10,800,000
- ------------------------------------------------------------------
30,800,000
- ------------------------------------------------------------------
MULTIPLE INDUSTRY-0.66%
Mississippi Business
Finance Corp.
(Mississippi Industrial
Development); Revenue
Bonds
5.61%(f) 02/01/23 10,000 10,000,000
- ------------------------------------------------------------------
Total Taxable Municipal
Bonds 50,800,000
- ------------------------------------------------------------------
TIME DEPOSITS-3.96%
Credit Communal de Belgique
5.125% 01/04/99 60,000 60,000,000
- ------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
SECURITIES-2.77%
Federal National Mortgage
Association(g)
4.696% 06/02/99 32,000 32,000,000
- ------------------------------------------------------------------
Student Loan Marketing
Association(g)
4.848% 02/08/99 10,000 10,000,180
- ------------------------------------------------------------------
Total U.S. Government
Agency Securities 42,000,180
- ------------------------------------------------------------------
Total Investments
(excluding repurchase
agreements) 790,808,755
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
<S> <C> <C> <C>
REPURCHASE
AGREEMENTS-45.73%(h)
Barclays Capital Inc.(i)
4.75% 01/04/99 $ 50,000 $ 50,000,000
- ------------------------------------------------------------------
Bear Stearns & Co., Inc.(j)
4.85% -- 55,000 55,000,000
- ------------------------------------------------------------------
CIBC Oppenheimer Corp.(k)
5.05% -- 100,000 100,000,000
- ------------------------------------------------------------------
Credit Suisse First Boston
Corp.(l)
5.00% 01/04/99 50,000 50,000,000
- ------------------------------------------------------------------
Goldman, Sachs & Co.(m)
4.80% 01/04/99 300,000 300,000,000
- ------------------------------------------------------------------
SBC Warburg Dillon Read
Inc.(n)
4.75% 01/04/99 138,804 138,803,265
- ------------------------------------------------------------------
Total Repurchase
Agreements 693,803,265
- ------------------------------------------------------------------
TOTAL INVESTMENTS-97.87% 1,484,612,020(o)
- ------------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-2.13% 32,384,637
- ------------------------------------------------------------------
NET ASSETS-100.00% $1,516,996,657
- ------------------------------------------------------------------
</TABLE>
Notes to Schedule of Investments:
(a) Interest rates are redetermined daily. Rate shown is the rate in effect on
12/31/98.
(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) 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
12/31/98.
(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 12/31/98.
(e) 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 12/31/98.
(f) 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 12/31/98.
(g) Interest rates are redetermined weekly. Rates shown are rates in effect on
12/31/98.
(h) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value is at least 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(i) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$300,158,333. Collateralized by $297,134,000 U.S. Government obligations, 0%
to 9.05% due 03/17/99 to 06/15/05 with an aggregate market value at 12/31/98
of $306,000,115.
(j) Open repurchase agreement entered into 12/31/98. Either party may terminate
the agreement upon demand. Interest rates, par and collateral are
redetermined daily. Collateralized by $354,763,000 U.S. Government
obligations, 0% to 8.65% due 01/15/99 to 06/11/18 with an aggregate market
value at 12/31/98 of $360,262,932.
(k) Open repurchase agreement entered into 12/31/98. Either party may terminate
the agreement upon demand. Interest rates, par and collateral are
redetermined daily. Collateralized by $1,105,835,904 U.S. Government
obligations, 5.882% to 8.50% due 06/30/01 to 11/01/37 with an aggregate
market value at 12/31/98 of $510,000,001.
(l) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$50,027,778. Collateralized by $153,487,893 U.S. Government obligations,
0.00% to 0.00% due 05/01/18 to 04/01/31 with an aggregate market value at
12/31/98 of $51,861,895.
(m) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$500,266,667. Collateralized by $484,139,000 U.S. Government obligations,
5.75% to 6.00% due 04/15/08 to 05/15/08 with an aggregate market value at
12/31/98 of $510,000,184.
(n) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$1,000,527,778. Collateralized by $2,207,068,000 U.S. Government
obligations, 0% to 6.75% due 06/30/99 to 11/15/21 with an aggregate market
value at 12/31/98 of $1,020,001,079.
(o) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
FS-69
<PAGE> 321
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase
agreements, at value (amortized cost) $ 790,808,755
- ----------------------------------------------------------
Repurchase agreements 693,803,265
- ----------------------------------------------------------
Receivables for:
Fund shares sold 110,560,096
- ----------------------------------------------------------
Interest 1,930,931
- ----------------------------------------------------------
Investment for deferred compensation plan 94,268
- ----------------------------------------------------------
Other assets 334,133
- ----------------------------------------------------------
Total assets 1,597,531,448
- ----------------------------------------------------------
LIABILITIES:
Payables for:
Fund shares reacquired 78,432,704
- ----------------------------------------------------------
Dividends 295,936
- ----------------------------------------------------------
Deferred compensation plan 94,268
- ----------------------------------------------------------
Accrued advisory fees 584,365
- ----------------------------------------------------------
Accrued distribution fees 937,106
- ----------------------------------------------------------
Accrued transfer agent fees 190,412
- ----------------------------------------------------------
Total liabilities 80,534,791
- ----------------------------------------------------------
Net assets applicable to shares
outstanding $1,516,996,657
- ----------------------------------------------------------
NET ASSETS:
AIM Cash Reserve Shares $1,179,071,674
==========================================================
Class B $ 310,534,240
==========================================================
Class C $ 27,390,743
==========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
AIM Cash Reserve Shares 1,179,046,939
==========================================================
Class B 310,522,285
==========================================================
Class C 27,390,325
==========================================================
AIM Cash Reserve Shares:
Net asset value, offering and redemption
price per share $ 1.00
==========================================================
Class B:
Net asset value and offering price per
share $ 1.00
==========================================================
Class C:
Net asset value and offering price per
share $ 1.00
==========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $59,499,145
- ---------------------------------------------------------
EXPENSES:
Advisory fees 5,891,106
- ---------------------------------------------------------
Administrative services fees 71,394
- ---------------------------------------------------------
Custodian fees 121,851
- ---------------------------------------------------------
Distribution fees - Class A 1,160,113
- ---------------------------------------------------------
Distribution fees - Class B 1,767,568
- ---------------------------------------------------------
Distribution fees - Class C 176,383
- ---------------------------------------------------------
Distribution fees - AIM Cash Reserve Shares 1,049,453
- ---------------------------------------------------------
Trustees' fees 19,516
- ---------------------------------------------------------
Transfer agent fees - Class A 767,760
- ---------------------------------------------------------
Transfer agent fees - Class B 292,385
- ---------------------------------------------------------
Transfer agent fees - Class C 29,176
- ---------------------------------------------------------
Transfer agent fees - AIM Cash Reserve
Shares 649,349
- ---------------------------------------------------------
Other 620,409
- ---------------------------------------------------------
Total expenses 12,616,463
- ---------------------------------------------------------
Less: Expenses paid indirectly (11,572)
- ---------------------------------------------------------
Net expenses 12,604,891
- ---------------------------------------------------------
Net investment income 46,894,254
- ---------------------------------------------------------
Net realized gain from investments 2,781
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $46,897,035
==========================================================
</TABLE>
See Notes to Financial Statements.
FS-70
<PAGE> 322
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
-------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 46,894,254 $ 37,026,961
- --------------------------------------------------------------------------------------------
Net realized gain from investments 2,781 19,347
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 46,897,035 37,046,308
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (20,797,936) (15,420,950)
- --------------------------------------------------------------------------------------------
Class B (6,486,731) (4,508,913)
- --------------------------------------------------------------------------------------------
Class C (628,599) (81,245)
- --------------------------------------------------------------------------------------------
AIM Cash Reserve Shares (18,980,988) (17,015,853)
- --------------------------------------------------------------------------------------------
Share transactions-net:
Class A (375,997,608) 88,133,325
- --------------------------------------------------------------------------------------------
Class B 194,469,771 24,881,617
- --------------------------------------------------------------------------------------------
Class C 19,103,703 8,286,622
- --------------------------------------------------------------------------------------------
AIM Cash Reserve Shares 834,944,363 28,629,341
- --------------------------------------------------------------------------------------------
Net increase in net assets 672,523,010 149,950,252
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 844,473,647 694,523,395
- --------------------------------------------------------------------------------------------
End of period $1,516,996,657 $844,473,647
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,516,959,549 $844,439,320
- --------------------------------------------------------------------------------------------
Undistributed net realized gain from investments 37,108 34,327
- --------------------------------------------------------------------------------------------
$1,516,996,657 $844,473,647
============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Money Market Fund (the "Fund") is a series portfolio of AIM Funds Group (the
"Trust"). The Trust is a Delaware business trust registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company consisting of nine separate series portfolios,
each having an unlimited number of shares of beneficial interest. The Fund
currently offers three different classes of shares: Class B shares, Class C
shares and AIM Cash Reserve Shares. The Fund formerly also offered Class A
shares; however, on December 21, 1998 the Class A shares were reclassified as
AIM Cash Reserve Shares. 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
FS-71
<PAGE> 323
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 year ended December 31, 1998, AIM
was reimbursed $71,394 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, 1998, the Fund paid AFS $904,191 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 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 C shares and the AIM Cash Reserve Shares (the "Class
C and Cash Reserve Plan"), and the Fund's Class B shares (the "Class B Plan")
(collectively, the "Plans"). The Fund, pursuant to the Class C and Cash Reserve
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets of 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 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 year ended
December 31, 1998, the Class A, Class B, Class C, and AIM Cash Reserve Shares
paid AIM Distributors $1,160,113, $1,767,568, $176,383 and $1,049,453,
respectively, as compensation under the Plans.
AIM Distributors received commissions of $347,757 from sales of the former
Class A shares of the Fund during the year ended December 31, 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 year ended
December 31, 1998, AIM Distributors received $905,887 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, 1998, the Fund paid legal fees of $5,530
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, 1998, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $11,563 and $9, respectively under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $11,572 during the year ended December 31, 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.
FS-72
<PAGE> 324
NOTE 5-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1998 and 1997
were as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold:
Class A* 12,526,260,894 $ 12,526,260,894 4,653,429,305 $ 4,653,429,305
- ------------------------------------------------------------------------------------------------------------------------------
Class B 732,230,888 732,230,888 420,215,854 420,215,854
- ------------------------------------------------------------------------------------------------------------------------------
Class C** 350,900,238 350,900,238 61,859,578 61,859,578
- ------------------------------------------------------------------------------------------------------------------------------
AIM Cash Reserve Shares 6,566,275,190 6,566,275,190 4,356,728,398 4,356,728,398
- ------------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A* 15,630,817 15,630,817 13,299,323 13,299,323
- ------------------------------------------------------------------------------------------------------------------------------
Class B 5,684,934 5,684,934 3,988,737 3,988,737
- ------------------------------------------------------------------------------------------------------------------------------
Class C** 536,206 536,206 75,390 75,390
- ------------------------------------------------------------------------------------------------------------------------------
AIM Cash Reserve Shares 15,456,154 15,456,154 13,807,718 13,807,718
- ------------------------------------------------------------------------------------------------------------------------------
Issued in connection with acquisitions***:
Class A* 135,276 135,276 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Class B 72,923,588 72,923,588 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Class C** 5,548,897 5,548,897 -- --
- ------------------------------------------------------------------------------------------------------------------------------
AIM Cash Reserve Shares 117,682,745 117,682,745 -- --
- ------------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A* (12,918,024,595) (12,918,024,595) (4,578,595,303) (4,578,595,303)
- ------------------------------------------------------------------------------------------------------------------------------
Class B (616,369,639) (616,369,639) (399,322,974) (399,322,974)
- ------------------------------------------------------------------------------------------------------------------------------
Class C** (337,881,638) (337,881,638) (53,648,346) (53,648,346)
- ------------------------------------------------------------------------------------------------------------------------------
AIM Cash Reserve Shares (5,864,469,726) (5,864,469,726) (4,341,906,775) (4,341,906,775)
- ------------------------------------------------------------------------------------------------------------------------------
672,520,229 $ 672,520,229 149,930,905 $ 149,930,905
==============================================================================================================================
</TABLE>
* Class A shares were reclassified to AIM Cash Reserve Shares effective
December 21, 1998.
** Class C shares commenced sales on August 4, 1997.
*** The Fund acquired AIM Advisor Cash Management Fund and AIM Dollar Fund on
February 27, 1998 and December 21, 1998, respectively. The acquired funds'
net assets as of the respective closing dates were $5,680,255 and
$190,605,903, respectively. The net assets of the Fund immediately prior to
each acquisition were $701,467,228 and $1,383,530,387, respectively.
NOTE 6-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A outstanding
during the period ended December 21, 1998 and each of the years in the four-year
period ended December 31, 1997; for a share of Class B and AIM Cash Reserve
Shares outstanding during each of the years in the five-year period ended
December 31, 1998, and for a share of Class C outstanding during the year ended
December 31, 1998 and the period August 4, 1997 (date sales commenced) through
December 31, 1997.
<TABLE>
<CAPTION>
CLASS A SHARES
---------------------------------------------------------
DECEMBER 21,
1998 1997 1996 1995 1994
------------ -------- -------- -------- --------
<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 0.0436 0.0453 0.0433 0.0495 0.0337
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.0436) (0.0453) (0.0433) (0.0495) (0.0337)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, date of reclassification $ (1.00)
============================================================ ======== ======== ======== ======== ========
Net asset value, end of period $ -- $ 1.00 $ 1.00 $ 1.00 $ 1.00
============================================================ ======== ======== ======== ======== ========
Total return(b) 4.44% 4.63% 4.42% 5.06% 3.43%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data;
Net assets, end of period (000's omitted) -- $376,012 $287,905 $221,487 $148,886
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.06%(c) 1.05% 1.07% 1.03% 0.97%(d)
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets 4.46%(c) 4.55% 4.34% 4.91% 3.53%(d)
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges where applicable.
(c) Ratios are annualized and based on average net assets of $478,464,451.
(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.
FS-73
<PAGE> 325
NOTE 6-FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS B SHARES
---------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- ------- --------
<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 0.0371(a) 0.0378 0.0360 0.0419 0.0259
- ------------------------------------------------------------ -------- -------- -------- ------- --------
Less distributions:
Dividends from net investment income (0.0371) (0.0378) (0.0360) (0.0419) (0.0259)
- ------------------------------------------------------------ -------- -------- -------- ------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============================================================ ======== ======== ======== ======= ========
Total return(b) 3.78% 3.84% 3.66% 4.27% 2.62%
============================================================ ======== ======== ======== ======= ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $310,534 $116,058 $ 91,148 $69,857 $ 33,999
============================================================ ======== ======== ======== ======= ========
Ratio of expenses to average net assets 1.81%(c) 1.80% 1.81% 1.78% 1.78%(d)
============================================================ ======== ======== ======== ======= ========
Ratio of net investment income to average net assets 3.71%(c) 3.80% 3.60% 4.14% 3.14%(d)
============================================================ ======== ======== ======== ======= ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges where applicable.
(c) Ratios are based on average net assets of $176,756,795.
(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.
<TABLE>
<CAPTION>
CLASS C SHARES AIM CASH RESERVE SHARES
-------------------- ----------------------------------------------------------
1998 1997 1998 1997 1996 1995 1994
-------- -------- ---------- -------- -------- -------- --------
<S> <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
- ------------------------------------------- -------- -------- ---------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.0371(a) 0.0158 0.0453(a) 0.0456 0.0433 0.0493 0.0337
- ------------------------------------------- -------- -------- ---------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.0371) (0.0158) (0.0453) (0.0456) (0.0433) (0.0493) (0.0337)
- ------------------------------------------- -------- -------- ---------- -------- -------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========================================== ======== ======== ========== ======== ======== ======== ========
Total return(b) 3.78% 3.92% 4.62% 4.66% 4.41% 5.04% 3.42%
=========================================== ======== ======== ========== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 27,391 $ 8,287 $1,179,072 $344,117 $315,470 $293,450 $359,952
=========================================== ======== ======== ========== ======== ======== ======== ========
Ratio of expenses to average net assets 1.81%(c) 1.80%(d) 0.99%(c) 1.05% 1.08% 1.04% 0.99%(e)
=========================================== ======== ======== ========== ======== ======== ======== ========
Ratio of net investment income to average
net assets 3.71%(c) 3.80%(d) 4.53%(c) 4.55% 4.32% 4.92% 3.49%(e)
=========================================== ======== ======== ========== ======== ======== ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges where applicable and is
annualized for periods less than one year.
(c) Ratios are based on average net assets of $17,638,255 and $419,781,232 for
Class C and AIM Cash Reserve Shares, respectively.
(d) Annualized.
(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.
FS-74
<PAGE> 326
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, 1998, 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 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. Our procedures included confirmation of
securities owned as of December 31, 1998, 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, 1998, 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 five-year period then ended, in
conformity with generally accepted accounting principles.
/s/ KMPG LLP
KPMG LLP
Houston, Texas
February 5, 1999
FS-75
<PAGE> 327
SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
ALABAMA-1.28%
Alabama (State of) Housing
Finance Authority; Single
Family Mortgage Series
D-2 RB
5.50%, 10/01/17(b) - Aaa $ 1,700 $ 1,737,196
- -----------------------------------------------------------------------
Courtland Industrial
Development Board
(Champion International
Corp. Project); Refunding
PCR
6.40%, 11/01/26(b) - Baa1 2,315 2,485,778
- -----------------------------------------------------------------------
McIntosh Industrial
Development Board;
Environmental Improvement
Series C IDR
5.375%, 06/01/28 AA- A2 1,000 1,015,720
- -----------------------------------------------------------------------
5,238,694
- -----------------------------------------------------------------------
ALASKA-1.66%
Alaska (State of) Housing
Finance Corp.;
Collateralized First
Veterans' Home Mortgage
Series A-2 RB
6.75%, 12/01/24(b) AAA Aaa 4,500 4,749,795
- -----------------------------------------------------------------------
Alaska (State of) Housing
Finance Corp.;
Collateralized Mortgage
Program First Series RB
6.875%, 06/01/33 AAA Aaa 695 730,640
- -----------------------------------------------------------------------
Alaska (State of) Housing
Finance Corp.; Series A
RB
4.00%, 06/01/26(c) A1+ VMIG-1 1,320 1,320,000
- -----------------------------------------------------------------------
6,800,435
- -----------------------------------------------------------------------
ARKANSAS-1.25%
Fayetteville (City of);
Water and Sewer Refunding
and Improvement Series
1992 RB
6.15%, 08/15/12 A A 2,000 2,076,760
- -----------------------------------------------------------------------
Independence (County of)
(Mississippi Power &
Light Project); Series C
PCR
9.50%, 07/01/14 - Baa2 1,000 1,025,320
- -----------------------------------------------------------------------
Little Rock (City of);
Sewer Improvement Series
B RB
5.75%, 02/01/06 AA Aa3 2,000 2,039,380
- -----------------------------------------------------------------------
5,141,460
- -----------------------------------------------------------------------
ARIZONA-1.62%
Arizona (State of)
Educational Loan
Marketing Corp.; RB
6.125%, 09/01/02(b) - Aa 1,900 2,006,077
- -----------------------------------------------------------------------
Mohave (County of) Unified
School District No. 1
(Lake Havasu); Series
1996 A GO
5.90%, 07/01/15(d) AAA Aaa 1,000 1,089,320
- -----------------------------------------------------------------------
Pima (County of) Unified
School District No. 10
(Amphitheater); School
Improvement Series 1992 E
GO
6.50%, 07/01/05 A+ A3 3,100 3,550,306
- -----------------------------------------------------------------------
6,645,703
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
CALIFORNIA-0.54%
Foothill/Eastern Corridor
Agency (California Toll
Road Project); Senior
Lien Series A RB
6.00%, 01/01/16 BBB- Baa3 $ 400 $ 453,412
- -----------------------------------------------------------------------
Sacramento (City of)
California Cogeneration
Authority (Procter &
Gamble Project); Series
1995 RB
7.00%, 07/01/04 BBB- - 500 570,590
- -----------------------------------------------------------------------
San Francisco (City and
County of) Parking
Authority; Parking Meter
Series 1994 RB
7.00%, 06/01/13(d) AAA Aaa 1,000 1,184,700
- -----------------------------------------------------------------------
2,208,702
- -----------------------------------------------------------------------
COLORADO-1.37%
Adams County School
District No. 1; Unlimited
Tax Building Series 1992
A GO
6.625%, 12/01/02(e)(f) AAA Aaa 500 556,040
- -----------------------------------------------------------------------
Colorado Health Facilities
Authority (National
Jewish Medical and
Research Project);
Hospital Series RB
5.25%, 01/01/18 BBB - 500 494,665
- -----------------------------------------------------------------------
5.375%, 01/01/29 BBB - 1,000 990,430
- -----------------------------------------------------------------------
Highlands Ranch Metro
District No. 1; Refunding
& Improvement Unlimited
Tax Series A GO
7.30%, 09/01/02(e)(f) NRR NRR 500 572,200
- -----------------------------------------------------------------------
Mesa County School District
No. 51; 1989 Series B
Certificates of
Participation
6.875%, 12/01/05(d) AAA Aaa 1,465 1,595,282
- -----------------------------------------------------------------------
Mountain Village Metro
District (San Miguel
County); Unlimited Tax
Refunding Series GO
7.95%, 12/01/02(e)(f) NRR NRR 50 57,924
- -----------------------------------------------------------------------
7.95%, 12/01/03(g) - - 375 407,284
- -----------------------------------------------------------------------
Westminster (City of);
Certificates of
Participation
4.35%, 12/01/07(d) AAA Aaa 955 963,394
- -----------------------------------------------------------------------
5,637,219
- -----------------------------------------------------------------------
CONNECTICUT-3.22%
Bridgeport (City of);
Unlimited Tax Series A GO
6.00%, 09/01/06(d) AAA Aaa 1,000 1,124,360
- -----------------------------------------------------------------------
Connecticut (State of);
General Purpose Public
Improvement Series 1992-A
GO
6.50%, 03/15/02(e)(f) NRR NRR 5,500 6,048,295
- -----------------------------------------------------------------------
Connecticut (State of)
Housing Finance
Authority; Housing
Mortgage Financing
Program Sub-Series C-2 RB
5.85%, 11/15/28(b) AA Aa3 3,500 3,651,235
- -----------------------------------------------------------------------
</TABLE>
FS-76
<PAGE> 328
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
CONNECTICUT-(CONTINUED)
Connecticut (State of)
Special Tax Obligation;
Second Lien Series RB
4.10%, 12/01/10(c) A1+ VMIG-1 $ 406 $ 406,000
- ---------------------------------------------------------------------
Connecticut Resource
Recovery Authority
(American Ref-Fuel Co.)
(Southeastern Connecticut
Project); Corporate
Credit Series 1988 RB(b)
8.10%, 01/11/99 A- A2 925 955,803
- ---------------------------------------------------------------------
Waterbury Housing
Authority; Refunding
Mortgage Series A RB
5.45%, 07/01/23(d) AAA Aaa 1,000 1,004,610
- ---------------------------------------------------------------------
13,190,303
- ---------------------------------------------------------------------
DELAWARE-0.07%
Delaware Economic
Development Authority
(Osteopathic Hospital
Association); Series A RB
6.75%, 01/01/13(e) NRR Aaa 250 295,475
- ---------------------------------------------------------------------
FLORIDA-1.44%
Dade (County of)
(Courthouse Center
Project); RB
5.90%, 04/01/10 - A3 500 542,100
- ---------------------------------------------------------------------
Escambia (County of)
(Champion International
Corp. Project); PCR
6.90%, 08/01/22(b) BBB Baa1 1,125 1,225,305
- ---------------------------------------------------------------------
Highlands (County of)
Health Facilities
Authority (Adventist
Health System Project);
Hospital Series RB
5.25%, 11/15/20 A- Baa1 2,000 1,979,340
- ---------------------------------------------------------------------
Lee (County of) Housing
Finance Authority
(Forestwood Apartments
Project); Multifamily
Housing Series A RB
3.40%, 06/15/25(c) AAA - 95 95,000
- ---------------------------------------------------------------------
Miami (City of) Parking
System; Series 1992 A RB
6.70%, 10/01/01(f) A A3 1,120 1,228,394
- ---------------------------------------------------------------------
Miramar (City of) Water
Improvement Assessment;
RB
5.00% 10/01/28(d) - Aaa 550 549,114
- ---------------------------------------------------------------------
Plantation (City of) Health
Facilities Authority
(Covenant Retirement
Communities Inc.); RB
7.75%, 12/01/02(e)(f) NRR NRR 250 290,305
- ---------------------------------------------------------------------
5,909,558
- ---------------------------------------------------------------------
GEORGIA-1.49%
De Kalb Private Hospital
Authority (Egleston
Children's Hospital
Project); Series A RB
3.90%, 03/01/24(c) A1+ VMIG-1 511 511,000
- ---------------------------------------------------------------------
Fulton (County of)
Development Authority;
(Delta Airlines Inc.
Project); Special
Facilities RB
5.45%, 05/01/23(b) BBB- Baa3 3,700 3,665,257
- ---------------------------------------------------------------------
Georgia (State of) Housing
and Finance Authority
(Home Ownership
Opportunity Program);
Series C RB
6.50%, 12/01/11 AA+ Aa2 800 853,456
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
GEORGIA-(CONTINUED)
Savannah (City of) Economic
Development Authority
(Hershey Foods Corp.
Project); IDR
6.60%, 06/01/12 A+ - $ 1,000 $ 1,090,670
- ---------------------------------------------------------------------
6,120,383
- ---------------------------------------------------------------------
IDAHO-0.28%
Idaho Health Facilities
Authority (Elks
Rehabilitation Hospital
Project); Hospital Series
RB
5.30%, 07/15/18 BBB - 1,150 1,145,826
- ---------------------------------------------------------------------
ILLINOIS-11.45%
Berwyn (City of) (Macneal
Memorial Hospital
Association); Hospital
Series 1991 RB
7.00%, 06/01/01(e)(f) AAA Aaa 3,250 3,559,302
- ---------------------------------------------------------------------
Chicago (City of); Sales
Tax Series RB
5.25%, 01/01/28(d) AAA Aaa 650 661,785
- ---------------------------------------------------------------------
Chicago (City of);
Wastewater Transmission;
RB
5.25%, Second Lien Series
B 01/01/17(d) AAA Aaa 2,500 2,548,075
- ---------------------------------------------------------------------
5.125%, Second Lien
Series 01/01/18(d) AAA Aaa 1,000 1,009,620
- ---------------------------------------------------------------------
Chicago Emergency Telephone
System; Unlimited Tax
Series GO
5.60%, 01/01/10(d) AAA Aaa 400 438,172
- ---------------------------------------------------------------------
Chicago Midway Airport;
Series A RB
5.625%, 01/01/22(d) AAA Aaa 1,000 1,059,670
- ---------------------------------------------------------------------
Cook (County of); Series
1992 B GO
5.75%, 11/15/02(e)(f) AAA Aaa 2,000 2,174,740
- ---------------------------------------------------------------------
Cook (County of) School
District No. 148
(Dolton); Unlimited Tax
Series GO
5.10%, Refunding Series A
12/01/17(d) - Aaa 665 660,185
- ---------------------------------------------------------------------
5.10%, Series B
12/01/17(d) - Aaa 810 804,136
- ---------------------------------------------------------------------
5.10%, Series B
06/01/18(d) - Aaa 625 619,650
- ---------------------------------------------------------------------
Du Page (County of) High
School District No. 87
(Glenbard TWP); Unlimited
Tax Series B GO
5.10%, 12/01/20 - Aa3 2,000 2,004,160
- ---------------------------------------------------------------------
Illinois (State of); Sales
Tax Series 1993 B RB
6.50%, 06/15/01(e)(f) AAA NRR 1,500 1,625,325
- ---------------------------------------------------------------------
Illinois (State of);
Unlimited Tax Series GO
5.25%, 07/01/22(d) AAA Aaa 4,475 4,539,843
- ---------------------------------------------------------------------
Illinois (State of)
Development Finance
Authority (American
College of Surgeons);
Series 1996 RB
3.85%, 08/01/26(c) A1+ - 243 243,000
- ---------------------------------------------------------------------
Illinois (State of)
Development Finance
Authority (CPC
International Project);
PCR
6.75%, 05/01/16 - A2 2,500 2,681,650
- ---------------------------------------------------------------------
</TABLE>
FS-77
<PAGE> 329
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
ILLINOIS-(CONTINUED)
Illinois Educational
Facilities Authority
(Midwestern University);
Series B RB
5.50%, 05/15/18 A - $ 1,000 $ 1,039,350
- ---------------------------------------------------------------------
Illinois Educational
Facilities Authority
(Northwestern
University); Adjustable
Medium Term Series RB
5.25%, 11/01/14(f) AA+ Aa1 1,000 1,048,280
- ---------------------------------------------------------------------
Illinois Educational
Facilities Authority
(Shedd Aquarium Society);
RB
5.60%, 07/01/27(d) AAA Aaa 3,500 3,693,130
- ---------------------------------------------------------------------
Illinois Health Facilities
Authority (Evangelical
Hospital Corp.); RB
6.25%, Series A
04/15/02(e)(f) NRR NRR 1,000 1,152,260
- ---------------------------------------------------------------------
6.25%, Series 1992-C
04/15/02(e)(f) NRR NRR 1,150 1,325,099
- ---------------------------------------------------------------------
Illinois Health Facilities
Authority (Franciscan
Sisters Health Care);
Refunding Series 1992 RB
6.40%, 09/01/04(e) AAA Aaa 2,475 2,775,366
- ---------------------------------------------------------------------
Illinois Health Facilities
Authority (Memorial
Hospital); RB
7.25%, 05/01/02(e)(f) NRR NRR 200 224,642
- ---------------------------------------------------------------------
Illinois Health Facilities
Authority (Ravenswood
Hospital Medical Center);
Refunding Series 1987 A
RB
8.80%, 06/01/06 - Baa1 1,000 1,015,250
- ---------------------------------------------------------------------
Illinois Health Facilities
Authority; Revolving Fund
Pool Series D RB
4.10%, 08/01/15(c) A1+ VMIG-1 304 304,000
- ---------------------------------------------------------------------
Kane (County of) School
District No. 131 (Aurora
East Side); Limited GO
5.35%, 01/01/04(d) AAA Aaa 1,000 1,060,010
- ---------------------------------------------------------------------
Lake County Community
Consolidated School
District No. 73
(Hawthorn); Unlimited Tax
Series 1997 GO
5.45%, 01/01/12(d) - Aaa 1,950 2,102,763
- ---------------------------------------------------------------------
Peoria and Pekin and
Waukegan (Cities of);
GNMA Collateralized
Mortgage Series 1990 RB
7.875%, 08/01/22(b) AA+ - 105 110,091
- ---------------------------------------------------------------------
Tazewell County Community
High School District No.
303 (Pekin); Unlimited
Tax Series 1996 GO
5.625%, 01/01/14(d) AAA Aaa 1,435 1,516,652
- ---------------------------------------------------------------------
University of Illinois
Auxiliary Facilities
System; Series 1991 RB
5.75%, 04/01/22 AA- Aa3 4,750 4,893,212
- ---------------------------------------------------------------------
46,889,418
- ---------------------------------------------------------------------
INDIANA-0.20%
Carmel Retirement Rental
Housing (Beverly
Enterprises Project);
Refunding Series RB
8.75%, 12/01/08(g) - - 95 106,885
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS(a) - PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
INDIANA-(CONTINUED)
Indiana (State of) Housing
Finance Authority; Series
B-1 RB
6.15%, 07/01/17 - Aaa $ 170 $ 180,129
- ---------------------------------------------------------------------
Indiana Transportation
Finance Authority
(Airport Lease Facility);
Series A RB
6.25%, 11/01/02(e)(f) NRR Aaa 395 436,664
- ---------------------------------------------------------------------
6.25%, 11/01/16 A A-1 105 112,304
- ---------------------------------------------------------------------
835,982
- ---------------------------------------------------------------------
IOWA-0.28%
Iowa Finance Authority
(Trinity Regional
Hospital Project);
Hospital Facilities
Refunding Series 1997 RB
6.00%, 07/01/12(d) AAA Aaa 1,000 1,147,130
- ---------------------------------------------------------------------
KANSAS-0.07%
Newton (City of) (Newton
Healthcare Corp.);
Hospital Series A RB
7.375%, 11/15/04(e)(f) NRR NRR 250 298,350
- ---------------------------------------------------------------------
KENTUCKY-2.04%
Carrollton & Henderson
(Cities of) Public Energy
Authority; Series A RB
5.00%, 01/01/08(d) AAA Aaa 2,000 2,114,120
- ---------------------------------------------------------------------
5.00%, 01/01/09(d) AAA Aaa 1,880 1,985,919
- ---------------------------------------------------------------------
Kentucky Economic
Development Finance
Authority (Appalachian
Regional Healthcare);
Refunding & Improvement
Hospital Systems Series
RB
5.875%, 10/01/22 BBB - 1,000 1,034,410
- ---------------------------------------------------------------------
Mount Sterling (City of);
Lease Funding Series 1993
A RB
6.15%, 03/01/13 - Aa 3,000 3,245,970
- ---------------------------------------------------------------------
8,380,419
- ---------------------------------------------------------------------
LOUISIANA-3.65%
Louisiana Public Facilities
Authority (Medical Center
at New Orleans Project);
RB
6.125%, 10/15/07(d) AAA - 2,775 2,956,485
- ---------------------------------------------------------------------
Louisiana Public Facilities
Authority (Our Lady of
Lake Regional Hospital);
Hospital Refunding Series
C RB
6.00%, 12/01/01(e)(f) AAA Aaa 2,500 2,701,725
- ---------------------------------------------------------------------
Louisiana Public Facilities
Authority (Tulane
University of Louisiana);
RB
6.00%, 10/01/16(d) AAA Aaa 2,500 2,781,425
- ---------------------------------------------------------------------
Louisiana Stadium &
Exposition District Hotel
Occupancy Tax and Stadium
Revenue; Refunding Series
B RB
5.00%, 07/01/26(d) AAA Aaa 2,000 1,961,900
- ---------------------------------------------------------------------
New Orleans Levee District;
Series 1995 A RB
5.95%, 11/01/07(d) AAA Aaa 1,000 1,114,540
- ---------------------------------------------------------------------
</TABLE>
FS-78
<PAGE> 330
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
LOUISIANA-(CONTINUED)
Ouachita Parish Hospital
Service District No. 1
(Glenwood Regional
Medical Center);
Refunding Series 1996 RB
5.70%, 05/15/16(d) AAA Aaa $ 1,000 $ 1,081,680
- --------------------------------------------------------------------
St. John Baptist Parish
(Sales Tax Distribution);
Public Improvement Series
1987 RB
7.60%, 01/01/08(e) NRR NRR 500 622,755
- --------------------------------------------------------------------
7.60%, 01/01/09(e) NRR NRR 500 628,635
- --------------------------------------------------------------------
West Feliciana Parish (Gulf
States Utility Co.);
Series A PCR
7.50%, 05/01/15 BB+ Ba1 1,000 1,106,170
- --------------------------------------------------------------------
14,955,315
- --------------------------------------------------------------------
MAINE-0.22%
Maine (State of) Education
Loan Authority; Education
Loan Series A-2 RB
6.95%, 12/01/07(b) - A 855 904,676
- --------------------------------------------------------------------
MARYLAND-0.47%
Maryland Health and Higher
Education Facilities
Authority (Doctors
Community Hospital Inc.);
Series 1990 RB
8.75%, 07/01/00(e)(f) AAA Aaa 1,000 1,096,680
- --------------------------------------------------------------------
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 790 820,976
- --------------------------------------------------------------------
1,917,656
- --------------------------------------------------------------------
MASSACHUSETTS-5.18%
Massachusetts (State of);
Consolidated Loan Series
1991 C GO
7.00%, 08/01/01(e)(f) NRR NRR 2,450 2,694,118
- --------------------------------------------------------------------
Massachusetts Bay
Transportation Authority
(General Transportation
System Project); Series B
RB
5.00%, 03/01/28 AA- Aa3 2,000 1,951,900
- --------------------------------------------------------------------
Massachusetts Health and
Education Facilities
Authority (Lowell General
Hospital); Series 1991 A
RB
8.40%, 06/01/01(e)(f) NRR NRR 3,550 3,999,430
- --------------------------------------------------------------------
Massachusetts Health and
Education Facilities
Authority (Valley
Regional Health System
Issue); Series 1990 B RB
8.00%, 07/01/00(e)(f) NRR Aaa 3,000 3,257,700
- --------------------------------------------------------------------
Massachusetts Health and
Education Facilities
Authority (Winchester
Hospital); Series D RB
5.80%, 07/01/09(d) AAA - 1,000 1,082,820
- --------------------------------------------------------------------
Massachusetts Housing
Finance Authority; Single
Family Series 11 RB
7.75%, 12/01/22(b) AAA Aaa 3,000 3,127,200
- --------------------------------------------------------------------
</TABLE>
<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(g) - - $ 200 $ 208,876
- --------------------------------------------------------------------
Massachusetts Municipal
Wholesale Electric
Cooperative Power Supply;
System Series 1992 A RB
6.75%, 07/01/08(d) AAA Aaa 3,000 3,295,530
- --------------------------------------------------------------------
Massachusetts Water
Resources Authority;
General Refunding Series
B RB
5.00%, 03/01/22(d) AAA Aaa 1,600 1,578,304
- --------------------------------------------------------------------
21,195,878
- --------------------------------------------------------------------
MICHIGAN-3.79%
Detroit (City of) School
District; School Building
and Site Unlimited Tax
Series 1992 GO
6.00%, 05/01/01(e)(f) NRR NRR 1,000 1,070,140
- --------------------------------------------------------------------
6.15%, 05/01/01(e)(f) NRR NRR 1,300 1,395,485
- --------------------------------------------------------------------
Flint (City of) Hospital
Building Authority;
Hospital Series B RB
5.375%, 07/01/18(d) A - 1,000 1,010,670
- --------------------------------------------------------------------
Garden City Hospital
Finance Authority (Garden
City Hospital); Hospital
Refunding Series RB
5.625%, 09/01/10 - Ba3 1,000 999,910
- --------------------------------------------------------------------
Lake Orion Community School
District; School Building
and Site Unlimited Tax
Refunding Series 1994 GO
7.00%, 05/01/05(e)(f) AAA Aaa 2,500 2,942,100
- --------------------------------------------------------------------
Lakeview Community School
District; Unlimited Tax
Series 1996 GO
5.75%, 05/01/16(d) AAA Aaa 1,000 1,068,700
- --------------------------------------------------------------------
Lincoln Park (City of)
School District;
Unlimited Tax Series 1996
GO
6.00%, 05/01/06(e)(f) AAA Aaa 1,210 1,367,106
- --------------------------------------------------------------------
Michigan (State of) Housing
Development Authority;
Refunding Series A RB
6.60%, 04/01/12 AA- - 945 1,020,316
- --------------------------------------------------------------------
Ypsilanti (City of) School
District; Refunding
Unlimited Tax Series 1996
GO
5.75%, 05/01/07(d)(f) AAA Aaa 4,275 4,669,598
- --------------------------------------------------------------------
15,544,025
- --------------------------------------------------------------------
MINNESOTA-0.27%
Centennial Independent
School District No. 12;
Unlimited Tax Series A GO
5.60%, 02/01/05(d) AAA Aaa 1,000 1,088,810
- --------------------------------------------------------------------
MISSISSIPPI-2.66%
Mississippi (State of)
Development Board (Panola
County Hospital); Special
Obligation Series RB
5.00%, 07/01/28 A - 5,750 5,535,525
- --------------------------------------------------------------------
</TABLE>
FS-79
<PAGE> 331
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
MISSISSIPPI-(CONTINUED)
Mississippi Higher
Education Assistance
Corp.; Student Loan
Sub-Series C RB
7.50%, 09/01/09(b) - A $ 5,000 $ 5,376,800
- --------------------------------------------------------------------
10,912,325
- --------------------------------------------------------------------
MISSOURI-2.83%
Joplin Industrial
Development Authority
(Catholic Health
Initiatives); Refunding
Series A RB
5.125%, 12/01/15 AA Aa2 1,350 1,363,986
- --------------------------------------------------------------------
Kansas City Industrial
Development Authority
(General Motors Corp.
Project); PCR
6.05%, 04/01/06 A A3 1,435 1,460,184
- --------------------------------------------------------------------
Kansas City Municipal
Assistance Corp.(Truman
Medical Center Charitable
Foundation); Leasehold
Improvement Series 1991 A
RB
7.00%, 11/01/01(e)(f) NRR NRR 605 659,638
- --------------------------------------------------------------------
Missouri (State of )
Environmental Improvement
and Energy Resources;
Series 1995 C PCR
5.85%, 01/01/10 - Aa1 1,000 1,085,480
- --------------------------------------------------------------------
Missouri (State of) Health
and Educational
Facilities Authority (BJC
Health System Project);
Hospital Series RB
5.00%, 05/15/28 AA Aa2 3,000 2,914,380
- --------------------------------------------------------------------
Missouri (State of) Health
and Educational
Facilities Authority
(Fontbonne College);
Educational Facilities
Series RB
5.125%, 10/01/17(d) A - 2,555 2,555,767
- --------------------------------------------------------------------
5.20%, 10/01/20(d) A - 1,575 1,577,252
- --------------------------------------------------------------------
11,616,687
- --------------------------------------------------------------------
NEVADA-1.49%
Boulder (City of) Hospital
(Boulder City Hospital
Inc.); Hospital Refunding
Series RB
5.85%, 01/01/22(g) - - 500 497,310
- --------------------------------------------------------------------
Humboldt (County of)
(Sierra Pacific Project);
Series 1987 PCR
6.55%, 10/01/13(d) AAA Aaa 3,000 3,265,440
- --------------------------------------------------------------------
Las Vegas (City of);
Refunding 1992 Limited
Tax GO
6.50%, 04/01/02(e)(f) AAA Aaa 1,000 1,100,730
- --------------------------------------------------------------------
Reno Redevelopment Agency;
Refunding Sub-Series A
Tax Allocation Notes
6.00%, 06/01/10 - Baa 1,185 1,251,976
- --------------------------------------------------------------------
6,115,456
- --------------------------------------------------------------------
NEW HAMPSHIRE-1.65%
Hudson (City of); Unlimited
Tax Series GO
5.25%, 03/15/28 - Aa3 1,610 1,626,325
- --------------------------------------------------------------------
New Hampshire Higher
Educational & Health
Facilities Authority
(Dartmouth College);
Refunding Series RB
5.375%, 06/01/23 - Aaa 1,000 1,029,660
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
NEW HAMPSHIRE-(CONTINUED)
New Hampshire State
Turnpike System; Series
1990 RB
7.40%, 04/01/00(e)(f) AAA Aaa $ 3,850 $ 4,110,876
- --------------------------------------------------------------------
6,766,861
- --------------------------------------------------------------------
NEW JERSEY-0.95%
Hudson County Correctional
Facility; Certificate of
Participation Series 1992
RB
6.60%, 12/01/21(d) AAA Aaa 1,250 1,360,837
- --------------------------------------------------------------------
New Jersey Economic
Development Authority
(Atlantic City Sewer
Co.); Sewer Facility
Series 1991 RB
7.25%, 12/01/11(b)(g) - - 1,715 1,849,336
- --------------------------------------------------------------------
New Jersey City Economic
Development Authority
(Franciscan Oaks
Project); First Mortgage
Series RB
5.70%, 10/01/17(g) - - 500 505,330
- --------------------------------------------------------------------
New Jersey Health Care
Facility Financing
Authority (St. Peters
Medical Center); Series
1987 C RB
8.60%, 07/01/17(d) AAA Aaa 190 194,416
- --------------------------------------------------------------------
3,909,919
- --------------------------------------------------------------------
NEW MEXICO-1.49%
Albuquerque (City of)
(Albuquerque Academy
Project); Educational
Facilities Series 1995 RB
5.75%, 10/15/15 AA- Aa2 915 957,181
- --------------------------------------------------------------------
Las Cruces South Central
Solid Waste Authority;
Environmental Services RB
5.65%, 06/01/09 - A 575 602,928
- --------------------------------------------------------------------
Los Alamos (County of);
Utility Series A RB
6.00%, 07/01/15(d) AAA Aaa 2,000 2,192,120
- --------------------------------------------------------------------
Santa Fe (City of); Series
1994 A RB
6.25%, 06/01/04(e)(f) AAA Aaa 2,100 2,338,224
- --------------------------------------------------------------------
6,090,453
- --------------------------------------------------------------------
NEW YORK-8.73%
New York (City of); GO
8.25%, Unlimited Tax
Series 1991 F
11/15/01(e)(f) AAA Aaa 1,955 2,223,304
- --------------------------------------------------------------------
Series 1991 F
11/15/01(e)(f) NRR NRR 45 51,110
- --------------------------------------------------------------------
7.65%, Unlimited Tax
Series 1992 F
02/01/02(e)(f) NRR Aaa 4,775 5,373,928
- --------------------------------------------------------------------
7.00%, Unlimited Tax
Series H 02/01/02(e)(f) NRR NRR 295 326,037
- --------------------------------------------------------------------
02/01/20 A- A3 55 60,033
- --------------------------------------------------------------------
7.20%, Unlimited Tax
Series H 02/01/02(e)(f) NRR NRR 375 416,609
- --------------------------------------------------------------------
02/01/15 A- A3 125 137,264
- --------------------------------------------------------------------
7.70%, Unlimited Tax
Series D 02/01/02(e)(f) NRR Aaa 1,970 2,219,914
- --------------------------------------------------------------------
02/01/09 A- A3 30 33,481
- --------------------------------------------------------------------
</TABLE>
FS-80
<PAGE> 332
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
NEW YORK-(CONTINUED)
7.00%, Unlimited Tax
Series C, Sub-Series
C-1 08/01/02(e)(f) NRR Aaa $ 2,000 $ 2,238,434
- --------------------------------------------------------------------
7.375, Unlimited Tax
Series B, Sub-Series
B-1 08/15/04(e)(f) NRR Aaa 285 335,947
- --------------------------------------------------------------------
7.375, Unlimited Tax
Series B, Sub-Series
B-1 08/15/04(e)(f) NRR NRR 215 249,667
- --------------------------------------------------------------------
6.25%, Unlimited Tax
Series A 08/01/17 A- A3 3,035 3,357,499
- --------------------------------------------------------------------
7.00%, Unlimited Tax
Series B 02/01/18(d) AAA Aaa 1,000 1,096,960
- --------------------------------------------------------------------
New York City Industrial
Development Agency
(Brooklyn Navy Yard Cogen
Partners); RB
5.65%, 10/01/28(b) BBB- Baa3 500 509,845
- --------------------------------------------------------------------
New York City Industrial
Development Agency (The
Lighthouse Inc. Project);
Series 1992 RB
6.50%, 07/01/02(e)(f) NRR NRR 1,500 1,657,380
- --------------------------------------------------------------------
New York City Municipal
Water Finance Authority;
Water & Sewer Systems
Series A RB
5.00%, 06/15/17 A A1 1,350 1,322,879
- --------------------------------------------------------------------
New York State Dorm
Authority (City
University System);
Series C RB
6.00%, 07/01/00(e)(f) NRR NRR 135 139,945
- --------------------------------------------------------------------
6.00%, 07/01/16 BBB+ Baa1 365 375,322
- --------------------------------------------------------------------
New York State Dorm
Authority (State
University Educational
Facilities); Refunding
Series A RB
6.50%, 05/15/06 A- A3 1,000 1,141,510
- --------------------------------------------------------------------
New York State
Environmental Facility
Corp.; Water Revenue
Series E PCR
6.875%, 06/15/01(e)(f) NRR Aaa 2,300 2,513,808
- --------------------------------------------------------------------
6.875%, 06/15/10 AA+ Aaa 1,100 1,197,658
- --------------------------------------------------------------------
New York State Urban
Development Corp.;
Capital Facilities 1991
Series 3 RB
7.375%, 01/01/02(e)(f) NRR Aaa 7,850 8,787,290
- --------------------------------------------------------------------
35,765,824
- --------------------------------------------------------------------
NORTH CAROLINA-1.77%
North Carolina Eastern
Municipal Power Agency;
Series A RB
6.125%, 01/01/10(d) AAA Aaa 1,500 1,621,740
- --------------------------------------------------------------------
North Carolina Housing
Finance Agency; Single
Family-Series II RB
6.20%, 03/01/16 AA Aa2 615 655,141
- --------------------------------------------------------------------
North Carolina Medical Care
Community Hospital (Annie
Penn Memorial Hospital);
Refunding Series RB
5.375%, 01/01/22 - Baa3 250 250,305
- --------------------------------------------------------------------
North Carolina Municipal
Power Agency (No. 1
Catawba Electric
Project); Refunding RB
7.25%, 01/01/07 A- A3 2,750 3,254,653
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
NORTH CAROLINA-(CONTINUED)
North Carolina Municipal
Power Agency (No. 1
Catawba Electric
Project); Series 1990 RB
6.50%, 01/01/10(e) AAA Aaa $ 260 $ 303,625
- --------------------------------------------------------------------
6.50%, 01/01/10(d) AAA Aaa 1,115 1,162,577
- --------------------------------------------------------------------
7,248,041
- --------------------------------------------------------------------
NORTH DAKOTA-0.25%
North Dakota Housing
Finance Agency; Home
Mortgage Series B RB
5.85%, 07/01/28(b) - Aa3 970 1,010,905
- --------------------------------------------------------------------
OHIO-1.77%
Cleveland (City of) Parking
Facilities; Improvement
Series RB
8.00%, 09/15/02(e)(f) NRR NRR 500 581,300
- --------------------------------------------------------------------
Fairfield (City of) School
District; Unlimited Tax
Series 1995 GO
6.10%, 12/01/15(h) AAA Aaa 1,000 1,085,340
- --------------------------------------------------------------------
Findlay (City of); Limited
Tax Series 1996 GO
5.875%, 07/01/17 AA- Aa3 1,000 1,096,870
- --------------------------------------------------------------------
Mason (City of) Health Care
Facilities (MCV Health
Care Facilities, Inc.);
Series 1990 RB
7.625%, 02/01/40(d) AAA - 2,135 2,317,073
- --------------------------------------------------------------------
Montgomery (County of)
(Grandview Hospital &
Medical Center);
Refunding Hospital Series
RB
5.50%, 12/01/10 BBB- - 1,000 972,650
- --------------------------------------------------------------------
Ohio Department of
Transportation (Panhandle
Rail Line Project);
Series 1992 Certificates
of Participation
6.50%, 04/15/12(d) AAA Aaa 1,100 1,201,090
- --------------------------------------------------------------------
7,254,323
- --------------------------------------------------------------------
OKLAHOMA-2.21%
Edmond (City of) Economic
Development Authority
(Collegiate Housing
Foundation Project);
Series A RB
5.375%, 12/01/19 - Baa3 500 491,045
- --------------------------------------------------------------------
5.50%, 12/01/28 - Baa3 500 492,395
- --------------------------------------------------------------------
McAlester (City of) Public
Works Authority;
Refunding and Improvement
Series 1995 RB
5.50%, 12/01/10(d) AAA Aaa 975 1,079,374
- --------------------------------------------------------------------
Oklahoma Development
Finance Authority Public
Facilities Financing
Program (Oklahoma State
University Project); RB
5.00%, 07/01/18(d) - Aaa 600 599,256
- --------------------------------------------------------------------
Sapula (City of) Municipal
Authority; Capital
Improvement Series RB
5.00%, 07/01/21(d) AAA Aaa 1,000 1,000,800
- --------------------------------------------------------------------
Southern Oklahoma Memorial
Hospital Authority;
Series 1993 A RB
5.60%, 02/01/00(e) NRR NRR 1,250 1,279,275
- --------------------------------------------------------------------
</TABLE>
FS-81
<PAGE> 333
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
OKLAHOMA-(CONTINUED)
Tulsa (City of) Industrial
Authority (St. Johns
Hospital); RB
6.25%, 02/15/14 AA Aa3 $ 2,000 $ 2,157,480
- --------------------------------------------------------------------
Tulsa (City of) Industrial
Authority (Tulsa Regional
Medical Center); Hospital
Series RB
7.20%, 06/01/03(e)(f) AAA NRR 500 576,775
- --------------------------------------------------------------------
Tulsa Public Facilities
Authority-Capital
Improvements-Water
System; Series 1988 B RB
6.00%, 03/01/08 A+ - 1,305 1,398,973
- --------------------------------------------------------------------
9,075,373
- --------------------------------------------------------------------
OREGON-1.37%
Bend (City of) Urban
Renewal Agency (Bend
Development Board); RB
4.85%, 06/01/18 - A3 1,080 1,062,612
- --------------------------------------------------------------------
Cow Creek Band Umpqua Tribe
Of Indians; Series B RB
5.10%, 07/01/12(d) AAA Aaa 1,000 1,009,280
- --------------------------------------------------------------------
Marion (County of) (Ogden
Martin Systems);
Refunding Solid Waste &
Electric Series RB
5.50%, 10/01/06(d) AAA Aaa 1,000 1,095,410
- --------------------------------------------------------------------
Portland (City of) Sewer
System; Series 1994 A RB
6.20%, 06/01/04(e)(f) NRR NRR 1,200 1,342,980
- --------------------------------------------------------------------
6.25%, 06/01/04(e)(f) NRR NRR 1,000 1,121,560
- --------------------------------------------------------------------
5,631,842
- --------------------------------------------------------------------
PENNSYLVANIA-2.73%
Allegheny (County of)
Industrial Development
Authority (USX Corp.);
Environmental Improvement
Series IDR
5.60%, 09/01/30 BBB- Baa2 1,000 1,004,860
- --------------------------------------------------------------------
Chester (County of) Health
and Educational
Facilities Authority
(Jefferson Health
Systems); Series B RB
5.375%, 05/15/27 AA- A1 4,000 4,042,080
- --------------------------------------------------------------------
Chester Upland School
Authority; Refunding
School Series B RB
5.25%, 09/01/21(d) AAA Aaa 1,000 1,014,510
- --------------------------------------------------------------------
Montgomery County
Industrial Development
Authority (Meadowood
Corp. Project); Refunding
First Mortgage Series A
RB
10.25%, 12/01/00(e)(f) NRR NRR 100 114,187
- --------------------------------------------------------------------
Montgomery County
Industrial Development
Authority (Pennsburg
Nursing & Rehabilitation
Center); RB
7.625%, 03/31/04(e)(f) NRR Aaa 100 119,219
- --------------------------------------------------------------------
Pennsylvania (State of);
Third Series GO
6.75%, 11/15/13(d) AAA Aaa 1,250 1,420,938
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
PENNSYLVANIA-(CONTINUED)
Pennsylvania Economic
Development Finance
Authority (Colver
Project); Resource
Recovery Series 1994 D RB
7.05%, 12/01/10(b) BBB- - $ 2,900 $ 3,213,895
- --------------------------------------------------------------------
Scranton-Lackawanna Health
& Welfare Authority
(Moses Taylor Hospital
Project); Series B RB
8.50%, 07/01/01(e)(f) AAA NRR 250 283,135
- --------------------------------------------------------------------
11,212,824
- --------------------------------------------------------------------
PUERTO RICO-1.35%
Puerto Rico (Commonwealth
of) Electric Power
Authority; RB
7.00%, Series 1991 P
07/01/01(e)(f) NRR Aaa 1,325 1,457,129
- --------------------------------------------------------------------
6.00%, Series 1989
07/01/99(f) BBB+ Baa1 4,000 4,057,440
- --------------------------------------------------------------------
5,514,569
- --------------------------------------------------------------------
RHODE ISLAND-0.60%
Rhode Island Depositors
Economic Protection
Corp.; Special Obligation
Series 1992 A RB
6.95%, 08/01/02(e)(f) AAA Aaa 1,250 1,404,325
- --------------------------------------------------------------------
Rhode Island Housing and
Mortgage Finance Agency;
Homeownership Opportunity
Series 15 B RB
6.00%, 10/01/04 AA+ Aa2 1,000 1,066,170
- --------------------------------------------------------------------
2,470,495
- --------------------------------------------------------------------
SOUTH CAROLINA-0.53%
Piedmont Municipal Power
Agency; Refunding
Electric Series A RB
5.75%, 01/01/24 BBB Baa2 1,150 1,151,610
- --------------------------------------------------------------------
South Carolina State
Education Assistance
Authority; Guaranteed
Student Loan Series 1990
RB
6.60%, 09/01/01(b) AA - 500 517,410
- --------------------------------------------------------------------
South Carolina State
Housing Finance and
Development Authority;
Homeownership Mortgage
Series 1990 C RB
7.50%, 07/01/05(b) AA Aa2 500 521,770
- --------------------------------------------------------------------
2,190,790
- --------------------------------------------------------------------
SOUTH DAKOTA-0.53%
South Dakota Health &
Educational Facilities
Authority (Huron Regional
Medical Center); RB
7.25%, 04/01/20 BBB - 100 110,276
- --------------------------------------------------------------------
South Dakota Housing
Development Authority;
Homeownership Mortgage
Series F RB
5.80%, 05/01/28(b) AAA Aa1 2,000 2,081,760
- --------------------------------------------------------------------
2,192,036
- --------------------------------------------------------------------
TENNESSEE-1.46%
Franklin Industrial
Development Board
(Landings Apartment
Project); Multifamily
Housing Series A RB
5.75%, 04/01/10(d) AAA Aaa 1,115 1,184,041
- --------------------------------------------------------------------
</TABLE>
FS-82
<PAGE> 334
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
TENNESSEE-(CONTINUED)
Montgomery (County of)
Health, Educational and
Housing Facilities Board
(Clarksville Project);
Refunding and Improvement
Hospital Series RB
5.375%, 01/01/28(d) A - $ 1,800 $ 1,762,452
- ---------------------------------------------------------------------
Shelby (County of);
Unlimited Tax School
Series B GO
6.00%, 03/01/02(e)(f) NRR NRR 1,000 1,075,160
- ---------------------------------------------------------------------
Shelby County Health,
Educational & Housing
Facilities Board (Kirby
Pines); Health Care
Facilities Series A RB
6.25%, 11/15/16(g) - - 1,000 1,026,100
- ---------------------------------------------------------------------
Tennessee Housing
Development Agency;
Homeownership Progressive
Series Q RB
6.80%, 07/01/17 AA Aa2 895 948,306
- ---------------------------------------------------------------------
5,996,059
- ---------------------------------------------------------------------
TEXAS-14.53%
Arlington Independent
School District;
Refunding Series 1995 GO
5.75%, 02/15/21(d) - Aaa 1,000 1,044,350
- ---------------------------------------------------------------------
Austin (City of); Utility
System RB
6.50%, 05/15/01(e)(f) AAA Aaa 1,380 1,493,367
- ---------------------------------------------------------------------
Austin Community College
District; Combined Fee
Revenue Building and
Refunding Series 1995 RB
6.10%, 02/01/05(e)(f) AAA Aaa 1,115 1,236,870
- ---------------------------------------------------------------------
Bellville Independent
School District;
Unlimited Tax School
Building and Refunding
Series 1995 A GO
6.125%, 02/01/20(d) - Aaa 830 897,819
- ---------------------------------------------------------------------
Brazos (County of) Health
Facilities Development
Corp. (Franciscan
Services Corp.); Series A
RB
5.375%, 01/01/22(d) AAA Aaa 2,000 2,042,600
- ---------------------------------------------------------------------
Brazos Higher Education
Loan Authority Inc.;
Student Loan Refunding RB
6.30%, Series 1992 C-1
11/01/01(b) - Aa 325 341,182
- ---------------------------------------------------------------------
6.45%, Series 1992 C-1
11/01/02(b) - Aa 1,135 1,207,685
- ---------------------------------------------------------------------
6.50%, Series 1994 B-1
06/01/04(b) - A 260 277,238
- ---------------------------------------------------------------------
Carrollton (City of); GO
5.75%, 08/15/16 AA- Aa2 1,000 1,079,730
- ---------------------------------------------------------------------
Comal County Industrial
Development Authority
(The Coleman Company,
Inc. Project); Industrial
Development Series 1980
RB
9.25%, 08/01/00(e) NRR NRR 590 619,972
- ---------------------------------------------------------------------
Dallas (City of);
Waterworks and Sewer
System Series A RB
6.00%, 10/01/01(e)(f) NRR NRR 2,030 2,172,892
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
TEXAS-(CONTINUED)
Dallas (City of);
Waterworks and Sewer
System Refunding and
Improvement Series RB
5.35%, 04/01/14 AA Aa2 $ 3,055 $ 3,183,370
- ---------------------------------------------------------------------
Dallas-Fort Worth Regional
Airport Authority;
Airport Series 1985 RB
6.10%, 11/01/07 A+ A1 160 160,515
- ---------------------------------------------------------------------
6.10%, 11/01/07(d) AAA Aaa 400 400,772
- ---------------------------------------------------------------------
DeSoto (City of)
Independent School
District; Refunding
Unlimited Tax Series GO
5.125%, 08/15/17(d) AAA - 2,155 2,156,099
- ---------------------------------------------------------------------
Edgewood (City of)
Independent School
District; Unlimited Tax
School Series GO
5.40%, 02/15/23(d) - Aaa 800 819,024
- ---------------------------------------------------------------------
Georgetown (City of);
Utility System Series
1995 A RB
6.20%, 08/15/05(e)(f) AAA Aaa 1,500 1,680,660
- ---------------------------------------------------------------------
Harris County; Toll Road
Unlimited Tax General
Obligation and
Subordinate Lien
Refunding Series 1991 RB
6.75%, 08/01/14 AA Aa2 3,850 4,205,240
- ---------------------------------------------------------------------
Harris County Health
Facilities Development
Corp. (Saint Luke's
Episcopal Hospital
Project); Series 1991 RB
6.70%, 02/15/01(e)(f) AAA NRR 1,000 1,107,290
- ---------------------------------------------------------------------
Harris County Mental Health
and Mental Retardation
Authority; Refunding
Series 1992 RB
6.25%, 09/15/10(d) AAA Aaa 4,500 4,799,430
- ---------------------------------------------------------------------
Houston (City of);
Refunding Series 1992 C
GO
6.25%, 03/01/02(e)(f) NRR NRR 1,470 1,575,972
- ---------------------------------------------------------------------
Hurst, Euless, Bedford,
Texas Independent School
District; Refunding RB
6.50%, 08/15/04(e)(f) AAA Aaa 640 721,350
- ---------------------------------------------------------------------
6.50%, 08/15/24(d) AAA Aaa 360 395,878
- ---------------------------------------------------------------------
Keller (City of)
Independent School
District; Certificates of
Participation Series 1994
RB
6.00%, 08/15/05(d) AAA Aaa 1,000 1,112,630
- ---------------------------------------------------------------------
Lockhart (City of);
Certificates of
Participation Tax and
Utility Systems Series
1996 GO
5.90%, 08/01/06(e)(f) AAA Aaa 1,100 1,227,699
- ---------------------------------------------------------------------
5.85%, 08/01/11(d) AAA Aaa 605 660,122
- ---------------------------------------------------------------------
North Central Texas Health
Facilities Development
Corp. (CC Young Memorial
Project); Hospital Series
RB
5.375%, 02/15/25(d) A - 1,000 1,007,850
- ---------------------------------------------------------------------
North Texas Higher
Education Authority Inc.;
Student Loan Refunding
Series D RB
6.10%, 04/01/08(b) - Aa 1,000 1,031,210
- ---------------------------------------------------------------------
6.30%, 04/01/09(b) - A 500 518,155
- ---------------------------------------------------------------------
</TABLE>
FS-83
<PAGE> 335
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
TEXAS-(CONTINUED)
Plano (City of) Independent
School District;
Unlimited Tax Series 1991
B GO
5.625%, 02/15/01(e)(f) AAA Aaa $ 2,500 $ 2,599,225
- --------------------------------------------------------------------
Richardson (City of)
Hospital Authority
(Baylor/Richardson
Project); Refunding and
Improvement Hospital
Series RB
5.50%, 12/01/18 BBB+ Baa2 1,000 985,670
- --------------------------------------------------------------------
5.625%, 12/01/28 BBB+ Baa2 1,250 1,233,013
- --------------------------------------------------------------------
Tarrant County Texas Water
Control and Improvement
District No. 1; Refunding
Series 1993 RB
5.20%, 03/01/10(d) AAA Aaa 2,000 2,057,720
- --------------------------------------------------------------------
Texas (State of) Public
Property Finance Corp.
(Mental Health Mental
Retardation); Series 1996
RB
6.20%, 09/01/16 BBB+ - 1,590 1,682,395
- --------------------------------------------------------------------
Texas (State of); Unlimited
Tax Veteran's Land GO
6.40%, 12/01/24(b) AA Aa2 2,000 2,165,880
- --------------------------------------------------------------------
Texas (State of) Department
of Housing and Community
Affairs (Asmara Project);
Multifamily Housing
Series 1996 A RB
6.30%, 01/01/16 A - 310 338,083
- --------------------------------------------------------------------
Texas (State of) Housing
Agency; Residential
Development Mortgage
Series 1987 D RB
8.40%, 07/01/20(b) A+ Aa 2,805 2,900,398
- --------------------------------------------------------------------
Texas National Research
Laboratory Community
Financing Corp.
(Superconducting Super
Collider); Lease RB
7.10%, 12/01/01(e)(f) AAA Aaa 600 667,302
- --------------------------------------------------------------------
Travis (County of) Health
Facility (Charity
Obligation Group);
Hospital Series A RB
5.125%, 11/01/24 AA+ Aa2 2,500 2,490,950
- --------------------------------------------------------------------
Tyler Health Facilities
Development Corp. (Mother
Frances Hospital);
Hospital Series A RB
5.625%, 07/01/13 - Baa2 1,000 1,007,370
- --------------------------------------------------------------------
Victoria (County of) (Texas
Hospital Citizens Medical
Center); RB
6.20%, 01/01/10(d) AAA Aaa 1,000 1,094,480
- --------------------------------------------------------------------
Weatherford (City of)
Independent School
District; Refunding
Series 1994 GO
6.40%, 02/15/05(e)(f) NRR Aaa 900 1,013,391
- --------------------------------------------------------------------
6.40%, 02/15/12(d) - Aaa 100 111,057
- --------------------------------------------------------------------
59,523,905
- --------------------------------------------------------------------
UTAH-1.75%
Intermountain Power Agency
(Utah Power Supply);
Series 1986 B RB
5.00%, 07/01/16 A+ A1 1,550 1,523,402
- --------------------------------------------------------------------
Salt Lake (County of)
(Westminster College
Project); RB
5.75%, 10/01/27 BBB - 1,000 1,022,110
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
UTAH-(CONTINUED)
Utah (State of) Associated
Municipal Power System
(San Juan Project);
Refunding Series RB
5.00%, 06/01/22(d) AAA Aaa $ 775 $ 763,398
- --------------------------------------------------------------------
Utah (State of) Housing
Finance Agency; Federally
Insured Term Subordinate
Single Family Mortgage RB
6.30%, Sub-Series 1994
E-1, 07/01/06 AA- - 465 498,764
- --------------------------------------------------------------------
7.15%, Sub-Series 1994
G-1, 07/01/06 AA- Aa2 290 316,700
- --------------------------------------------------------------------
Utah (State of) Housing
Finance Agency; Single
Family Mortgage RB
6.05%, Series 1994 C
07/01/06 - A1 605 642,322
- --------------------------------------------------------------------
6.45%, Series G2 RB
07/01/27(b) AAA Aaa 1,065 1,132,862
- --------------------------------------------------------------------
Utah (State of) Water
Finance Agency; Series A
RB
5.30%, 10/01/23(d) AAA Aaa 1,250 1,271,775
- --------------------------------------------------------------------
7,171,333
- --------------------------------------------------------------------
VIRGIN ISLANDS-0.91%
Virgin Islands Public
Finance Authority;
Matching Fund Loan Notes
Series A RB
7.25%, 10/01/02(e)(f) NRR NRR 1,000 1,141,540
- --------------------------------------------------------------------
Virgin Islands Territory
(Hugo Insurance Claims
Fund); Special Tax Bond
Series 1991 GO
7.75%, 10/01/01(e)(f) NRR NRR 2,350 2,593,742
- --------------------------------------------------------------------
3,735,282
- --------------------------------------------------------------------
VIRGINIA-1.68%
Covington-Alleghany (County
of) Industrial
Development Authority
(Beverly Enterprises);
Refunding Series RB
9.375%, 09/01/01(g) - - 40 42,420
- --------------------------------------------------------------------
Lynchburg (City of)
Industrial Development
Authority (Centra Health
Inc.); Refunding
Healthcare Facilities
Series RB
5.20%, 01/01/18 A+ A1 2,500 2,508,275
- --------------------------------------------------------------------
Richmond (City of); Public
Improvement Refunding
Series B GO
6.25%, 01/15/18 AA A1 2,000 2,122,780
- --------------------------------------------------------------------
Richmond (City of) Public
Utility; Refunding Series
A RB
5.125%, 01/15/28 A+ A1 1,000 990,290
- --------------------------------------------------------------------
Virginia Beach (City of)
Development Authority
(Sentara Health System);
Refunding Healthcare
Facilities Series RB
4.75%, 11/01/21 AA Aa2 1,000 949,170
- --------------------------------------------------------------------
Virginia Housing
Development Authority;
Commonwealth Mortgage
Series A RB
7.10%, 01/01/17 AA+ Aa1 250 264,065
- --------------------------------------------------------------------
6,877,000
- --------------------------------------------------------------------
</TABLE>
FS-84
<PAGE> 336
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
WASHINGTON-2.30%
Clark (County of) Gamas
School District No. 117;
GO
6.00%, 12/01/05(e)(f) AAA Aaa $ 1,000 $ 1,113,180
- --------------------------------------------------------------------
King (County of); Unlimited
Tax GO
5.50%, 07/01/07(e) AAA Aaa 500 541,540
- --------------------------------------------------------------------
King (County of); Unlimited
Tax Refunding GO
6.50%, 12/01/11 AA+ Aa1 500 501,440
- --------------------------------------------------------------------
Pend Oreille (County of)
Public Utility District
No. 1; Electric Series B
RB
6.30%, 01/01/17 A- A 1,400 1,513,946
- --------------------------------------------------------------------
Seattle (City of)
Metropolitan Municipality
Sewer District; Series T
RB
6.80%, 01/01/00(e)(f) NRR NRR 1,780 1,872,631
- --------------------------------------------------------------------
Washington State Public
Power Supply System
(Nuclear Project No. 1);
Refunding Series A RB
6.00%, 07/01/07(d) AAA Aaa 1,000 1,129,660
- --------------------------------------------------------------------
5.75%, 07/01/12(d) AAA Aaa 2,000 2,180,700
- --------------------------------------------------------------------
West Richland (City of);
Water & Sewer Series RB
7.00%, 12/01/04(e)(f) AAA Aaa 500 579,570
- --------------------------------------------------------------------
9,432,667
- --------------------------------------------------------------------
WEST VIRGINIA-0.12%
Ohio County Board of
Education; Unlimited Tax
Refunding Series GO
5.125%, 06/01/18 A+ A 500 508,405
- --------------------------------------------------------------------
WISCONSIN-0.80%
Wisconsin Health and
Educational Facilities
Authority (Children's
Hospital of Wisconsin
Inc); RB
5.125%, 02/15/21(d) AAA Aaa 1,000 996,670
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RATINGS(a) PAR MARKET
S&P MOODY'S (000) VALUE
<S> <C> <C> <C> <C>
WISCONSIN-(CONTINUED)
Wisconsin Health and
Educational Facilities
Authority (Sinai
Samaritan Medical
Center); Series 1994 F RB
5.75%, 08/15/16(d) AAA Aaa $ 1,500 $ 1,615,755
- --------------------------------------------------------------------
Wisconsin Housing and
Economic Development
Authority; Home Ownership
RB
7.35%, Series 1994 E
01/01/17 AA Aa2 500 538,600
- --------------------------------------------------------------------
8.00%, Series 1990 E
03/01/21(b) AA Aa 130 135,407
- --------------------------------------------------------------------
3,286,432
- --------------------------------------------------------------------
WYOMING-0.86%
Campbell (County of) School
District No. 1
(Gillette); Unlimited Tax
Series GO
5.35%, 06/01/04 AAA Aaa 1,000 1,072,500
- --------------------------------------------------------------------
Laramie (County of)
(Memorial Hospital
Project); Hospital Series
RB
6.70%, 05/01/12(d) AAA Aaa 250 276,935
- --------------------------------------------------------------------
Natrona (County of) Wyoming
Medical Center; RB
6.00%, 09/15/11(d) AAA Aaa 1,000 1,099,770
- --------------------------------------------------------------------
Sweetwater (County of)
(Idaho Power Company
Project); Series 1996 A
PCR
6.05%, 07/15/26 A A3 1,000 1,080,270
- --------------------------------------------------------------------
3,529,475
- --------------------------------------------------------------------
TOTAL INVESTMENTS-99.16%
(Cost $379,395,507) 406,530,698
- --------------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.84% 3,462,519
- --------------------------------------------------------------------
NET ASSETS-100.00% $409,993,217
====================================================================
</TABLE>
Notes to Schedule of Investments:
(a) Ratings assigned by Moody's Investors Service, Inc. ("Moody's") and Standard
& Poor's Corporation ("S&P"). NRR indicates a security that is not re-rated
subsequent to funding of an escrow fund (consisting of U.S. Treasury
obligations); this funding is pursuant to an advance refunding of the
security. Ratings are not covered by Independent Auditors' Report.
(b) Security subject to the alternative minimum tax.
(c) Demand security; payable upon demand by the Fund with usually no more than
seven calendar days' notice. Interest rates are redetermined periodically.
Rates shown are in effect on December 31, 1998.
(d) Secured by bond insurance.
(e) Secured by an escrow fund of U.S. Treasury obligations.
(f) Security has an irrevocable call or mandatory put by the issuer. Maturity
date reflects such call or put.
(g) 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.
(h) Secured by a letter of credit.
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-85
<PAGE> 337
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$379,395,507) $406,530,698
- ----------------------------------------------------------
Receivables for:
Fund shares sold 667,653
- ----------------------------------------------------------
Interest 7,212,829
- ----------------------------------------------------------
Investments sold 474,995
- ----------------------------------------------------------
Investment for deferred compensation plan 67,607
- ----------------------------------------------------------
Other assets 53,298
- ----------------------------------------------------------
Total assets 415,007,080
- ----------------------------------------------------------
LIABILITIES:
Payables for:
Fund shares reacquired 395,648
- ----------------------------------------------------------
Investments purchased 3,223,120
- ----------------------------------------------------------
Dividends 778,082
- ----------------------------------------------------------
Amount due to custodian 6,120
- ----------------------------------------------------------
Deferred compensation plan 67,607
- ----------------------------------------------------------
Accrued advisory fees 156,126
- ----------------------------------------------------------
Accrued distribution fees 303,385
- ----------------------------------------------------------
Accrued transfer agent fees 17,837
- ----------------------------------------------------------
Accrued operating expenses 65,938
- ----------------------------------------------------------
Total liabilities 5,013,863
- ----------------------------------------------------------
Net assets applicable to shares outstanding $409,993,217
- ----------------------------------------------------------
NET ASSETS:
Class A $327,705,242
==========================================================
Class B $ 72,723,215
==========================================================
Class C $ 9,564,760
==========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 39,223,500
==========================================================
Class B 8,691,472
==========================================================
Class C 1,144,808
==========================================================
Class A:
Net asset value and redemption price per
share $ 8.35
- ----------------------------------------------------------
Offering price per share:
(Net asset value of $8.35
divided by 95.25%) $ 8.77
==========================================================
Class B:
Net asset value and offering price per
share $ 8.37
==========================================================
Class C:
Net asset value and offering price per
share $ 8.35
==========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $22,383,574
- ----------------------------------------------------------
EXPENSES:
Advisory fees 1,738,038
- ----------------------------------------------------------
Administrative services fees 73,917
- ----------------------------------------------------------
Custodian fees 18,454
- ----------------------------------------------------------
Transfer agent fees - Class A 163,401
- ----------------------------------------------------------
Transfer agent fees - Class B 28,772
- ----------------------------------------------------------
Transfer agent fees - Class C 2,514
- ----------------------------------------------------------
Trustees' fees 10,408
- ----------------------------------------------------------
Distribution fees - Class A 806,482
- ----------------------------------------------------------
Distribution fees - Class B 568,813
- ----------------------------------------------------------
Distribution fees - Class C 50,355
- ----------------------------------------------------------
Other 170,519
==========================================================
Total expenses 3,631,673
==========================================================
Less: Expenses paid indirectly (4,261)
==========================================================
Net expenses 3,627,412
==========================================================
Net investment income 18,756,162
==========================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES:
Net realized gain from investment securities 595,427
- ----------------------------------------------------------
Net unrealized appreciation (depreciation) of
investment securities (197,391)
- ----------------------------------------------------------
Net gain on investment securities 398,036
- ----------------------------------------------------------
Net increase in net assets resulting from
operations $19,154,198
==========================================================
</TABLE>
See Notes to Financial Statements.
FS-86
<PAGE> 338
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 18,756,162 $ 16,818,463
- ------------------------------------------------------------------------------------------
Net realized gain from investment securities 595,427 114,781
- ------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities (197,391) 9,751,922
- ------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 19,154,198 26,685,166
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (16,134,077) (15,139,605)
- ------------------------------------------------------------------------------------------
Class B (2,410,612) (1,703,002)
- ------------------------------------------------------------------------------------------
Class C (214,027) (5,880)
- ------------------------------------------------------------------------------------------
Distributions in excess of net investment income:
Class A (87,502) (152,238)
- ------------------------------------------------------------------------------------------
Class B (15,369) (20,640)
- ------------------------------------------------------------------------------------------
Class C (1,355) (62)
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A 8,923,504 30,852,332
- ------------------------------------------------------------------------------------------
Class B 25,558,113 12,563,423
- ------------------------------------------------------------------------------------------
Class C 8,741,537 817,511
- ------------------------------------------------------------------------------------------
Net increase in net assets 43,514,410 53,897,005
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 366,478,807 312,581,802
- ------------------------------------------------------------------------------------------
End of period $409,993,217 $366,478,807
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $383,815,745 $340,696,817
- ------------------------------------------------------------------------------------------
Undistributed net investment income (73,902) (71,348)
- ------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities (883,817) (1,479,244)
- ------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 27,135,191 27,332,582
- ------------------------------------------------------------------------------------------
$409,993,217 $366,478,807
==========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
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: Class A shares,
Class B shares and Class C shares. 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
FS-87
<PAGE> 339
are valued at fair value as determined in good faith by or under the
supervision of the Trust's officers in a manner specifically authorized by
the Board of Trustees. Notwithstanding the above, short-term obligations
with maturities of 60 days or less are valued at amortized cost.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. It is the policy of the Fund to
declare daily dividends from net investment income. Such dividends are paid
monthly. Distributions from net realized capital gains, if any, are
recorded on ex-dividend date and are paid annually. On December 31, 1998
additional paid-in capital was decreased by $104,226 and undistributed net
investment income was increased by $104,226 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 $871,215 (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,
1998, AIM was reimbursed $73,917 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, 1998, AFS
was paid $126,501 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 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 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 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 year ended December 31, 1998, the Class A, Class B and Class
C shares paid AIM Distributors $806,482, $568,813 and $50,355, respectively, as
compensation under the Plans.
AIM Distributors received commissions of $100,100 from sales of the Class A
shares of the Fund during the year ended December 31, 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 year ended December 31, 1998,
AIM Distributors received $48,077 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, 1998, the Fund paid legal fees of $4,664
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, 1998, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) of $4,261 under an expense
offset arrangement. The effect of the above arrangements resulted in a reduction
of the Fund's total expenses of $4,261 during the year ended December 31, 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.
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) $1,000,000,000 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 May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended December 31, 1998, 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-88
<PAGE> 340
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, 1998 was
$117,522,000 and $73,292,724, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $27,282,565
- -------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (147,374)
- -------------------------------------------------------------------------
Net unrealized appreciation of investment securities $27,135,191
=========================================================================
</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, 1998 and 1997
were as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------- ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 12,409,366 $ 103,769,637 10,031,224 $ 79,386,539
- --------------------------------------------------------------------------------------------------------------------------
Class B 5,306,019 44,489,342 2,368,696 19,504,059
- --------------------------------------------------------------------------------------------------------------------------
Class C* 1,294,847 10,824,561 111,584 923,229
- --------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 1,031,670 8,611,126 1,051,195 8,642,466
- --------------------------------------------------------------------------------------------------------------------------
Class B 183,219 1,532,455 131,460 1,082,551
- --------------------------------------------------------------------------------------------------------------------------
Class C* 16,529 138,044 510 4,239
- --------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (12,388,704) (103,457,259) (6,962,233) (57,176,673)
- --------------------------------------------------------------------------------------------------------------------------
Class B (2,444,886) (20,463,684) (975,132) (8,023,187)
- --------------------------------------------------------------------------------------------------------------------------
Class C* (265,347) (2,221,068) (13,315) (109,957)
- --------------------------------------------------------------------------------------------------------------------------
5,142,713 $ 43,223,154 5,743,989 $ 44,233,266
==========================================================================================================================
</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 and a share of
Class B outstanding during each of the years in the five-year period ended
December 31, 1998; and for a share of Class C outstanding during the year ended
December 31, 1998 and the period August 4, 1997 (date sales commenced) through
December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.34 $ 8.19 $ 8.31 $ 7.78 $ 8.61
- --------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.42 0.42 0.43 0.43 0.46
- --------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.01 0.16 (0.12) 0.56 (0.78)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.43 0.58 0.31 0.99 (0.32)
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.42) (0.43) (0.43) (0.43) (0.45)
- --------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (0.03)
- --------------------------------------------------------------------------------------------------------------------------
Returns of capital -- -- -- (0.03) (0.03)
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (0.42) (0.43) (0.43) (0.46) (0.51)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.35 $ 8.34 $ 8.19 $ 8.31 $ 7.78
==========================================================================================================================
Total return(a) 5.28% 7.27% 3.90% 13.05% (3.79)%
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $327,705 $318,469 $278,812 $284,803 $257,456
==========================================================================================================================
Ratio of expenses to average net assets 0.82%(b) 0.90% 0.80% 0.88% 0.89%
==========================================================================================================================
Ratio of net investment income to average net assets 5.00%(b) 5.14% 5.29% 5.26% 5.61%
==========================================================================================================================
Portfolio turnover rate 19% 24% 26% 36% 43%
==========================================================================================================================
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average daily net assets of $322,592,733.
FS-89
<PAGE> 341
NOTE 8-FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------------------ -----------------
1998 1997 1996 1995 1994 1998 1997
------- ------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.36 $ 8.19 $ 8.31 $ 7.78 $ 8.61 $ 8.35 $ 8.30
- --------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.36 0.36 0.37 0.39 0.39 0.36 0.15
- --------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 0.01 0.17 (0.13) 0.54 (0.78) -- 0.04
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.37 0.53 0.24 0.93 (0.39) 0.36 0.19
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.36) (0.36) (0.36) (0.37) (0.38) (0.36) (0.14)
- --------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- -- (0.03) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Returns of capital -- -- -- (0.03) (0.03) -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (0.36) (0.36) (0.36) (0.40) (0.44) (0.36) (0.14)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.37 $ 8.36 $ 8.19 $ 8.31 $ 7.78 $ 8.35 $ 8.35
================================================================================================================================
Total return(a) 4.48% 6.59% 2.99% 12.14% (4.57)% 4.36% 2.36%
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $72,723 $47,185 $33,770 $21,478 $9,175 $9,565 $ 825
================================================================================================================================
Ratio of expenses to average net assets 1.57%(b) 1.66% 1.61% 1.68%(c) 1.67%(c) 1.57%(b) 1.67%(d)
================================================================================================================================
Ratio of net investment income to average net
assets 4.25%(b) 4.38% 4.49% 4.46%(e) 4.83%(e) 4.25%(b) 4.37%(d)
================================================================================================================================
Portfolio turnover rate 19% 24% 26% 36% 43% 19% 24%
================================================================================================================================
</TABLE>
(a) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(b) Ratios are based on average daily net assets of $56,881,310 and $5,035,467
for Class B and Class C, respectively.
(c) 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% and 1.84% for the periods 1995-1994, respectively.
(d) Annualized.
(e) 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 were 4.37% and 4.66% for the periods 1995-1994, respectively.
FS-90
<PAGE> 342
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Select Growth Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Select Growth Fund (a portfolio of AIM
Funds Group), including the schedule of investments, as
of December 31, 1998, 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 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. Our procedures included confirmation of
securities owned as of December 31, 1998, 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 Select
Growth Fund as of December 31, 1998, 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 five-year period then ended, in conformity
with generally accepted accounting principles.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
February 5, 1999
FS-91
<PAGE> 343
SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-89.75%
BANKS (MONEY CENTER)-0.99%
Chase Manhattan Corp. (The) 110,400 $ 7,514,101
- --------------------------------------------------------------
BANKS (REGIONAL)-0.50%
AmSouth Bancorporation 82,500 3,764,064
- --------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-2.44%
CBS Corp.(a) 122,400 4,008,601
- --------------------------------------------------------------
Chancellor Media Corp.(a) 76,000 3,638,500
- --------------------------------------------------------------
Clear Channel Communications, Inc.(a) 153,400 8,360,300
- --------------------------------------------------------------
Jacor Communications, Inc.(a) 38,500 2,478,438
- --------------------------------------------------------------
18,485,839
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-2.51%
Comverse Technology, Inc.(a) 143,300 10,174,301
- --------------------------------------------------------------
Lucent Technologies, Inc. 80,400 8,844,000
- --------------------------------------------------------------
19,018,301
- --------------------------------------------------------------
COMPUTERS (HARDWARE)-1.70%
Dell Computer Corp.(a) 176,000 12,881,001
- --------------------------------------------------------------
COMPUTERS (PERIPHERALS)-2.19%
EMC Corp.(a) 100,000 8,500,001
- --------------------------------------------------------------
Quantum Corp.(a) 380,000 8,075,000
- --------------------------------------------------------------
16,575,001
- --------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-14.48%
America Online, Inc.(a) 203,000 32,480,001
- --------------------------------------------------------------
BMC Software, Inc.(a) 108,000 4,812,750
- --------------------------------------------------------------
Cadence Design Systems, Inc.(a) 147,000 4,373,250
- --------------------------------------------------------------
Citrix Systems, Inc.(a) 61,650 5,983,903
- --------------------------------------------------------------
Compuware Corp.(a) 104,000 8,125,000
- --------------------------------------------------------------
Concord EFS, Inc.(a) 116,550 4,938,806
- --------------------------------------------------------------
Electronic Arts, Inc.(a) 96,700 5,427,287
- --------------------------------------------------------------
HBO & Co. 226,400 6,494,850
- --------------------------------------------------------------
InfoSpace.com, Inc.(a) 50,300 1,917,687
- --------------------------------------------------------------
ISS Group, Inc.(a) 8,200 451,000
- --------------------------------------------------------------
Medical Manager Corp.(a) 120,000 3,765,000
- --------------------------------------------------------------
Microsoft Corp.(a) 139,800 19,388,512
- --------------------------------------------------------------
Sterling Commerce, Inc.(a) 100,000 4,500,000
- --------------------------------------------------------------
USWeb Corp.(a) 261,000 6,883,875
- --------------------------------------------------------------
109,541,921
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONSUMER FINANCE-2.67%
Capital One Financial Corp. 31,000 $ 3,565,001
- --------------------------------------------------------------
Household International, Inc. 153,400 6,078,475
- --------------------------------------------------------------
MBNA Corp. 158,925 3,963,192
- --------------------------------------------------------------
Providian Financial Corp. 88,050 6,603,750
- --------------------------------------------------------------
20,210,418
- --------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-0.62%
McKesson Corp. 59,000 4,664,689
- --------------------------------------------------------------
ELECTRIC COMPANIES-1.43%
Niagara Mohawk Power Corp.(a) 214,300 3,455,588
- --------------------------------------------------------------
Northeast Utilities(a) 146,600 2,345,600
- --------------------------------------------------------------
Texas Utilities Co. 107,000 4,995,562
- --------------------------------------------------------------
10,796,750
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-2.63%
American Power Conversion Corp.(a) 50,000 2,421,876
- --------------------------------------------------------------
Raychem Corp. 52,700 1,702,868
- --------------------------------------------------------------
Sanmina Corp.(a) 87,200 5,450,000
- --------------------------------------------------------------
SCI Systems, Inc.(a) 99,500 5,746,125
- --------------------------------------------------------------
Solectron Corp.(a) 49,000 4,553,937
- --------------------------------------------------------------
19,874,806
- --------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-0.47%
Waters Corp.(a) 41,000 3,577,251
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-3.19%
Altera Corp.(a) 140,400 8,546,851
- --------------------------------------------------------------
Linear Technology Corp. 44,400 3,976,575
- --------------------------------------------------------------
Maxim Integrated Products, Inc.(a) 70,000 3,058,125
- --------------------------------------------------------------
PMC-Sierra, Inc.(a) 135,800 8,572,375
- --------------------------------------------------------------
24,153,926
- --------------------------------------------------------------
ENGINEERING & CONSTRUCTION-0.46%
McDermott International, Inc. 140,700 3,473,532
- --------------------------------------------------------------
ENTERTAINMENT-1.19%
SFX Entertainment, Inc.-Class A(a) 164,200 9,010,476
- --------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-0.62%
Teradyne, Inc.(a) 110,000 4,661,251
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-6.89%
American Express Co. 40,100 4,100,226
- --------------------------------------------------------------
Associates First Capital
Corp.-Class A 175,200 7,424,100
- --------------------------------------------------------------
</TABLE>
FS-92
<PAGE> 344
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCIAL (DIVERSIFIED)-(CONTINUED)
Citigroup Inc. 200,250 $ 9,912,375
- --------------------------------------------------------------
Fannie Mae 81,500 6,031,000
- --------------------------------------------------------------
Freddie Mac 241,020 15,530,726
- --------------------------------------------------------------
Hamilton Bancorp, Inc.(a) 98,000 2,615,375
- --------------------------------------------------------------
Heller Financial, Inc. 95,300 2,799,437
- --------------------------------------------------------------
MGIC Investment Corp. 92,900 3,698,581
- --------------------------------------------------------------
52,111,820
- --------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-1.79%
Warner-Lambert Co. 180,000 13,533,751
- --------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-3.27%
Forest Laboratories, Inc.(a) 105,200 5,595,325
- --------------------------------------------------------------
ICN Pharmaceuticals, Inc. 115,750 2,618,843
- --------------------------------------------------------------
Jones Pharma Inc. 110,000 4,015,000
- --------------------------------------------------------------
Medicis Pharmaceutical-Class A(a) 78,000 4,650,750
- --------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 125,000 7,859,375
- --------------------------------------------------------------
24,739,293
- --------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)-1.71%
Lilly (Eli) & Co. 32,300 2,870,662
- --------------------------------------------------------------
Pfizer Inc. 80,400 10,085,175
- --------------------------------------------------------------
12,955,837
- --------------------------------------------------------------
HEALTH CARE (LONG-TERM CARE)-0.46%
HCR Manor Care, Inc.(a) 118,700 3,486,812
- --------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.99%
Express Scripts, Inc.-Class A(a) 34,600 2,322,525
- --------------------------------------------------------------
United HealthCare Corp. 119,800 5,158,887
- --------------------------------------------------------------
7,481,412
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-2.38%
Arterial Vascular Engineering,
Inc.(a) 27,700 1,454,250
- --------------------------------------------------------------
Beckman Coulter Inc. 34,300 1,860,775
- --------------------------------------------------------------
Biomet, Inc. 120,600 4,854,150
- --------------------------------------------------------------
Guidant Corp. 52,500 5,788,125
- --------------------------------------------------------------
Sybron International Corp.(a) 149,000 4,050,937
- --------------------------------------------------------------
18,008,237
- --------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.91%
Ocular Sciences, Inc.(a) 125,000 3,343,750
- --------------------------------------------------------------
Omnicare, Inc. 71,400 2,481,150
- --------------------------------------------------------------
Quintiles Transnational Corp.(a) 20,400 1,088,850
- --------------------------------------------------------------
6,913,750
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HOMEBUILDING-0.43%
Clayton Homes, Inc. 235,000 $ 3,245,937
- --------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.57%
Conseco, Inc. 141,400 4,321,537
- --------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.33%
Century Business Services, Inc.(a) 100,000 1,437,500
- --------------------------------------------------------------
MONY Group, Inc. (The)(a) 33,900 1,061,493
- --------------------------------------------------------------
2,498,993
- --------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-0.35%
CMAC Investment Corp. 57,000 2,618,437
- --------------------------------------------------------------
INVESTMENT MANAGEMENT-1.48%
Affiliated Managers Group, Inc.(a) 54,300 1,622,212
- --------------------------------------------------------------
Knight/Trimark Group, Inc.-Class A(a) 400,000 9,575,000
- --------------------------------------------------------------
11,197,212
- --------------------------------------------------------------
LODGING-HOTELS-1.20%
Carnival Corp.-Class A 189,500 9,096,000
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-1.67%
Tyco International Ltd. 167,700 12,650,868
- --------------------------------------------------------------
NATURAL GAS-0.42%
Enron Corp. 56,000 3,195,500
- --------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.39%
Knoll, Inc.(a) 100,000 2,962,500
- --------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-0.46%
Atlantic Richfield Co. 52,900 3,451,725
- --------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.94%
ENSCO International, Inc. 344,600 3,682,912
- --------------------------------------------------------------
Schlumberger Ltd. 73,400 3,385,575
- --------------------------------------------------------------
7,068,487
- --------------------------------------------------------------
PERSONAL CARE-0.51%
Steiner Leisure Ltd.(a) 120,000 3,840,000
- --------------------------------------------------------------
RAILROADS-0.67%
Kansas City Southern Industries,
Inc. 103,000 5,066,312
- --------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-1.00%
Home Depot, Inc. (The) 45,200 2,765,675
- --------------------------------------------------------------
Lowe's Companies, Inc. 93,600 4,791,150
- --------------------------------------------------------------
7,556,825
- --------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-1.12%
CDW Computer Centers, Inc.(a) 76,050 7,296,046
- --------------------------------------------------------------
</TABLE>
FS-93
<PAGE> 345
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (COMPUTERS & ELECTRONICS)-(CONTINUED)
Tech Data Corp.(a) 30,000 $ 1,207,500
- --------------------------------------------------------------
8,503,546
- --------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-1.08%
J.C. Penney Co., Inc. 61,200 2,868,750
- --------------------------------------------------------------
Kohl's Corp.(a) 21,800 1,339,337
- --------------------------------------------------------------
Saks Inc.(a) 124,500 3,929,531
- --------------------------------------------------------------
8,137,618
- --------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.49%
Dollar Tree Stores, Inc.(a) 84,025 3,670,842
- --------------------------------------------------------------
RETAIL (DRUG STORES)-1.40%
CVS Corp. 192,498 10,587,390
- --------------------------------------------------------------
RETAIL (FOOD CHAINS)-2.09%
Kroger Co.(a) 114,900 6,951,450
- --------------------------------------------------------------
Safeway, Inc.(a) 146,000 8,896,875
- --------------------------------------------------------------
15,848,325
- --------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-1.94%
Costco Companies, Inc.(a) 76,000 5,486,250
- --------------------------------------------------------------
Dayton Hudson Corp. 170,000 9,222,500
- --------------------------------------------------------------
14,708,750
- --------------------------------------------------------------
RETAIL (SPECIALTY)-0.91%
Williams-Sonoma, Inc.(a) 170,000 6,853,125
- --------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.43%
Washington Mutual, Inc. 85,512 3,265,489
- --------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.18%
Young & Rubicam, Inc.(a) 42,600 1,379,175
- --------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-1.83%
Convergys Corp.(a) 98,000 2,192,750
- --------------------------------------------------------------
Service Corp. International 162,400 6,181,350
- --------------------------------------------------------------
Stewart Enterprises, Inc.-Class A 210,800 4,690,300
- --------------------------------------------------------------
Trammell Crow Co.(a) 28,400 795,200
- --------------------------------------------------------------
13,859,600
- --------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-0.52%
SunGard Data Systems Inc.(a) 98,600 3,913,187
- --------------------------------------------------------------
SERVICES (DATA PROCESSING)-2.97%
Affiliated Computer Services, Inc.(a) 22,600 1,017,000
- --------------------------------------------------------------
CSG Systems International, Inc.(a) 90,000 7,110,000
- --------------------------------------------------------------
DST Systems, Inc.(a) 58,100 3,315,331
- --------------------------------------------------------------
Fiserv, Inc.(a) 56,850 2,924,221
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (DATA PROCESSING)-(CONTINUED)
NOVA Corp.(a) 102,233 $ 3,546,189
- --------------------------------------------------------------
Paychex, Inc. 89,000 4,577,937
- --------------------------------------------------------------
22,490,678
- --------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.34%
Robert Half International, Inc.(a) 58,000 2,591,875
- --------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL)-0.41%
Corrections Corp. of America(a) 177,600 3,130,200
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-3.11%
MCI WorldCom, Inc.(a) 327,963 23,531,345
- --------------------------------------------------------------
TEXTILES (APPAREL)-0.48%
Tommy Hilfiger Corp.(a) 60,200 3,612,000
- --------------------------------------------------------------
TOBACCO-1.32%
Philip Morris Companies, Inc. 186,800 9,993,800
- --------------------------------------------------------------
WASTE MANAGEMENT-2.22%
Allied Waste Industries, Inc.(a) 226,050 5,340,431
- --------------------------------------------------------------
KTI, Inc.(a) 210,000 4,541,250
- --------------------------------------------------------------
Waste Management, Inc. 148,920 6,943,395
- --------------------------------------------------------------
16,825,076
- --------------------------------------------------------------
Total Domestic Common Stocks
(Cost $419,252,775) 679,106,593
- --------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-1.60%
BERMUDA-0.28%
Global Crossing Ltd.
(Telecommunications-Long Distance)(a) 47,600 2,147,950
- --------------------------------------------------------------
FINLAND-0.59%
Nokia Oyj A.B.-Class A-ADR
(Communications Equipment) 36,700 4,420,056
- --------------------------------------------------------------
NETHERLANDS-0.73%
Philips Electronics N.V.-ADR-New
York Shares (Electrical Equipment) 81,200 5,496,225
- --------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$7,151,112) 12,064,231
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
DOMESTIC CONVERTIBLE CORPORATE
NOTES-0.25%
COMPUTERS (PERIPHERALS)-0.25%
EMC Corp., Conv. Sub. Notes,
3.25%, 03/15/02 (Cost $677,145) $ 500,000 $ 1,885,000
- --------------------------------------------------------------
</TABLE>
FS-94
<PAGE> 346
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES-2.62%
U.S. TREASURY BILLS(B)-2.62%
4.439%, 03/25/99(c) (Cost
$19,844,292) $20,050,000 $ 19,844,292
- --------------------------------------------------------------
REPURCHASE AGREEMENT(d)-4.63%
Goldman, Sachs & Co., 4.40%,
01/04/99(e) (Cost $35,047,833) 35,047,833 35,047,833
- --------------------------------------------------------------
TOTAL INVESTMENTS-98.85% 747,947,949
- --------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-1.15% 8,698,821
- --------------------------------------------------------------
NET ASSETS-100.00% $756,646,770
==============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) U.S. Treasury bills are traded on 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 is at least 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 12/31/98 with a maturing value of
$700,342,222. Collateralized by $646,494,000 U.S. Government obligations, 0%
to 11.75% due 02/15/99 to 04/15/28 with an aggregate market value at
12/31/98 of $714,694,897.
Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Sub. - Subordinated
See Notes to Financial Statements.
FS-95
<PAGE> 347
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$481,973,157) $747,947,949
- ---------------------------------------------------------
Receivables for:
Investments sold 10,294,721
- ---------------------------------------------------------
Fund shares sold 6,395,594
- ---------------------------------------------------------
Dividends and interest 216,101
- ---------------------------------------------------------
Variation margin 57,800
- ---------------------------------------------------------
Investment for deferred compensation plan 67,342
- ---------------------------------------------------------
Other assets 59,351
- ---------------------------------------------------------
Total assets 765,038,858
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 5,243,174
- ---------------------------------------------------------
Fund shares reacquired 1,859,671
- ---------------------------------------------------------
Deferred compensation plan 67,342
- ---------------------------------------------------------
Accrued advisory fees 393,919
- ---------------------------------------------------------
Accrued distribution fees 649,458
- ---------------------------------------------------------
Accrued transfer agent fees 87,005
- ---------------------------------------------------------
Accrued operating expenses 91,519
- ---------------------------------------------------------
Total liabilities 8,392,088
- ---------------------------------------------------------
Net assets applicable to shares outstanding $756,646,770
- ---------------------------------------------------------
NET ASSETS:
Class A $320,143,475
=========================================================
Class B $428,001,840
=========================================================
Class C $ 8,501,455
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 16,543,648
=========================================================
Class B 23,350,643
=========================================================
Class C 464,149
=========================================================
Class A:
Net asset value and redemption price per
share $ 19.35
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $19.35
divided by 94.50%) $ 20.48
=========================================================
Class B:
Net asset value and offering price per
share $ 18.33
=========================================================
Class C:
Net asset value and offering price per
share $ 18.32
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $14,769 foreign
withholding tax) $ 2,559,950
- ---------------------------------------------------------
Interest 3,261,372
- ---------------------------------------------------------
Total investment income 5,821,322
- ---------------------------------------------------------
EXPENSES:
Advisory fees 4,362,261
- ---------------------------------------------------------
Administrative services fees 78,567
- ---------------------------------------------------------
Custodian fees 65,321
- ---------------------------------------------------------
Transfer agent fees-Class A 383,508
- ---------------------------------------------------------
Transfer agent fees-Class B 774,106
- ---------------------------------------------------------
Transfer agent fees-Class C 10,945
- ---------------------------------------------------------
Trustees' fees 12,591
- ---------------------------------------------------------
Distribution fees-Class A 701,677
- ---------------------------------------------------------
Distribution fees-Class B 3,710,226
- ---------------------------------------------------------
Distribution fees-Class C 42,675
- ---------------------------------------------------------
Other 225,296
- ---------------------------------------------------------
Total expenses 10,367,173
- ---------------------------------------------------------
Less: Expenses paid indirectly (12,167)
- ---------------------------------------------------------
Net expenses 10,355,006
- ---------------------------------------------------------
Net investment income (loss) (4,533,684)
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FUTURES AND OPTION
CONTRACTS:
Net realized gain (loss) from:
Investment securities 10,012,133
- ---------------------------------------------------------
Futures contracts 7,613,270
- ---------------------------------------------------------
Option contracts (9,052)
- ---------------------------------------------------------
17,616,351
- ---------------------------------------------------------
Net unrealized appreciation of:
Investment securities 147,338,375
- ---------------------------------------------------------
Foreign currencies 26
- ---------------------------------------------------------
Futures contracts 1,416,600
- ---------------------------------------------------------
148,755,001
- ---------------------------------------------------------
Net gain from investment securities,
foreign currencies, futures and
option contracts 166,371,352
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $161,837,668
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-96
<PAGE> 348
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (4,533,684) $ (2,562,900)
- -------------------------------------------------------------------------------------------
Net realized gain from investment securities, futures and
option contracts 17,616,351 68,573,981
- -------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currencies and futures contracts 148,755,001 29,604,019
- -------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 161,837,668 95,615,100
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A -- (115,803)
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (8,360,767) (28,869,623)
- -------------------------------------------------------------------------------------------
Class B (11,756,791) (40,478,955)
- -------------------------------------------------------------------------------------------
Class C (234,011) (105,058)
- -------------------------------------------------------------------------------------------
Share transactions-net:
Class A (7,618,676) 23,238,247
- -------------------------------------------------------------------------------------------
Class B (6,948,989) 64,250,779
- -------------------------------------------------------------------------------------------
Class C 6,185,419 1,318,691
- -------------------------------------------------------------------------------------------
Net increase in net assets 133,103,853 114,853,378
- -------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 623,542,917 508,689,539
- -------------------------------------------------------------------------------------------
End of period $756,646,770 $623,542,917
===========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $494,529,257 $499,110,813
- -------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (71,168) (34,200)
- -------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, futures and option contracts (4,913,364) 6,119,260
- -------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and futures contracts 267,102,045 118,347,044
- -------------------------------------------------------------------------------------------
$756,646,770 $623,542,917
===========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Select 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: Class A shares,
Class B shares and Class C 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. 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-97
<PAGE> 349
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. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
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.
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 and paid annually. On
December 31, 1998 additional paid-in capital was increased by $3,800,690,
undistributed net investment income was increased by $4,496,716 and
undistributed net realized gains was decreased by $8,297,406 as a result of
equalization credits and net operating loss reclassifications 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. 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
FS-98
<PAGE> 350
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 25% of the net assets of the Fund.
G. Put Options -- The Fund may purchase put options. By purchasing a put
option, the Fund obtains the right (but not the obligation) to sell the
option's underlying instrument at a fixed strike price. In return for this
right, the Fund pays an option premium. The option's underlying instrument
may be a security or a futures contract. Put options may be used by the
Fund to hedge securities it owns by locking in a minimum price at which the
Fund can sell. If security prices fall, the put option could be exercised
to offset all or a portion of the Fund's resulting losses. At the same
time, because the maximum the Fund has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Fund to
profit from an increase in the value of the securities hedged. The Fund
will not purchase put options where the aggregate value of the securities
underlying all such options exceeds 25% of the value of its net assets.
H. 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.
I. 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.
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,
1998, AIM was reimbursed $78,567 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,
1998, AFS was paid $666,866 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 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 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 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 year ended December 31, 1998, the Class A, Class B and Class
C shares paid AIM Distributors $701,677, $3,710,226 and $42,675, respectively,
as compensation under the Plans.
AIM Distributors received commissions of $136,229 from sales of the Class A
shares of the Fund during the year ended December 31, 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 year ended December 31, 1998,
AIM Distributors received $105,783 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, 1998, the Fund paid legal fees of $4,830
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, 1998, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $7,306 and $4,861, respectively, under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $12,167 during the year ended December 31, 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.
FS-99
<PAGE> 351
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) $1,000,000,000 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 May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended December 31, 1998, 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, 1998 was
$400,007,825 and $403,676,609, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of December 31, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $273,731,588
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (8,010,915)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $265,720,673
=========================================================
</TABLE>
Cost of investments for tax purposes is $482,227,276.
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1998 and 1997
were as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 31,005,519 $ 526,456,274 14,466,946 $ 234,213,923
- --------------------------------------------------------------------------------
Class B 5,430,217 86,111,821 7,100,475 113,053,525
- --------------------------------------------------------------------------------
Class C* 569,912 9,220,769 104,003 1,760,456
- --------------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 444,090 7,953,651 1,802,991 27,333,257
- --------------------------------------------------------------------------------
Class B 649,261 11,017,972 2,600,309 37,704,454
- --------------------------------------------------------------------------------
Class C* 13,022 220,846 6,820 98,891
- --------------------------------------------------------------------------------
Reacquired:
Class A (31,896,692) (542,028,601) (14,695,429) (238,308,933)
- --------------------------------------------------------------------------------
Class B (6,508,718) (104,078,782) (5,524,470) (86,507,200)
- --------------------------------------------------------------------------------
Class C* (198,182) (3,256,196) (31,426) (540,656)
- --------------------------------------------------------------------------------
(491,571) $ (8,382,246) 5,830,219 $ 88,807,717
================================================================================
</TABLE>
* Class C shares commenced sales on August 4, 1997.
NOTE 8-OPEN FUTURES CONTRACTS
On December 31, 1998, $1,020,000 principal amount of U.S. Treasury obligations
were pledged as collateral to cover margin requirements for open futures
contracts. Open futures contracts were as follows:
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
CONTRACTS CONTRACTS MONTH/COMMITMENT APPRECIATION
--------- --------- ---------------- ------------
<S> <C> <C> <C>
S&P 500 Index 68 March 99/Buy $1,127,100
</TABLE>
NOTE 9-CALL OPTION CONTRACTS WRITTEN
Transactions in call option contracts written during the year ended December 31,
1998 are summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ----------
<S> <C> <C>
Beginning of period -- $ --
- ------------------------------------------------------------
Written 2,056 1,225,702
- ------------------------------------------------------------
Closed (478) (188,956)
- ------------------------------------------------------------
Exercised (1,329) (971,846)
- ------------------------------------------------------------
Expired (249) (64,900)
- ------------------------------------------------------------
End of period -- $ --
- ------------------------------------------------------------
</TABLE>
FS-100
<PAGE> 352
NOTE 10-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and a share of
Class B outstanding during each of the years in the five-year period ended
December 31, 1998; and for a share of Class C outstanding during the year ended
December 31, 1998 and the period August 4, 1997 (date sales commenced) through
December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 15.67 $ 14.78 $ 13.05 $ 10.32 $ 11.32
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss) (0.04) 0.01(a) 0.07 0.02(a) --
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 4.24 2.82 2.34 3.50 (0.57)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations 4.20 2.83 2.41 3.52 (0.57)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income -- (0.01) -- -- --
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains (0.52) (1.93) (0.68) (0.79) (0.43)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (0.52) (1.94) (0.68) (0.79) (0.43)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 19.35 $ 15.67 $ 14.78 $ 13.05 $ 10.32
============================================================ ======== ======== ======== ======== ========
Total return(b) 27.09% 19.54% 18.61% 34.31% (4.99)%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $320,143 $266,168 $227,882 $168,217 $123,271
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.11%(c) 1.13%() 1.18% 1.28% 1.22%
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets (0.22)%(c) 0.04%() 0.46% 0.20% 0.02%
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 68% 110% 97% 87% 201%
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) Ratios are based on average net assets of $280,671,673.
<TABLE>
<CAPTION>
CLASS B CLASS C
---------------------------------------------------------- --------------------
1998 1997 1996 1995 1994 1998 1997
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.98 $ 14.32 $ 12.77 $ 10.21 $ 11.31 $ 14.98 $ 17.65
- ----------------------------------------- -------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss) (0.17) (0.13)(a) (0.05) (0.08)(a) (0.06) (0.17)(a) (0.04)(a)
- ----------------------------------------- -------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities (both
realized and unrealized) 4.04 2.72 2.28 3.43 (0.61) 4.03 (0.70)
- ----------------------------------------- -------- -------- -------- -------- -------- -------- --------
Total from investment operations 3.87 2.59 2.23 3.35 (0.67) 3.86 (0.74)
- ----------------------------------------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Distributions from net realized gains (0.52) (1.93) (0.68) (0.79) (0.43) (0.52) (1.93)
- ----------------------------------------- -------- -------- -------- -------- -------- -------- --------
Total distributions (0.52) (1.93) (0.68) (0.79) (0.43) (0.52) (1.93)
- ----------------------------------------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 18.33 $ 14.98 $ 14.32 $ 12.77 $ 10.21 $ 18.32 $ 14.98
========================================= ======== ======== ======== ======== ======== ======== ========
Total return(b) 26.13% 18.50% 17.60% 33.00% (5.88)% 26.07% (3.86)%
========================================= ======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $428,002 $356,186 $280,807 $138,034 $ 38,448 $ 8,501 $ 1,189
========================================= ======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.93%(c) 1.99% 2.03% 2.13% 2.18% 1.93%(c) 1.95%(d)
========================================= ======== ======== ======== ======== ======== ======== ========
Ratio of net investment income (loss) to
average net assets (1.04)%(c) (0.82)% (0.39)% (0.65)% (0.94)% (1.04)%(c) (0.77)%(d)
========================================= ======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 68% 110% 97% 87% 201% 68% 110%
========================================= ======== ======== ======== ======== ======== ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average net assets of $371,022,634 and $4,267,476 for
Class B and Class C, respectively.
(d) Annualized.
FS-101
<PAGE> 353
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, 1998, 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 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. Our procedures included confirmation of
securities owned as of December 31, 1998, 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, 1998, 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 five-year period then ended, in conformity
with generally accepted accounting principles.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
February 5, 1999
FS-102
<PAGE> 354
SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-86.11%
AIRLINES-0.39%
Continental Airlines, Inc.(a) 2,172,100 $ 72,765,350
- ---------------------------------------------------------------
AUTOMOBILES-0.21%
Ford Motor Co. 675,000 39,614,062
- ---------------------------------------------------------------
BANKS (MONEY CENTER)-1.54%
Chase Manhattan Corp. (The) 4,250,000 289,265,625
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-4.66%
Comcast Corp.-Class A 1,600,000 93,900,000
- ---------------------------------------------------------------
Cox Communications, Inc.-Class
A(a) 6,083,700 420,535,763
- ---------------------------------------------------------------
MediaOne Group Inc.(a) 7,600,000 357,200,000
- ---------------------------------------------------------------
871,635,763
- ---------------------------------------------------------------
BUILDING MATERIALS-0.49%
Masco Corp. 3,200,000 92,000,000
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.09%
Comverse Technology, Inc.(a) 1,939,500 137,704,500
- ---------------------------------------------------------------
Lucent Technologies, Inc. 600,000 66,000,000
- ---------------------------------------------------------------
203,704,500
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-3.11%
Dell Computer Corp.(a) 3,750,000 274,453,125
- ---------------------------------------------------------------
International Business Machines
Corp. 600,000 110,850,000
- ---------------------------------------------------------------
Sun Microsystems, Inc.(a) 2,300,000 196,937,500
- ---------------------------------------------------------------
582,240,625
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-1.64%
Cisco Systems, Inc.(a) 3,300,000 306,281,250
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.95%
EMC Corp.(a) 1,500,000 127,500,000
- ---------------------------------------------------------------
Lexmark International Group,
Inc.(a) 500,000 50,250,000
- ---------------------------------------------------------------
177,750,000
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-6.84%
BMC Software, Inc.(a) 5,500,000 245,093,750
- ---------------------------------------------------------------
Computer Sciences Corp.(a) 2,900,000 186,868,750
- ---------------------------------------------------------------
Microsoft Corp.(a) 2,850,000 395,259,375
- ---------------------------------------------------------------
Sterling Commerce, Inc.(a) 2,400,000 108,000,000
- ---------------------------------------------------------------
Unisys Corp.(a) 10,000,000 344,375,000
- ---------------------------------------------------------------
1,279,596,875
- ---------------------------------------------------------------
CONSUMER FINANCE-1.02%
MBNA Corp. 1,800,000 44,887,500
- ---------------------------------------------------------------
Providian Financial Corp. 1,950,000 146,250,000
- ---------------------------------------------------------------
191,137,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DISTRIBUTORS (FOOD & HEALTH)-0.07%
Cardinal Health, Inc. 167,100 $ 12,678,712
- ---------------------------------------------------------------
ELECTRIC COMPANIES-0.13%
Wisconsin Energy Corp. 791,100 24,870,206
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.75%
General Electric Co. 3,200,000 326,600,000
- ---------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-0.12%
Waters Corp.(a) 250,000 21,812,500
- ---------------------------------------------------------------
ENTERTAINMENT-3.08%
Time Warner Inc. 9,300,000 577,181,250
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-6.73%
Ambac Financial Group, Inc. 1,100,000 66,206,250
- ---------------------------------------------------------------
American Express Co. 1,500,000 153,375,000
- ---------------------------------------------------------------
American General Corp. 1,300,000 101,400,000
- ---------------------------------------------------------------
Associates First Capital
Corp.-Class A 5,600,000 237,300,000
- ---------------------------------------------------------------
Citigroup Inc. 1,400,000 69,300,000
- ---------------------------------------------------------------
Fannie Mae 3,700,000 273,800,000
- ---------------------------------------------------------------
Freddie Mac 4,954,200 319,236,263
- ---------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 550,000 39,050,000
- ---------------------------------------------------------------
1,259,667,513
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-1.78%
Bristol-Myers Squibb Co. 2,150,000 287,696,875
- ---------------------------------------------------------------
Warner-Lambert Co. 600,000 45,112,500
- ---------------------------------------------------------------
332,809,375
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-0.34%
Watson Pharmaceuticals, Inc.(a) 1,000,000 62,875,000
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)-4.01%
Merck & Co., Inc. 1,100,000 162,456,250
- ---------------------------------------------------------------
Pharmacia & Upjohn, Inc. 10,373,400 587,393,775
- ---------------------------------------------------------------
749,850,025
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-4.94%
Allegiance Corp. 1,200,000 55,950,000
- ---------------------------------------------------------------
Guidant Corp. 6,900,000 760,725,000
- ---------------------------------------------------------------
Medtronic, Inc. 1,450,000 107,662,500
- ---------------------------------------------------------------
924,337,500
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.53%
Alza Corp.(a) 1,900,000 99,275,000
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-2.08%
Colgate-Palmolive Co. 4,200,000 390,075,000
- ---------------------------------------------------------------
</TABLE>
FS-103
<PAGE> 355
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (LIFE/HEALTH)-0.33%
Provident Companies, Inc. 1,500,000 $ 62,250,000
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-4.32%
Ace, Ltd. 2,578,600 88,800,538
- ---------------------------------------------------------------
American International Group,
Inc. 6,500,000 628,062,500
- ---------------------------------------------------------------
Hartford Financial Services
Group Inc. (The) 1,663,800 91,301,025
- ---------------------------------------------------------------
808,164,063
- ---------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-2.09%
Allstate Corp. (The) 2,750,000 106,218,750
- ---------------------------------------------------------------
EXEL Ltd.-Class A 2,225,000 166,875,000
- ---------------------------------------------------------------
Progressive Corp. 700,000 118,562,500
- ---------------------------------------------------------------
391,656,250
- ---------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.21%
Merrill Lynch & Co., Inc.(b) 599,500 40,016,625
- ---------------------------------------------------------------
LODGING-HOTELS-2.28%
Carnival Corp. 6,650,000 319,200,000
- ---------------------------------------------------------------
Royal Caribbean Cruises Ltd. 2,900,000 107,300,000
- ---------------------------------------------------------------
426,500,000
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-1.61%
Tyco International Ltd. 4,000,000 301,750,000
- ---------------------------------------------------------------
NATURAL GAS-1.01%
El Paso Energy Corp. 1,300,000 45,256,250
- ---------------------------------------------------------------
Enron Corp. 1,700,000 97,006,250
- ---------------------------------------------------------------
Williams Companies, Inc. (The) 1,500,000 46,781,250
- ---------------------------------------------------------------
189,043,750
- ---------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-0.24%
Amoco Corp. 750,000 45,281,250
- ---------------------------------------------------------------
PERSONAL CARE-1.08%
Avon Products, Inc. 4,550,000 201,337,500
- ---------------------------------------------------------------
PHOTOGRAPHY/IMAGING-1.70%
Xerox Corp. 2,700,000 318,600,000
- ---------------------------------------------------------------
PUBLISHING-0.31%
Dow Jones & Co., Inc. 1,200,000 57,750,000
- ---------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.26%
New York Times Co.-Class A
(The) 1,400,000 48,562,500
- ---------------------------------------------------------------
RAILROADS-0.26%
Kansas City Southern
Industries, Inc. 1,000,000 49,187,500
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.82%
Lowe's Companies, Inc. 3,000,000 153,562,500
- ---------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.21%
Federated Department Stores,
Inc.(a) 900,000 39,206,250
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (FOOD CHAINS)-2.11%
Albertson's, Inc. 500,000 $ 31,843,750
- ---------------------------------------------------------------
Kroger Co.(a) 3,079,600 186,315,800
- ---------------------------------------------------------------
Safeway, Inc.(a) 2,905,700 177,066,094
- ---------------------------------------------------------------
395,225,644
- ---------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-5.15%
Costco Companies, Inc.(a) 3,100,000 223,781,250
- ---------------------------------------------------------------
Dayton Hudson Corp. 6,600,000 358,050,000
- ---------------------------------------------------------------
Wal-Mart Stores, Inc. 4,700,000 382,756,250
- ---------------------------------------------------------------
964,587,500
- ---------------------------------------------------------------
SERVICES (ADVERTISING & MARKETING)-1.60%
Omnicom Group, Inc. 5,156,000 299,048,000
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.36%
Stewart Enterprises, Inc.-Class
A 3,000,000 66,750,000
- ---------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-0.64%
SunGard Data Systems Inc.(a) 3,023,600 119,999,125
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.37%
Ceridian Corp.(a) 400,000 27,925,000
- ---------------------------------------------------------------
Equifax, Inc. 1,200,000 41,025,000
- ---------------------------------------------------------------
68,950,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-1.60%
AirTouch Communications,
Inc.(a) 4,150,000 299,318,750
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-5.74%
MCI WorldCom, Inc.(a) 14,972,543 1,074,279,961
- ---------------------------------------------------------------
TELEPHONE-1.35%
BellSouth Corp. 2,900,000 144,637,500
- ---------------------------------------------------------------
SBC Communications, Inc. 2,000,000 107,250,000
- ---------------------------------------------------------------
251,887,500
- ---------------------------------------------------------------
TOBACCO-1.07%
Philip Morris Companies, Inc. 3,750,000 200,625,000
- ---------------------------------------------------------------
WASTE MANAGEMENT-1.89%
Waste Management, Inc. 7,599,998 354,349,907
- ---------------------------------------------------------------
Total Domestic Common
Stocks (Cost
$10,797,450,533) 16,115,913,206
- ---------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-4.68%
CANADA-0.40%
Royal Bank of Canada
(Banks-Major Regional) 1,500,000 75,049,020
- ---------------------------------------------------------------
FINLAND-3.55%
Nokia Oyj A.B.-Class A
(Communications Equipment) 23,000 2,797,998
- ---------------------------------------------------------------
</TABLE>
FS-104
<PAGE> 356
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINLAND-(CONTINUED)
Nokia Oyj A.B.-Class A-ADR
(Communications Equipment) 5,500,000 $ 662,406,250
- ---------------------------------------------------------------
665,204,248
- ---------------------------------------------------------------
SWEDEN-0.26%
Telefonaktiebolaget LM
Ericsson-ADR (Communications
Equipment) 2,000,000 47,875,000
- ---------------------------------------------------------------
UNITED KINGDOM-0.47%
British Petroleum Co. PLC-ADR
(Oil-International
Integrated) 500,000 44,812,500
- ---------------------------------------------------------------
WPP Group PLC
(Services-Advertising/
Marketing) 7,000,000 42,548,787
- ---------------------------------------------------------------
87,361,287
- ---------------------------------------------------------------
Total Foreign Stocks &
Other Equity Interests
(Cost $545,076,752) 875,489,555
- ---------------------------------------------------------------
MASTER NOTE AGREEMENT-0.21%
Merrill Lynch Mortgage Capital,
Inc., 5.78%, 08/16/99(c)
(Cost $40,000,000) $ 40,000,000 $ 40,000,000
- ---------------------------------------------------------------
TIME DEPOSIT-2.05%
SunTrust Bank of Atlanta,
4.00%, 01/04/99 (Cost
$382,984,564) 382,984,564 382,984,564
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENTS(d)-7.18%
Bear Stearns & Co., Inc.,
4.85%(e) $292,000,000 $ 292,000,000
- ---------------------------------------------------------------
Credit Suisse First Boston
Corp., 5.00%, 01/04/99(f) 105,000,000 105,000,000
- ---------------------------------------------------------------
Dean Witter Reynolds, Inc.,
5.00%, 01/04/99(g) 255,000,000 255,000,000
- ---------------------------------------------------------------
Deutsche Morgan Grenfel Inc.,
5.00%(h) 200,000,000 200,000,000
- ---------------------------------------------------------------
First Chicago Capital Markets,
Inc., 5.04%, 01/04/99(i) 5,949,388 5,949,388
- ---------------------------------------------------------------
Goldman, Sachs & Co., 5.00%,
01/04/99(j) 400,000,000 400,000,000
- ---------------------------------------------------------------
Greenwich Capital Markets,
Inc., 4.10%, 01/04/99(k) 40,000,000 40,000,000
- ---------------------------------------------------------------
SBC Warburg Dillon Read Inc.,
4.75%, 01/04/99(l) 45,964,800 45,964,800
- ---------------------------------------------------------------
Total Repurchase Agreements
(Cost $1,343,914,188) 1,343,914,188
- ---------------------------------------------------------------
TOTAL INVESTMENTS-100.23% 18,758,301,513
- ---------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS-(0.23)% (43,045,043)
- ---------------------------------------------------------------
NET ASSETS-100.00% $18,715,256,470
================================================================
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 8.
(c) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon two days' notice to the issuer. Interest rates on
master notes are redetermined periodically. Rate shown is the rate in effect
on 12/31/98.
(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 is at least 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) Open repurchase agreement entered into 10/05/98. Either party may terminate
the agreement upon demand. Interest rates, par and collateral are
redetermined daily. Collateralized by $354,763,000 U.S. Government
obligations, 0% to 8.65% due 01/15/99 to 06/11/18 with an aggregate market
value at 12/31/98 of $360,262,932.
(f) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$150,083,333. Collateralized by $140,222,000 U.S. Government obligations,
5.50% to 8.125% due 02/02/01 to 08/15/28 with an aggregate market value at
12/31/98 of $155,433,051.
(g) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$300,166,667. Collateralized by a $304,116,000 U.S. Government obligation,
0% due 11/04/03 with a market value at 12/31/98 of $306,000,953.
(h) Open repurchase agreement entered into 10/02/97. Either party may terminate
the agreement upon demand. Interest rates, par and collateral are
redetermined daily. Collateralized by $373,807,171 U.S. Government
obligations, 6.132% to 7.077% due 09/01/33 to 07/01/34 with an aggregate
market value at 12/31/98 of $204,000,000.
(i) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$485,271,600. Collateralized by $500,177,000 U.S. Government obligations, 0%
to 5.86% due 02/09/99 to 04/28/03 with an aggregate market value at 12/31/98
of $494,702,672.
(j) Repurchase agreement entered into 12/31/98 with a maturing value of
$400,222,222. Collateralized by $902,636,386 U.S. Government obligations,
5.886% to 7.889% due 07/01/19 to 02/01/38 with an aggregate market value at
12/31/98 of $408,000,000.
(k) Repurchase agreement entered into 12/31/98 with a maturing value of
$40,018,222. Collateralized by $41,294,406 U.S. Government obligations,
5.50% to 9.50% due 12/01/08 to 12/01/28 with an aggregate market value at
12/31/98 of $40,803,888.
(l) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$1,000,527,778. Collateralized by $2,207,068,000 U.S. Government
obligations, 0% to 6.75% due 06/30/99 to 11/15/21 with an aggregate market
value at 12/31/98 of $1,020,001,079.
Abbreviation:
ADR - American Depositary Receipt
CAD - Canadian Dollar
FIM - Finnish Marka
GBP - British Pound Sterling
SEK - Swedish Krona
See Notes to Financial Statements.
FS-105
<PAGE> 357
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$13,109,426,037) $18,758,301,513
- ----------------------------------------------------------
Foreign currencies, at value (cost
$6,184) 6,108
- ----------------------------------------------------------
Receivables for:
Investments sold 17,364,690
- ----------------------------------------------------------
Fund shares sold 34,930,383
- ----------------------------------------------------------
Dividends and interest 7,931,517
- ----------------------------------------------------------
Forward contracts 5,466,427
- ----------------------------------------------------------
Investment for deferred compensation plan 134,758
- ----------------------------------------------------------
Other assets 343,720
- ----------------------------------------------------------
Total assets 18,824,479,116
- ----------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 34,538,469
- ----------------------------------------------------------
Fund shares reacquired 45,628,894
- ----------------------------------------------------------
Deferred compensation plan 134,758
- ----------------------------------------------------------
Forward contracts 923,264
- ----------------------------------------------------------
Options written (Premiums received
$1,254,474) 1,141,844
- ----------------------------------------------------------
Accrued advisory fees 9,079,319
- ----------------------------------------------------------
Accrued distribution fees 15,591,465
- ----------------------------------------------------------
Accrued transfer agent fees 929,692
- ----------------------------------------------------------
Accrued trustees' fees 22,091
- ----------------------------------------------------------
Accrued operating expenses 1,232,850
- ----------------------------------------------------------
Total liabilities 109,222,646
- ----------------------------------------------------------
Net assets applicable to shares
outstanding $18,715,256,470
- ----------------------------------------------------------
NET ASSETS:
Class A $ 8,823,093,519
==========================================================
Class B $ 9,680,068,386
==========================================================
Class C $ 212,094,565
==========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 219,528,926
==========================================================
Class B 246,662,868
==========================================================
Class C 5,402,874
==========================================================
Class A:
Net asset value and redemption price
per share $ 40.19
- ----------------------------------------------------------
Offering price per share:
(Net asset value of $40.19 divided
by 94.50%) $ 42.53
==========================================================
Class B:
Net asset value and offering price per
share $ 39.24
==========================================================
Class C:
Net asset value and offering price per
share $ 39.26
==========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $3,464,586 foreign
withholding tax) $ 126,900,270
- ----------------------------------------------------------
Interest 71,253,935
- ----------------------------------------------------------
Total investment income 198,154,205
- ----------------------------------------------------------
EXPENSES:
Advisory fees 98,360,939
- ----------------------------------------------------------
Administrative services fees 323,939
- ----------------------------------------------------------
Custodian fees 918,751
- ----------------------------------------------------------
Distribution fees -- Class A 19,005,948
- ----------------------------------------------------------
Distribution fees -- Class B 79,819,281
- ----------------------------------------------------------
Distribution fees -- Class C 1,114,428
- ----------------------------------------------------------
Trustees' fees 130,394
- ----------------------------------------------------------
Transfer agent fees -- Class A 9,249,742
- ----------------------------------------------------------
Transfer agent fees -- Class B 13,852,532
- ----------------------------------------------------------
Transfer agent fees -- Class C 248,230
- ----------------------------------------------------------
Other 2,845,132
- ----------------------------------------------------------
Total expenses 225,869,316
- ----------------------------------------------------------
Less: Expenses paid indirectly (246,587)
- ----------------------------------------------------------
Fees waived by advisor (3,423,939)
- ----------------------------------------------------------
Net expenses 222,198,790
- ----------------------------------------------------------
Net investment income (loss) (24,044,585)
- ----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FUTURES, FORWARD AND OPTION
CONTRACTS:
Net realized gain (loss) from:
Investment securities 1,239,384,004
- ----------------------------------------------------------
Foreign currencies 447,068
- ----------------------------------------------------------
Forward contracts (36,087,505)
- ----------------------------------------------------------
Futures contracts 1,526,410
- ----------------------------------------------------------
Option contracts written (7,886,317)
- ----------------------------------------------------------
1,197,383,660
- ----------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities 3,329,000,942
- ----------------------------------------------------------
Foreign currencies 206,713
- ----------------------------------------------------------
Forward contracts 4,543,163
- ----------------------------------------------------------
Option contracts written (4,845,758)
- ----------------------------------------------------------
3,328,905,060
- ----------------------------------------------------------
Net gain from investment securities,
foreign currencies, futures, forward
and option contracts 4,526,288,720
- ----------------------------------------------------------
Net increase in net assets resulting from
operations $4,502,244,135
==========================================================
</TABLE>
See Notes to Financial Statements.
FS-106
<PAGE> 358
STATEMENT OF CHANGES IN NET ASSETS
for the years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (24,044,585) $ 20,314,716
- --------------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures, forward and option contracts 1,197,383,660 1,450,271,721
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currencies, forward contracts and option
contracts 3,328,905,060 961,987,307
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 4,502,244,135 2,432,573,744
- --------------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (18,008,475) (7,048,371)
- --------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (539,610,813) (677,329,447)
- --------------------------------------------------------------------------------------------------
Class B (602,045,865) (697,438,107)
- --------------------------------------------------------------------------------------------------
Class C (12,727,398) (2,766,027)
- --------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 439,374,153 1,076,707,236
- --------------------------------------------------------------------------------------------------
Class B 1,179,878,726 1,473,648,468
- --------------------------------------------------------------------------------------------------
Class C 156,203,496 35,606,705
- --------------------------------------------------------------------------------------------------
Net increase in net assets 5,105,307,959 3,633,954,201
- --------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 13,609,948,511 9,975,994,310
- --------------------------------------------------------------------------------------------------
End of period $18,715,256,470 $13,609,948,511
==================================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $12,965,142,636 $11,116,186,261
- --------------------------------------------------------------------------------------------------
Undistributed net investment income (391,429) 17,752,405
- --------------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign
currencies, futures, forward and option contracts 96,971,065 151,380,707
- --------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, forward contracts and option contracts 5,653,534,198 2,324,629,138
- --------------------------------------------------------------------------------------------------
$18,715,256,470 $13,609,948,511
- --------------------------------------------------------------------------------------------------
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
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: Class A shares, Class B
shares and Class C shares. 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
FS-107
<PAGE> 359
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. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
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 forward currency contracts at
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
CONTRACT TO UNREALIZED
SETTLEMENT ------------------------- APPRECIATION
DATE DELIVER RECEIVE VALUE (DEPRECIATION)
---------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
2/10/99 CAD 88,000,000 57,212,826 57,517,060 (304,234)
2/26/99 CAD 1,000,000 645,307 653,677 (8,370)
1/19/99 FIM 519,000,000 104,150,617 101,937,707 2,212,910
1/20/99 FIM 369,000,000 72,053,961 72,479,805 (425,844)
1/20/99 FIM 451,000,000 88,915,869 88,586,428 329,441
1/21/99 FIM 540,000,000 107,593,581 106,073,660 1,519,921
1/22/99 FIM 574,000,000 113,663,523 112,758,382 905,141
1/19/99 GBP 5,000,000 8,476,100 8,295,020 181,080
1/20/99 GBP 17,000,000 28,407,000 28,200,478 206,522
2/16/99 GBP 12,500,000 20,670,000 20,689,032 (19,032)
2/18/99 GBP 5,500,000 9,193,085 9,101,747 91,338
1/19/99 SEK 10,000,000 1,252,678 1,232,604 20,074
2/16/99 SEK 276,000,000 33,895,829 34,061,613 (165,784)
----------- ----------- ---------
646,130,376 641,587,213 4,543,163
</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 and distributions to
shareholders are recorded on the ex-dividend date. Such dividends are paid
annually. On December 31, 1998 additional paid-in capital was increased by
$73,500,000, undistributed net investment income was increased by
$23,909,226 and undistributed net realized gains was decreased by
$97,409,226 as a result of differing book/tax treatment of foreign currency
transactions and equalization credits 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. 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 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
FS-108
<PAGE> 360
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 25% of the net
assets of the Fund.
G. Put Options -- The Fund may purchase put options. By purchasing a put
option, the Fund obtains the right (but not the obligation) to sell the
option's underlying instrument at a fixed strike price. In return for this
right, the Fund pays an option premium. The option's underlying instrument
may be a security or a futures contract. Put options may be used by the
Fund to hedge securities it owns by locking in a minimum price at which the
Fund can sell. If security prices fall, the put option could be exercised
to offset all or a portion of the Fund's resulting losses. At the same
time, because the maximum the Fund has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Fund to
profit from an increase in the value of the securities hedged. The Fund
will not purchase put options where the aggregate value of the securities
underlying all such options exceeds 25% of the value of its net assets.
H. 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.
I. 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, 1998, AIM
voluntarily waived advisory fees in the amount of $3,423,939.
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,
1998, AIM was reimbursed $323,939 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, 1998, AFS was paid
$14,002,958 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 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 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 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
FS-109
<PAGE> 361
respective classes. During the year ended December 31, 1998, the Class A, Class
B and Class C shares paid AIM Distributors $19,005,948, $79,819,281 and
$1,114,428, respectively, as compensation under the Plans.
AIM Distributors received commissions of $4,259,204 from sales of the Class
A shares of the Fund during the year ended December 31, 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 year ended December 31,
1998, AIM Distributors received $1,498,642 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, 1998, the Fund paid legal fees of
$32,680 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, 1998, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $174,089 and $72,498, respectively under expense offset arrangements.
The effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $246,587 during the year ended December 31, 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.
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) $1,000,000,000 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 May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended December 31, 1998, 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.
FS-110
<PAGE> 362
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, 1998 was
$17,711,356,448 and $16,096,656,971, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $5,657,577,843
- ----------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (71,716,453)
- ----------------------------------------------------------------------------
Net unrealized appreciation of investment securities $5,585,861,390
============================================================================
</TABLE>
Cost of investments for tax purposes is $13,172,440,123.
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1998 and 1997
were as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 61,939,114 $ 2,232,305,973 56,549,515 $ 1,862,338,902
- ---------------------------------------------------------------------------------------------------------------------------
Class B 44,964,399 1,587,327,551 44,494,521 1,452,059,926
- ---------------------------------------------------------------------------------------------------------------------------
Class C* 4,634,085 164,861,278 982,300 34,164,971
- ---------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 13,921,013 529,914,065 20,397,239 655,150,256
- ---------------------------------------------------------------------------------------------------------------------------
Class B 15,274,620 567,695,520 20,756,501 656,098,487
- ---------------------------------------------------------------------------------------------------------------------------
Class C* 327,964 12,197,171 82,603 2,611,962
- ---------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (64,405,244) (2,322,845,885) (43,852,562) (1,440,781,922)
- ---------------------------------------------------------------------------------------------------------------------------
Class B (27,805,340) (975,144,345) (19,618,229) (634,509,945)
- ---------------------------------------------------------------------------------------------------------------------------
Class C* (590,550) (20,854,953) (33,528) (1,170,228)
- ---------------------------------------------------------------------------------------------------------------------------
48,260,061 $ 1,775,456,375 79,758,360 $ 2,585,962,409
===========================================================================================================================
</TABLE>
* Class C shares commenced sales on August 4, 1997.
NOTE 8-CALL OPTION CONTRACTS WRITTEN
Transactions in call option contracts written during the year ended December 31,
1998 are summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ------------
<S> <C> <C>
Beginning of period 43,901 $ 19,083,250
- ---------------------------------------------------------------------------------------
Written 152,389 86,212,411
- ---------------------------------------------------------------------------------------
Closed (57,500) (30,689,449)
- ---------------------------------------------------------------------------------------
Exercised (78,819) (54,836,551)
- ---------------------------------------------------------------------------------------
Expired (56,976) (18,515,187)
- ---------------------------------------------------------------------------------------
End of period 2,995 $ 1,254,474
=======================================================================================
</TABLE>
Open call option contracts written at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
NUMBER DECEMBER 31,
CONTRACT STRIKE OF PREMIUM 1998 UNREALIZED
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE APPRECIATION
----- -------- ------ --------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Merrill Lynch & Co., Inc. Jan. 99 65 2,995 $1,254,474 $ 1,141,844 $ 112,630
=================================================================================================================================
</TABLE>
FS-111
<PAGE> 363
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and a share of
Class B outstanding during each of the years in the five-year period ended
December 31, 1998; and for a share of Class C outstanding during the year ended
December 31, 1998 and the period August 4, 1997 (date sales commenced) through
December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 32.42 $ 29.15 $ 26.81 $ 21.14 $ 20.82
- -------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income 0.09 0.17 0.43(a) 0.14 0.16
- -------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Net gains on securities (both realized and unrealized) 10.38 6.78 3.42 7.21 0.52
- -------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 10.47 6.95 3.85 7.35 0.68
- -------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income (0.09) (0.04) (0.41) (0.09) (0.16)
- -------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Distributions from net realized gains (2.61) (3.64) (1.10) (1.59) (0.20)
- -------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Total distributions (2.70) (3.68) (1.51) (1.68) (0.36)
- -------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 40.19 $ 32.42 $ 29.15 $ 26.81 $ 21.14
======================================================== ========== ========== ========== ========== ==========
Total return(b) 32.76% 23.95% 14.52% 34.85% 3.28%
======================================================== ========== ========== ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $8,823,094 $6,745,253 $5,100,061 $3,408,952 $1,358,725
======================================================== ========== ========== ========== ========== ==========
Ratio of expenses to average net assets(c) 1.00%(d) 1.04% 1.11% 1.12% 0.98%
======================================================== ========== ========== ========== ========== ==========
Ratio of net investment income to average net assets(e) 0.26%(d) 0.57% 1.65% 0.74% 0.92%
======================================================== ========== ========== ========== ========== ==========
Portfolio turnover rate 113% 137% 126% 151% 127%
======================================================== ========== ========== ========== ========== ==========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.02%, 1.06%, 1.13% and 1.13% for 1998-1995, respectively.
(d) Ratios are based on average net assets of $7,602,379,116.
(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 0.24%, 0.55%, 1.63% and 0.73% for 1998-1995,
respectively.
FS-112
<PAGE> 364
NOTE 9-FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------------------------------------------- ------------------------
1998 1997 1996 1995 1994 1998 1997
---------- ---------- ---------- ---------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 31.89 $ 28.92 $ 26.65 $ 21.13 $ 20.82 $ 31.90 $ 35.60
- --------------------------------- ---------- ---------- ---------- ---------- -------- -------- -------
Income from investment
operations:
Net investment income (loss) (0.18) (0.07) 0.20(a) (0.01) -- (0.19)(a) (0.01)
- --------------------------------- ---------- ---------- ---------- ---------- -------- -------- -------
Net gains (losses) on securities
(both realized and unrealized) 10.14 6.68 3.38 7.12 0.51 10.16 (0.05)
- --------------------------------- ---------- ---------- ---------- ---------- -------- -------- -------
Total from investment
operations 9.96 6.61 3.58 7.11 0.51 9.97 (0.06)
- --------------------------------- ---------- ---------- ---------- ---------- -------- -------- -------
Less distributions:
Dividends from net investment
income -- -- (0.21) -- -- -- --
- --------------------------------- ---------- ---------- ---------- ---------- -------- -------- -------
Distributions from net realized
gains (2.61) (3.64) (1.10) (1.59) (0.20) (2.61) (3.64)
- --------------------------------- ---------- ---------- ---------- ---------- -------- -------- -------
Total distributions (2.61) (3.64) (1.31) (1.59) (0.20) (2.61) (3.64)
================================= ========== ========== ========== ========== ======== ======== =======
Net asset value, end of period $ 39.24 $ 31.89 $ 28.92 $ 26.65 $ 21.13 $ 39.26 $ 31.90
================================= ========== ========== ========== ========== ======== ======== =======
Total return(b) 31.70% 22.96% 13.57% 33.73% 2.46% 31.72% (0.08)%
================================= ========== ========== ========== ========== ======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted) 19,680,068 $6,831,796 $4,875,933 $2,860,531 $680,119 $212,095 $32,900
================================= ========== ========== ========== ========== ======== ======== =======
Ratio of expenses to average net
assets(c) 1.80%(d) 1.85% 1.94% 1.94% 1.90% 1.80%(d) 1.84%(f)
================================= ========== ========== ========== ========== ======== ======== =======
Ratio of net investment income
(loss) to average net assets(e) (0.54)%(d) (0.24)% 0.82% (0.08)% 0.00% (0.54)%(d) (0.23)%(f)
================================= ========== ========== ========== ========== ======== ======== =======
Portfolio turnover rate 113% 137% 126% 151% 127% 113% 137%
================================= ========== ========== ========== ========== ======== ======== =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.82%, 1.87%, 1.96% and 1.96% for 1998-1995 for Class B, respectively, and
1.82% and 1.86% (annualized) for 1998-1997, respectively, for Class C.
(d) Ratios are based on average net assets of $7,981,928,079 and $111,442,755
for Class B and Class C, 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 (0.56)%, (0.26)%, 0.81% and (0.09)% for 1998-1995,
respectively, for Class B, and (0.56)% and (0.25)% (annualized) for
1998-1997, respectively, for Class C.
(f) Annualized.
FS-113
<PAGE> 365
PART C
OTHER INFORMATION
Item 23. Exhibits
Exhibit
Number
a(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 Post- Effective Amendment No. 73 on 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 on 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) Amended and Restated Agreement and Declaration of Trust
of the Registrant, dated as of November 5, 1998, was filed
as an Exhibit to Post-Effective Amendment No. 75 on
February 12, 1999, and is hereby incorporated by reference.
- (b) Amendment No. 1, dated December 21, 1998 to Amended and
Restated Agreement and Declaration of Trust of the
Registrant (reclassification of Class A Shares of AIM Money
Market Fund), dated as of November 5, 1998, was filed as an
Exhibit to Post-Effective Amendment No. 75 on February 12,
1999, and is hereby incorporated by reference.
b(1) - (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.
<PAGE> 366
- (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.
(2) - Amended and Restated By-Laws of the Registrant were filed
electronically as an Exhibit to Post-Effective Amendment
No. 72 on April 28, 1997.
(3) - Amended and Restated Bylaws of the Registrant were filed
as an Exhibit to Post-Effective Amendment No. 75 on
February 12, 1999, and is hereby incorporated by reference.
c - Instruments Defining Rights of Security Holders - None.
d(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) - (a) 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.
- (b) 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.
- (c) 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.
(3) - (a) 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) Amendment No. 1 dated as of May 1, 1998, to the Master
Investment Advisory Agreement, dated February 28, 1997
between Registrant and A I M Advisors, Inc., is filed
herewith electronically.
(4) - (a) Foreign Country Selection and Mandatory Securities
Depository Responsibilities Delegation Agreement, dated
September 9, 1998, between Registrant and A I M Advisors,
Inc. was filed as an Exhibit to Post-Effective Amendment
No. 75 on February 12, 1999, and is hereby incorporated by
reference.
- (b) Amendment No. 1, dated September 28, 1998 to Foreign
Country Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement, dated September 9,
1998, between Registrant and A I M Advisors, Inc. was filed
as an Exhibit to Post-Effective Amendment No. 75 on
February 12, 1999, and is hereby incorporated by reference.
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- (c) Amendment No. 2, dated as of December 14, 1998 to
Foreign Country Selection and Mandatory Securities
Depository Responsibilities Delegation Agreement, dated
September 9, 1998, between Registrant and A I M Advisors,
Inc. is filed herewith electronically.
- (d) Amendment No. 3, dated as of December 22, 1998 to
Foreign Country Selection and Mandatory Securities
Depository Responsibilities Delegation Agreement, dated
September 9, 1998, between Registrant and A I M Advisors,
Inc. is filed herewith electronically.
- (e) Amendment No. 4, dated as of January 26, 1999 to
Foreign Country Selection and Mandatory Securities
Depository Responsibilities Delegation Agreement, dated
September 9, 1998, between Registrant and A I M Advisors,
Inc. is filed herewith electronically.
- (f) Amendment No. 5, dated as of March 1, 1999 to Foreign
Country Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement, dated September 9,
1998, between Registrant and A I M Advisors, Inc. is filed
herewith electronically.
- (g) Amendment No. 6, dated as of March 18, 1999 to Foreign
Country Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement, dated September 9,
1998, between Registrant and A I M Advisors, Inc. is filed
herewith electronically.
(5) - 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.
(6) - 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.
e(1) - Master Distribution Agreement, dated August 6, 1993, between
the Registrant (on behalf of its Class A Shares and Class C
Shares) and A I M Distributors, Inc. was filed as an
Exhibit to Post-Effective Amendment No. 67 on October 15,
1993.
(2) - Master Distribution Agreement, dated August 6, 1993, between
the Registrant (on behalf of its Class B Shares) and A I M
Distributors, Inc. was filed as an Exhibit to
Post-Effective Amendment No. 67 on October 15, 1993.
(3) - Master Distribution Agreement, dated October 18, 1993,
between the Registrant (on behalf of its Class A Shares and
Class C Shares) and A I M Distributors, Inc. was filed as
an Exhibit to Post-Effective Amendment No. 68 on April 11,
1994, and was filed electronically as an Exhibit to
Post-Effective Amendment No. 71 on April 26, 1997.
(4) - Master Distribution Agreement, dated October 18, 1993,
between the Registrant (on behalf of its Class B Shares)
and A I M Distributors, Inc. was filed as an Exhibit to
Post-Effective Amendment No. 68 on April 11, 1994.
(5) - Amended and Restated Master Distribution Agreement, dated
May 2, 1995, between the Registrant (on behalf of its Class
B Shares) and A I M Distributors, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment
No. 70 on November 17, 1995.
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(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) - (a) 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.
- (b) Amendment No. 1, dated as of May 1, 1998, to the Master
Distribution Agreement, dated as of February 28, 1997,
between Registrant (on behalf of its Class B Shares) and A
I M Distributors, Inc. is filed herewith electronically.
(8) - (a) 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) Amendment No. 1, date as of December 21, 1998, to the
Amended and Restated Master Distribution Agreement between
Registrant (on behalf of its Class A Shares, Class C Shares
and AIM Cash Reserve Shares) and A I M Distributors, Inc.
is filed herewith electronically.
(9) - Form of Selected Dealer Agreement between A I M
Distributors, Inc. and selected dealers was filed as an
Exhibit to Post-Effective Amendment No. 75 on February 12,
1999, and is hereby incorporated by reference.
(10) - Form of Bank Selling Group Agreement between A I M
Distributors, Inc. and banks was filed as an Exhibit to
Post-Effective Amendment No. 75 on February 12, 1999, and
is hereby incorporated by reference.
f(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.
(3) - 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.
(4) - 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.
(5) - Form of Deferred Compensation Plan for Eligible
Directors/Trustees was filed as an Exhibit to
Post-Effective Amendment No. 69 on February 28, 1995.
g(1) - (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.
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<PAGE> 369
- (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) Amendment No. 2, dated September 28, 1996, to the
Custodian Contract, dated October 15, 1993, between
Registrant and State Street Bank and Trust Company was
filed as an Exhibit to Post-Effective Amendment No. 75 on
February 12, 1999, and is hereby incorporated by reference.
- (d) Amendment, dated September 9, 1998, to the 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. 75 on February 12,
1999, and is hereby incorporated by reference.
(2) - 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.
(3) - (a) 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.
- (b) Amendment, dated July 30, 1996, to the Custodian
Contract, dated October 19, 1995, between the Registrant,
on behalf of AIM Municipal Bond Fund, and The Bank of New
York was filed as an Exhibit to Post-Effective Amendment
No. 75 on February 12, 1999, and is hereby incorporated by
reference.
h(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) - (a) 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.
- (b) 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.
(3) - (a) 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.
- (b) 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. was filed electronically as
an Exhibit to Post-Effective Amendment No. 71 on April 26,
1996, and is hereby incorporated by reference.
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<PAGE> 370
- (c) 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. was filed electronically as
an Exhibit to Post-Effective Amendment No. 71 on April 26,
1996, and is hereby incorporated by reference.
- (d) 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. was filed electronically as
an Exhibit to Post-Effective Amendment No. 73 on July 25,
1997, and is hereby incorporated by reference.
- (e) Amendment No. 4, dated June 30, 1998, to the Remote
Access and Related Services Agreement, dated December 23,
1994, between Registrant and First Data Investor Services
Group, Inc. was filed as an Exhibit to Post-Effective
Amendment No. 75 on February 12, 1999, and is hereby
incorporated by reference.
- (f) Amendment No. 5, dated July 1, 1998, to the Remote
Access and Related Services Agreement, dated December 23,
1994, between Registrant and First Data Investor Services
Group, Inc. was filed as an Exhibit to Post-Effective
Amendment No. 75 on February 12, 1999, and is hereby
incorporated by reference.
- (g) 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.
(4) - 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.
(5) - Shareholder Sub-Accounting Services Agreement, dated as of
October 1, 1993, between the Registrant and First Data
Investor 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.
(6) - 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.
(7) - 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.
(8) - (a) 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.
- (b) 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.
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<PAGE> 371
- (c) 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.
- (d) 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.
(9) - (a) 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.
- (b) Amendment No. 1, dated as of May 1, 1998, to the Master
Administrative Services Agreement, dated February 28, 1997,
between Registrant and A I M Advisors, Inc. is filed
herewith electronically.
i - Opinion of Ballard Spahr Andrews & Ingersoll was filed in
connection with the Registrant's Rule 24f-2 Notice on or
about February 27, 1997.
j(1) - Consent of Ballard Spahr Andrews & Ingersoll, LLP is filed
herewith electronically.
(2) - Consent of KPMG LLP is filed herewith electronically.
k - Financial Statements - None.
l - Agreements Concerning Initial Capitalization - None.
m(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.
(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) - (a) 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.
C-7
<PAGE> 372
- (b) Amendment No. 1, dated as of May 1, 1998, to the Second
Amended and Restated Master Distribution Plan for
Registrant's Class B Shares, dated as of June 30, 1997, is
filed herewith electronically.
(8) - (a) Third Amended and Restated Master Distribution Plan for
Registrant's Class A Shares, Class C Shares and AIM Cash
Reserve Shares was filed as an Exhibit to Post-Effective
Amendment No. 75 on February 12, 1999, and is hereby
incorporated by reference.
- (b) Amendment No. 1, dated as of December 21, 1998, to the
Third Amended and Restated Master Distribution Plan for
Registrant's Class A Shares, Class C Shares and AIM Cash
Reserve Shares is filed herewith electronically.
(9) - Form of Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution Plan was
filed as an Exhibit to Post-Effective Amendment No. 75 on
February 12, 1999, and is hereby incorporated by reference.
(10) - Form of Bank Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution Plan was
filed as an Exhibit to Post-Effective Amendment No. 75 on
February 12, 1999, and is hereby incorporated by reference.
(11) - Form of Variable Group Annuity Contractholder Service
Agreement to be used in connection with Registrant's Master
Distribution Plan was filed as an Exhibit to Post-
Effective Amendment No. 75 on February 12, 1999, and is
hereby incorporated by reference.
(12) - Form of Agency Pricing Agreement to be used in connection
with Registrant's Master Distribution Plan was filed as an
Exhibit to Post-Effective Amendment No. 75 on February 12,
1999, and is hereby incorporated by reference.
(13) - 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 as an
Exhibit to Post-Effective Amendment No. 75 on February 12,
1999, and are hereby incorporated by reference.
n - Financial Data Schedule is filed herewith electronically.
o(1) - 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.
(2) - 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.
Item 24. Persons Controlled by or Under Common Control with Registrant
Provide a list or diagram of all persons directly or indirectly controlled
by or under common control with the Registrant. For any person controlled by
another person, disclose the percentage of voting securities owned by the
immediately controlling person or other basis of that person's control. For
each company, also provide the state or other sovereign power under the laws of
which the company is organized.
None.
C-8
<PAGE> 373
Item 25. Indemnification
State the general effect of any contract, arrangements or statute
under which any director, officer, underwriter or affiliated person of the
Registrant is insured or indemnified against any liability incurred in their
official capacity, other than insurance provided by any director, officer,
affiliated person or underwriter for their own protection.
The Registrant's Amended and Restated Agreement and Declaration of
Trust, dated November 5, 1998, as amended, provides, among other
things (i) that trustees shall not be liable for any act or omission
or any conduct whatsoever (except for liabilities to the Registrant or
its shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of duty); (ii) for the
indemnification by the Registrant of the trustees and officers to the
fullest extent permitted by the Delaware Business Trust Act and
Bylaws; and (iii) that the shareholders and former shareholders of the
Registrant are held harmless by the Registrant (or applicable
portfolio or class) from personal liability arising from their status
as such, and are indemnified by the Registrant (or applicable
portfolio or class) against all loss and expense arising from such
personal liability in accordance with the Registrant's Bylaws and
applicable law.
A I M Advisors, Inc., the Registrant and other investment companies
managed by A I M Advisors, Inc., their respective officers, trustees,
directors and employees (the "Insured Parties") are insured under a
joint Mutual Fund and Investment Advisory Professional and Directors
and Officers Liability Policy, issued by ICI Mutual Insurance Company,
with a $35,000,000 limit of liability.
Item 26. Business and Other Connections of Investment Advisor
Describe any other business, profession, vocation or employment of a
substantial nature that each investment advisor of the Registrant, and each
director, officer or partner of the advisor, is or has been engaged within the
last two fiscal years, for his or her own account or in the capacity of
director, officer, employee, partner, or trustee.
The only employment of a substantial nature of the Advisor's directors
and officers is with the Advisor and its affiliated companies.
Reference is also made to the caption "Fund Management--The Advisor"
in the Prospectus which comprises Part A of the Registration
Statement, and to the caption "Management" of the Statement of
Additional Information which comprises Part B of the Registration
Statement, and to Item 27(b) of this Part C.
Item 27. Principal Underwriters
(a) State the name of each investment company (other than the Registrant) for
which each principal underwriter currently distributing the Registrant's
securities also acts as a principal underwriter, depositor, or investment
advisor.
A I M Distributors, Inc., the Registrant's principal
underwriter, also acts as a principal underwriter to the following
investment companies:
AIM Advisor Funds, Inc.
AIM Equity Funds, Inc. (Retail Classes)
AIM Growth Series
AIM International Funds, Inc.
AIM Investment Funds
AIM Investment Portfolios
AIM Investment Securities Funds - (Retail Classes)
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<PAGE> 374
AIM Series Trust
AIM Special Opportunities Funds
AIM Summit Fund, Inc.
AIM Tax-Exempt Funds, Inc.
AIM Variable Insurance Funds, Inc.
GT Global Floating Rate Fund, Inc.
(b) Provide the information required by the following tables for each director,
officer or partner of each principal underwriter named in response to Item 20:
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Underwriter with Registrant
- ----------------- ---------------- ---------------
<S> <C> <C>
Charles T. Bauer Chairman of the Board of Directors Chairman & Trustee
Michael J. Cemo President & Director None
Gary T. Crum Director Senior Vice President
Robert H. Graham Senior Vice President & Director President & Trustee
William G. Littlepage Senior Vice President & Director None
James L. Salners Executive Vice President None
John Caldwell Senior Vice President None
Marilyn M. Miller Senior Vice President None
Gene L. Needles Senior Vice President None
Gordon J. Sprague Senior Vice President None
Michael C. Vessels Senior Vice President None
B.J. Thompson First Vice President None
James R. Anderson Vice President None
Mary K. Coleman Vice President None
Mary A. Corcoran Vice President None
Melville B. Cox Vice President & Chief Vice President
Compliance Officer
Sidney M. Dilgren Vice President None
Glenda A. Dayton Vice President None
Tony D. Green Vice President None
</TABLE>
- -----------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-10
<PAGE> 375
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Underwriter with Registrant
- ----------------- ---------------- ---------------
<S> <C> <C>
Dawn M. Hawley Vice President & Treasurer None
Ofelia M. Mayo Vice President, General Counsel Assistant Secretary
& Assistant Secretary
Charles H. McLaughlin Vice President None
Ivy B. McLemore Vice President None
Terri L. Ransdell Vice President None
Carol F. Relihan Vice President Senior Vice President
& Secretary
Kamala C. Sachidanandan Vice President None
Frank V. Serebrin Vice President None
Christopher T. Simutis Vice President None
Gary K. Wendler Vice President None
Norman W. Woodson Vice President None
Kathleen J. Pflueger Secretary Assistant Secretary
Sheila R. Brown Assistant Vice President None
Scott E. Burman Assistant Vice President None
Luke P. Beausoleil Assistant Vice President None
Tisha B. Christopher Assistant Vice President None
Mary E. Gentempo Assistant Vice President None
David E. Hessel Assistant Vice President, None
Assistant Treasurer
& Controller
Simon R. Hoyle Assistant Vice President None
Kathryn A. Jordan Assistant Vice President None
Mary C. Mangham Assistant Vice President None
</TABLE>
- ---------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-11
<PAGE> 376
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Underwriter with Registrant
- ----------------- ---------------- ---------------
<S> <C> <C>
Kim T. McAuliffe Assistant Vice President None
David B. O'Neil Assistant Vice President None
Rebecca Starling-Klatt Assistant Vice President None
Nicholas D. White Assistant Vice President None
Nancy L. Martin Assistant General Counsel Assistant Secretary
& Assistant Secretary
Samuel D. Sirko Assistant General Counsel Assistant Secretary
& Assistant Secretary
P. Michelle Grace Assistant Secretary Assistant Secretary
Lisa A. Moss Assistant Secretary Assistant Secretary
Stephen I. Winer Assistant Secretary Assistant Secretary
</TABLE>
- --------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
(c) Provide the information required by the following table for all commissions
and other compensation received, directly or indirectly, from the Registrant
during the last fiscal year by each principal underwriter who is not an
affiliated person of the Registrant or any affiliated person of an affiliated
person:
None.
Item 28. Location of Accounts and Records
State the name and address of each person maintaining physical
possession of each account, book, or other document required to be maintained
by section 31(a) [15 U.S.C. 80a-30(a)] and the rules under that section.
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas
77046-1173, will maintain physical possession of each such account,
book or other document of the Registrant at its principal executive
offices, except for those maintained by the Registrant's Custodians,
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110 (except AIM Municipal Bond Fund) and The Bank of
New York, 90 Washington Street, 11th Floor, New York, New York 10286
(for AIM Municipal Bond Fund), and the Registrant's Transfer Agent and
Dividend Paying Agent, A I M Fund Services, Inc., P. O. Box 4739,
Houston, Texas 77210-4739.
Item 29. Management Services
Provide a summary of the substantive provisions of any
management-related service contract not discussed in Part A or Part B,
disclosing the parties to the contract and the total amount paid and by whom
for the Registrant's last three fiscal years.
None.
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<PAGE> 377
Item 30. Undertakings
In initial registration statements filed under the Securities Act,
provide an undertaking to file an amendment to the registration statement with
certified financial statements showing the initial capital received before
accepting subscriptions from more than 25 persons if the Registrant intends to
raise its initial capital under section 14(a)(3) [15 U.S.C. 80a-14(a)(3)].
Not applicable.
C-13
<PAGE> 378
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Houston, Texas on the 15th day of
April, 1999.
REGISTRANT: AIM FUNDS GROUP
By: /s/ ROBERT H. GRAHAM
-------------------------------------
Robert H. Graham, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ CHARLES T. BAUER Chairman & Trustee April 15, 1999
-------------------------
(Charles T. Bauer)
/s/ ROBERT H. GRAHAM Trustee & President April 15, 1999
------------------------- (Principal Executive Officer)
(Robert H. Graham)
/s/ BRUCE L. CROCKETT Trustee April 15, 1999
-------------------------
(Bruce L. Crockett)
/s/ OWEN DALY II Trustee April 15, 1999
-------------------------
(Owen Daly II)
/s/ EDWARD K. DUNN, JR. Trustee April 15, 1999
-------------------------
(Edward K. Dunn, Jr.)
/s/ JACK FIELDS Trustee April 15, 1999
-------------------------
(Jack Fields)
/s/ CARL FRISCHLING Trustee April 15, 1999
-------------------------
(Carl Frischling)
/s/ PREMA MATHAI-DAVIS Trustee April 15, 1999
-------------------------
(Prema Mathai-Davis)
/s/ LEWIS F. PENNOCK Trustee April 15, 1999
-------------------------
(Lewis F. Pennock)
/s/ LOUIS S. SKLAR Trustee April 15, 1999
-------------------------
(Louis S. Sklar)
/s/ JOHN J. ARTHUR Senior Vice President & April 15, 1999
------------------------- Treasurer (Principal Financial
(John J. Arthur) and Accounting Officer)
</TABLE>
<PAGE> 379
INDEX TO EXHIBITS
AIM FUNDS GROUP
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
d(3)(b) Amendment No. 1 dated as of May 1, 1998, to the Master Investment Advisory Agreement, dated
February 28, 1997 between Registrant and A I M Advisors, Inc.
d(4)(c) Amendment No. 2, dated as of December 14, 1998 to Foreign Country Selection and Mandatory
Securities Depository Responsibilities Delegation Agreement, dated September 9, 1998, between
Registrant and A I M Advisors, Inc.
d(4)(d) Amendment No. 3, dated as of December 22, 1998 to Foreign Country Selection and Mandatory
Securities Depository Responsibilities Delegation Agreement, dated September 9, 1998, between
Registrant and A I M Advisors, Inc.
d(4)(e) Amendment No. 4, dated as of January 26, 1999 to Foreign Country Selection and Mandatory
Securities Depository Responsibilities Delegation Agreement, dated September 9, 1998, between
Registrant and A I M Advisors, Inc.
d(4)(f) Amendment No. 5, dated as of March 1, 1999 to Foreign Country Selection and Mandatory
Securities Depository Responsibilities Delegation Agreement, dated September 9, 1998, between
Registrant and A I M Advisors, Inc.
d(4)(g) Amendment No. 6, dated as of March 18, 1999 to Foreign Country Selection and Mandatory
Securities Depository Responsibilities Delegation Agreement, dated September 9, 1998, between
Registrant and A I M Advisors, Inc.
e(7)(b) Amendment No. 1, dated as of May 1, 1998, to the Master Distribution Agreement, dated as of
February 28, 1997, between Registrant (on behalf of its Class B Shares) and A I M Distributors,
Inc.
e(8)(b) Amendment No. 1, dated as of December 21, 1998, to the Amended and Restated Master
Distribution Agreement between Registrant (on behalf of its Class A Shares, Class C Shares and
AIM Cash Reserve Shares) and A I M Distributors, Inc.
h(9)(b) Amendment No. 1, dated as of May 1, 1998, to the Master Administrative Services Agreement,
dated February 28, 1997, between Registrant and A I M Advisors, Inc.
j(1) Consent of Ballard Spahr Andrews & Ingersoll, LLP
j(2) Consent of KPMG LLP
m(7)(b) Amendment No. 1, dated as of May 1, 1998, to the Second Amended and Restated Master
Distribution Plan for Registrant's Class B Shares, dated as of June 30, 1997
m(8)(b) Amendment No. 1, dated as of December 21, 1998, to the Third Amended and Restated Master
Distribution Plan for Registrant's Class A Shares, Class C Shares and AIM Cash Reserve Shares
n Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT d(3)(b)
AMENDMENT NO. 1
TO
MASTER INVESTMENT ADVISORY AGREEMENT
This Amendment dated as of May 1, 1998, amends the Master Investment
Advisory Agreement (the "Agreement"), dated February 28, 1997, between AIM
Funds Group, a Delaware business trust, and A I M Advisors, Inc., a Delaware
corporation.
Appendix A to the Agreement is hereby deleted in its entirety and
replaced with the following:
"APPENDIX A
TO
MASTER INVESTMENT ADVISORY AGREEMENT
OF
AIM FUNDS GROUP
The Company shall pay the Advisor, out of the assets of a Fund, as
full compensation for all services rendered and all facilities furnished
hereunder, a management fee for such Fund set forth below. Such fees shall be
calculated by applying the following annual rates to the average daily net
assets of such Fund for the calendar year computed in the manner used for the
determination of the net asset value of shares of such Fund.
AIM GLOBAL UTILITIES FUND
<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>
AIM HIGH YIELD FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
First $200 million ................ 0.625%
Next $300 million ................. 0.55%
Next $500 million ................. 0.50%
Amount over $1 billion ............ 0.45%
</TABLE>
<PAGE> 2
AIM MONEY MARKET FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
First $1 billion .................. 0.55%
Over $1 billion ................... 0.50%
</TABLE>
AIM MUNICIPAL BOND FUND
AIM INTERMEDIATE GOVERNMENT FUND
AIM INCOME FUND
<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>
AIM BALANCED FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
First $150 million ................ 0.75%
Over $150 million ................. 0.50%
</TABLE>
AIM SELECT GROWTH FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
First $150 million ................ 0.80%
Over $150 million ................. 0.625%
</TABLE>
AIM VALUE FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
First $150 million ................ 0.80%
Over $150 million ................. 0.625%"
</TABLE>
<PAGE> 3
In all other respects, the Agreement is hereby confirmed and remains
in full force and effect.
AIM FUNDS GROUP
Attest: /s/ SAMUEL D. SIRKO By: /s/ ROBERT H. GRAHAM
----------------------------- -------------------------------------
Assistant Secretary President
(SEAL)
A I M ADVISORS, INC.
Attest: /s/ SAMUEL D. SIRKO By: /s/ ROBERT H. GRAHAM
----------------------------- -------------------------------------
Assistant Secretary President
(SEAL)
<PAGE> 1
EXHIBIT d(4)(c)
AMENDMENT NO. 2
TO
FOREIGN COUNTRY SELECTION
AND MANDATORY SECURITIES DEPOSITORY RESPONSIBILITIES
DELEGATION AGREEMENT
This Amendment No. 2, dated as of December 14, 1998, amends the
Foreign Country Selection and Mandatory Securities Depository Responsibilities
Delegation Agreement (the "Agreement"), dated September 9, 1998, between A I M
Advisors, Inc., a Delaware corporation and each registered investment company
(the "Investment Companies") and its respective portfolios (the "Funds") listed
on the signature page thereof.
W I T N E S S E T H:
WHEREAS, the parties to the Agreement desire to amend the Agreement to
add AIM V.I. Global Growth and Income Fund and AIM V.I. Telecommunications Fund
of AIM Variable Insurance Funds, Inc. as a party to the agreement;
NOW, THEREFORE, the parties agree as follows;
1. The list of Investment Companies and Funds covered by the
Agreement is hereby amended to include the following:
"AIM V.I. Global Growth and Income Fund
AIM V.I. Telecommunications Fund"
2. In all other respects, the Agreement is hereby confirmed and
remains in full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused this Amendment No. 2 to be
executed by their respective officers on the date first written above.
A I M ADVISORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
------------------------------- ----------------------------
Assistant Secretary President
(SEAL)
AIM ADVISOR FUNDS, INC. AIM SPECIAL OPPORTUNITIES FUNDS
AIM Advisor Flex Fund AIM Small Cap Opportunities Fund
AIM Advisor International Value Fund
AIM Advisor Large Cap Value Fund AIM SUMMIT FUND, INC.
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund AIM INTERNATIONAL FUNDS, INC.
AIM Asian Growth Fund
AIM EQUITY FUNDS, INC. AIM European Development Fund
AIM Aggressive Growth Fund AIM International Equity Fund
AIM Blue Chip Fund AIM Global Aggressive Growth Fund
AIM Capital Development Fund AIM Global Growth Fund
AIM Charter Fund AIM Global Income Fund
AIM Constellation Fund
AIM Weingarten Fund AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Aggressive Growth Fund
AIM FUNDS GROUP AIM V.I. Balanced Fund
AIM Balanced Fund AIM V.I. Capital Appreciation Fund
AIM Global Utilities Fund AIM V.I. Capital Development Fund
AIM High Yield Fund AIM V.I. Diversified Income Fund
AIM Income Fund AIM V.I. Global Growth and Income Fund
AIM Money Market Fund AIM V.I. Global Utilities Fund
AIM Select Growth Fund AIM V.I. Government Securities Fund
AIM Value Fund AIM V.I. Growth Fund
AIM V.I. Growth & Income Fund
AIM INVESTMENT SECURITIES FUNDS AIM V.I. High Yield Fund
AIM High Yield Fund II AIM V.I. International Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Telecommunications Fund
AIM V.I. Value Fund
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
------------------------------- ----------------------------
Assistant Secretary President
(SEAL)
<PAGE> 1
EXHIBIT d(4)(d)
AMENDMENT NO. 3
TO
FOREIGN COUNTRY SELECTION
AND MANDATORY SECURITIES DEPOSITORY RESPONSIBILITIES
DELEGATION AGREEMENT
This Amendment No. 3, dated as of December 22, 1998, amends the Foreign
Country Selection and Mandatory Securities Depository Responsibilities
Delegation Agreement, dated September 9, 1998, between A I M Advisors, Inc., a
Delaware corporation and each registered investment company (the "Investment
Companies") and its respective portfolios (the "Funds") listed on the signature
page thereof (as amended and supplemented, the "Agreement").
NOW, THEREFORE, the parties agree as follows;
The list of Investment Companies and Funds covered by the Agreement is
hereby amended to include the following portfolio of AIM Special
Opportunities Funds:
AIM Mid Cap Opportunities Fund
In all other respects, the Agreement is hereby confirmed and remains in
full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused this Amendment No. 3 to be
executed by their respective officers on the date first written above.
A I M ADVISORS, INC.
Attest: /s/ P. MICHELLE GRACE By: /s/ CAROL F. RELIHAN
----------------------------- -------------------------------
Assistant Secretary Senior Vice President
AIM ADVISOR FUNDS, INC. AIM SPECIAL OPPORTUNITIES FUNDS
AIM Advisor Flex Fund AIM Small Cap Opportunities Fund
AIM Advisor International Value Fund AIM Mid Cap Opportunities Fund
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund AIM SUMMIT FUND, INC.
AIM Advisor Real Estate Fund
AIM INTERNATIONAL FUNDS, INC.
AIM EQUITY FUNDS, INC. AIM Asian Growth Fund
AIM Aggressive Growth Fund AIM European Development Fund
AIM Blue Chip Fund AIM International Equity Fund
AIM Capital Development Fund AIM Global Aggressive Growth Fund
AIM Charter Fund AIM Global Growth Fund
AIM Constellation Fund AIM Global Income Fund
AIM Weingarten Fund
AIM VARIABLE INSURANCE FUNDS, INC.
AIM FUNDS GROUP AIM V.I. Aggressive Growth Fund
AIM Balanced Fund AIM V.I. Balanced Fund
AIM Global Utilities Fund AIM V.I. Capital Appreciation Fund
AIM High Yield Fund AIM V.I. Capital Development Fund
AIM Income Fund AIM V.I. Diversified Income Fund
AIM Money Market Fund AIM V.I. Global Growth and Income Fund
AIM Select Growth Fund AIM V.I. Global Utilities Fund
AIM Value Fund AIM V.I. Government Securities Fund
AIM V.I. Growth Fund
AIM INVESTMENT SECURITIES FUNDS AIM V.I. Growth & Income Fund
AIM High Yield Fund II AIM V.I. High Yield Fund
AIM V.I. International Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Telecommunications Fund
AIM V.I. Value Fund
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
----------------------------- -----------------------------------
Assistant Secretary President
<PAGE> 1
EXHIBIT d(4)(e)
AMENDMENT NO. 4
TO
FOREIGN COUNTRY SELECTION
AND MANDATORY SECURITIES DEPOSITORY RESPONSIBILITIES
DELEGATION AGREEMENT
This Amendment No. 4, dated as of January 26, 1999, amends the Foreign
Country Selection and Mandatory Securities Depository Responsibilities
Delegation Agreement, dated September 9, 1998, between A I M Advisors, Inc., a
Delaware corporation and each registered investment company (the "Investment
Companies") and its respective portfolios (the "Funds") listed on the signature
page thereof (as amended and supplemented, the "Agreement").
NOW, THEREFORE, the parties agree as follows;
The list of Investment Companies and Funds covered by the Agreement is
hereby amended to include the following investment companies and funds:
EMERGING MARKETS DEBT PORTFOLIO
GROWTH PORTFOLIO
Small Cap Portfolio
Value Portfolio
GLOBAL INVESTMENT PORTFOLIO
Global Consumer Products and Services Portfolio
Global Financial Services Portfolio
Global Infrastructure Portfolio
Global Natural Resources Portfolio
GT GLOBAL FLOATING RATE FUND, INC. (doing business as AIM
Floating Rate Fund)
AIM SERIES TRUST
AIM Global Trends Fund
FLOATING RATE PORTFOLIO
AIM EASTERN EUROPE FUND
AIM INVESTMENT FUNDS
AIM Global Government Income Fund
AIM Strategic Income Fund
AIM Emerging Markets Debt Fund
AIM Global Growth & Income Fund
AIM Emerging Markets Fund
AIM Developing Markets Fund
AIM Latin American Growth Fund
AIM Global Financial Services Fund
<PAGE> 2
AIM Global Health Care Fund
AIM Global Telecommunications Fund
AIM Global Consumer Products and Services Fund
AIM Global Infrastructure Fund
AIM Global Resources Fund
AIM GROWTH SERIES
AIM New Pacific Growth Fund
AIM Europe Growth Fund
AIM Japan Growth Fund
AIM International Growth Fund
AIM Worldwide Growth Fund
AIM Mid Cap Equity Fund
AIM Small Cap Growth Fund
AIM Basic Value Fund
GT GLOBAL VARIABLE INVESTMENT TRUST
GT Global Variable Latin America Fund
GT Global Variable Telecommunications Fund
GT Global Variable Growth & Income Fund
GT Global Variable Strategic Income Fund
GT Global Variable Emerging Markets Fund
GT Global Variable Government Income Fund
GT Global Variable U.S. Government Income Fund
GT Global Variable Infrastructure Fund
GT Global Variable Natural Resources Fund
GT GLOBAL VARIABLE INVESTMENT SERIES
GT Global Variable New Pacific Fund
GT Global Variable Europe Fund
GT Global Variable America Fund
GT Global Variable International Fund
GT Global Variable Money Market Fund
In all other respects, the Agreement is hereby confirmed and remains in
full force and effect.
<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this Amendment No. 4 to be
executed by their respective officers on the date first written above.
A I M ADVISORS, INC.
Attest: /s/ P. MICHELLE GRACE By: /s/ CAROL F. RELIHAN
--------------------------------- ---------------------------------
Assistant Secretary Senior Vice President
AIM ADVISOR FUNDS, INC. AIM INTERNATIONAL FUNDS, INC.
AIM Advisor Flex Fund AIM Asian Growth Fund
AIM Advisor International Value Fund AIM European Development Fund
AIM Advisor Large Cap Value Fund AIM International Equity Fund
AIM Advisor MultiFlex Fund AIM Global Aggressive Growth Fund
AIM Advisor Real Estate Fund AIM Global Growth Fund
AIM Global Income Fund
AIM EQUITY FUNDS, INC.
AIM Aggressive Growth Fund AIM VARIABLE INSURANCE FUNDS, INC.
AIM Blue Chip Fund AIM V.I. Aggressive Growth Fund
AIM Capital Development Fund AIM V.I. Balanced Fund
AIM Charter Fund AIM V.I. Capital Appreciation Fund
AIM Constellation Fund AIM V.I. Capital Development Fund
AIM Weingarten Fund AIM V.I. Diversified Income Fund
AIM V.I. Global Growth and Income Fund
AIM FUNDS GROUP AIM V.I. Global Utilities Fund
AIM Balanced Fund AIM V.I. Government Securities Fund
AIM Global Utilities Fund AIM V.I. Growth Fund
AIM High Yield Fund AIM V.I. Growth & Income Fund
AIM Income Fund AIM V.I. High Yield Fund
AIM Money Market Fund AIM V.I. International Equity Fund
AIM Select Growth Fund AIM V.I. Money Market Fund
AIM Value Fund AIM V.I. Telecommunications Fund
AIM V.I. Value Fund
AIM INVESTMENT SECURITIES FUNDS
AIM High Yield Fund II EMERGING MARKETS DEBT PORTFOLIO
AIM SPECIAL OPPORTUNITIES FUNDS GROWTH PORTFOLIO
AIM Small Cap Opportunities Fund Small Cap Portfolio
AIM Mid Cap Opportunities Fund Value Portfolio
AIM SUMMIT FUND, INC.
<PAGE> 4
GLOBAL INVESTMENT PORTFOLIO AIM GROWTH SERIES
Global Consumer Products and Services AIM New Pacific Growth Fund
Portfolio AIM Europe Growth Fund
Global Financial Services Portfolio AIM Japan Growth Fund
Global Infrastructure Portfolio AIM International Growth Fund
Global Natural Resources Portfolio AIM Worldwide Growth Fund
AIM Mid Cap Equity Fund
GT GLOBAL FLOATING RATE FUND, INC. AIM Small Cap Growth Fund
(doing business as AIM Floating Rate AIM Basic Value Fund
Fund)
GT GLOBAL VARIABLE INVESTMENT TRUST
AIM SERIES TRUST GT Global Variable Latin America Fund
AIM Global Trends Fund GT Global Variable Telecommunications
Fund
FLOATING RATE PORTFOLIO GT Global Variable Growth & Income
Fund
AIM EASTERN EUROPE FUND GT Global Variable Strategic Income
Fund
AIM INVESTMENT FUNDS GT Global Variable Emerging Markets
AIM Global Government Income Fund Fund
AIM Strategic Income Fund GT Global Variable Government Income
AIM Emerging Markets Debt Fund Fund
AIM Global Growth & Income Fund GT Global Variable U.S. Government
AIM Emerging Markets Fund Income Fund
AIM Developing Markets Fund GT Global Variable Infrastructure Fund
AIM Latin American Growth Fund GT Global Variable Natural Resources
AIM Global Financial Services Fund Fund
AIM Global Health Care Fund
AIM Global Telecommunications Fund GT GLOBAL VARIABLE INVESTMENT SERIES
AIM Global Consumer Products and GT Global Variable New Pacific Fund
Services Fund GT Global Variable Europe Fund
AIM Global Infrastructure Fund GT Global Variable America Fund
AIM Global Resources Fund GT Global Variable International Fund
GT Global Variable Money Market Fund
/s/ SAMUEL D. SIRKO
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
------------------------------ ------------------------------------
Assistant Secretary President
<PAGE> 1
EXHIBIT d(4)(f)
AMENDMENT NO. 5
TO
FOREIGN COUNTRY SELECTION
AND MANDATORY SECURITIES DEPOSITORY RESPONSIBILITIES
DELEGATION AGREEMENT
This Amendment No. 5, dated as of March 1, 1999, amends the Foreign
Country Selection and Mandatory Securities Depository Responsibilities
Delegation Agreement, dated September 9, 1998, between A I M Advisors, Inc., a
Delaware corporation and each registered investment company (the "Investment
Companies") and its respective portfolios (the "Funds") listed on the signature
page thereof (as amended and supplemented, the "Agreement").
NOW, THEREFORE, the parties agree as follows;
The list of Investment Companies and Funds covered by the Agreement is
hereby amended to include the following portfolio of AIM Equity Funds,
Inc.:
AIM Large Cap Growth Fund
In all other respects, the Agreement is hereby confirmed and remains in
full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused this Amendment No. 5 to be
executed by their respective officers on the date first written above.
A I M ADVISORS, INC.
Attest: By: /s/ CAROL F. RELIHAN
-------------------------------- -------------------------------
Assistant Secretary Senior Vice President
AIM ADVISOR FUNDS, INC. AIM INTERNATIONAL FUNDS, INC.
AIM Advisor Flex Fund AIM Asian Growth Fund
AIM Advisor International Value Fund AIM European Development Fund
AIM Advisor Large Cap Value Fund AIM International Equity Fund
AIM Advisor MultiFlex Fund AIM Global Aggressive Growth Fund
AIM Advisor Real Estate Fund AIM Global Growth Fund
AIM Global Income Fund
AIM EQUITY FUNDS, INC.
AIM Aggressive Growth Fund AIM VARIABLE INSURANCE FUNDS, INC.
AIM Blue Chip Fund AIM V.I. Aggressive Growth Fund
AIM Capital Development Fund AIM V.I. Balanced Fund
AIM Charter Fund AIM V.I. Capital Appreciation Fund
AIM Constellation Fund AIM V.I. Capital Development Fund
AIM Large Cap Growth Fund AIM V.I. Diversified Income Fund
AIM Weingarten Fund AIM V.I. Global Growth and Income Fund
AIM V.I. Global Utilities Fund
AIM FUNDS GROUP AIM V.I. Government Securities Fund
AIM Balanced Fund AIM V.I. Growth Fund
AIM Global Utilities Fund AIM V.I. Growth & Income Fund
AIM High Yield Fund AIM V.I. High Yield Fund
AIM Income Fund AIM V.I. International Equity Fund
AIM Money Market Fund AIM V.I. Money Market Fund
AIM Select Growth Fund AIM V.I. Telecommunications Fund
AIM Value Fund AIM V.I. Value Fund
AIM INVESTMENT SECURITIES FUNDS EMERGING MARKETS DEBT PORTFOLIO
AIM High Yield Fund II
GROWTH PORTFOLIO
AIM SPECIAL OPPORTUNITIES FUNDS Small Cap Portfolio
AIM Small Cap Opportunities Fund Value Portfolio
AIM Mid Cap Opportunities Fund
AIM SUMMIT FUND, INC.
<PAGE> 3
GLOBAL INVESTMENT PORTFOLIO AIM GROWTH SERIES
Global Consumer Products and Services AIM New Pacific Growth Fund
Portfolio AIM Europe Growth Fund
Global Financial Services Portfolio AIM Japan Growth Fund
Global Infrastructure Portfolio AIM International Growth Fund
Global Natural Resources Portfolio AIM Worldwide Growth Fund
AIM Mid Cap Equity Fund
GT GLOBAL FLOATING RATE FUND, INC. AIM Small Cap Growth Fund
(doing business as AIM Floating Rate AIM Basic Value Fund
Fund)
GT GLOBAL VARIABLE INVESTMENT
AIM SERIES TRUST TRUST
AIM Global Trends Fund GT Global Variable Latin America Fund
GT Global Variable Telecommunications
FLOATING RATE PORTFOLIO Fund
GT Global Variable Growth & Income
AIM EASTERN EUROPE FUND Fund
GT Global Variable Strategic Income
AIM INVESTMENT FUNDS Fund
AIM Global Government Income Fund GT Global Variable Emerging Markets
AIM Strategic Income Fund Fund
AIM Emerging Markets Debt Fund GT Global Variable Government Income
AIM Global Growth & Income Fund Fund
AIM Emerging Markets Fund GT Global Variable U.S. Government
AIM Developing Markets Fund Income Fund
AIM Latin American Growth Fund GT Global Variable Infrastructure
AIM Global Financial Services Fund Fund
AIM Global Health Care Fund GT Global Variable Natural Resources
AIM Global Telecommunications Fund Fund
AIM Global Consumer Products and
Services Fund GT GLOBAL VARIABLE INVESTMENT SERIES
AIM Global Infrastructure Fund GT Global Variable New Pacific Fund
AIM Global Resources Fund GT Global Variable Europe Fund
GT Global Variable America Fund
GT Global Variable International Fund
GT Global Variable Money Market Fund
/s/ SAMUEL D. SIRKO
Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM
-------------------------------- ------------------------------------
Assistant Secretary President
<PAGE> 1
EXHIBIT d(4)(g)
AMENDMENT NO. 6
TO
FOREIGN COUNTRY SELECTION
AND MANDATORY SECURITIES DEPOSITORY RESPONSIBILITIES
DELEGATION AGREEMENT
This Amendment No. 6, dated as of March 18, 1999, amends the Foreign
Country Selection and Mandatory Securities Depository Responsibilities
Delegation Agreement, dated September 9, 1998, between A I M Advisors, Inc., a
Delaware corporation and each registered investment company (the "Investment
Companies") and its respective portfolios (the "Funds") listed on the signature
page thereof (as amended and supplemented, the "Agreement").
NOW, THEREFORE, the parties agree as follows;
The list of Investment Companies and Funds covered by the Agreement is
hereby amended to include the following portfolios of AIM Equity Funds,
Inc.:
AIM Dent Demographic Trends Fund
AIM Growth and Income Fund
The list of Investment Companies and Funds covered by the Agreement is
hereby amended to delete the following portfolio of AIM Investment Funds:
AIM Emerging Markets Fund
The list of Investment Companies and Funds covered by the Agreement is
hereby amended to delete the following portfolios of AIM Growth Series:
AIM International Growth Fund
AIM Worldwide Growth Fund
In all other respects, the Agreement is hereby confirmed and remains in
full force and effect.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused this Amendment No. 6 to be
executed by their respective officers on the date first written above.
A I M ADVISORS, INC.
Attest: /s/ P. MICHELLE GRACE By: /s/ CAROL F. RELIHAN
------------------------ -------------------------
Assistant Secretary Senior Vice President
<TABLE>
<S> <C>
AIM ADVISOR FUNDS, INC. AIM INTERNATIONAL FUNDS, INC.
AIM Advisor Flex Fund AIM Asian Growth Fund
AIM Advisor International Value Fund AIM European Development Fund
AIM Advisor Large Cap Value Fund AIM International Equity Fund
AIM Advisor MultiFlex Fund AIM Global Aggressive Growth Fund
AIM Advisor Real Estate Fund AIM Global Growth Fund
AIM Global Income Fund
AIM EQUITY FUNDS, INC.
AIM Aggressive Growth Fund AIM VARIABLE INSURANCE FUNDS, INC.
AIM Blue Chip Fund AIM V.I. Aggressive Growth Fund
AIM Capital Development Fund AIM V.I. Balanced Fund
AIM Charter Fund AIM V.I. Capital Appreciation Fund
AIM Constellation Fund AIM V.I. Capital Development Fund
AIM Dent Demographic Trends Fund AIM V.I. Diversified Income Fund
AIM Growth and Income Fund AIM V.I. Global Growth and Income Fund
AIM Large Cap Growth Fund AIM V.I. Global Utilities Fund
AIM Weingarten Fund AIM V.I. Government Securities Fund
AIM V.I. Growth Fund
AIM FUNDS GROUP AIM V.I. Growth & Income Fund
AIM Balanced Fund AIM V.I. High Yield Fund
AIM Global Utilities Fund AIM V.I. International Equity Fund
AIM High Yield Fund AIM V.I. Money Market Fund
AIM Income Fund AIM V.I. Telecommunications Fund
AIM Money Market Fund AIM V.I. Value Fund
AIM Select Growth Fund
AIM Value Fund EMERGING MARKETS DEBT PORTFOLIO
AIM INVESTMENT SECURITIES FUNDS GROWTH PORTFOLIO
AIM High Yield Fund II Small Cap Portfolio
Value Portfolio
AIM SPECIAL OPPORTUNITIES FUNDS
AIM Small Cap Opportunities Fund
AIM Mid Cap Opportunities Fund
AIM SUMMIT FUND, INC.
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
GLOBAL INVESTMENT PORTFOLIO AIM GROWTH SERIES
Global Consumer Products and Services AIM New Pacific Growth Fund
Portfolio AIM Europe Growth Fund
Global Financial Services Portfolio AIM Japan Growth Fund
Global Infrastructure Portfolio AIM Mid Cap Equity Fund
Global Natural Resources Portfolio AIM Small Cap Growth Fund
AIM Basic Value Fund
GT GLOBAL FLOATING RATE FUND, INC.
(doing business as AIM Floating Rate GT GLOBAL VARIABLE INVESTMENT
Fund) TRUST
GT Global Variable Latin America Fund
AIM SERIES TRUST GT Global Variable Telecommunications
AIM Global Trends Fund Fund
GT Global Variable Growth & Income Fund
FLOATING RATE PORTFOLIO GT Global Variable Strategic Income Fund
GT Global Variable Emerging Markets Fund
AIM EASTERN EUROPE FUND GT Global Variable Government Income Fund
GT Global Variable U.S. Government Income
AIM INVESTMENT FUNDS Fund
AIM Global Government Income Fund GT Global Variable Infrastructure Fund
AIM Strategic Income Fund GT Global Variable Natural Resources Fund
AIM Emerging Markets Debt Fund
AIM Global Growth & Income Fund GT GLOBAL VARIABLE INVESTMENT
AIM Developing Markets Fund SERIES
AIM Latin American Growth Fund GT Global Variable New Pacific Fund
AIM Global Financial Services Fund GT Global Variable Europe Fund
AIM Global Health Care Fund GT Global Variable America Fund
AIM Global Telecommunications Fund GT Global Variable International Fund
AIM Global Consumer Products and GT Global Variable Money Market Fund
Services Fund
AIM Global Infrastructure Fund
AIM Global Resources Fund
</TABLE>
Attest: /s/ OFELIA M. MAYO By: /s/ ROBERT H. GRAHAM
------------------------ ----------------------------
Assistant Secretary President
<PAGE> 1
EXHIBIT e(7)(b)
AMENDMENT NO. 1
MASTER DISTRIBUTION AGREEMENT
(CLASS B SHARES)
The Master Distribution Agreement (the "Agreement"), dated February
28, 1997, by and between AIM Funds Group, a Delaware business trust, and A I M
Distributors, Inc., a Delaware corporation, is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and
replaced with the following:
"SCHEDULE A
TO
MASTER DISTRIBUTION AGREEMENT
OF
AIM FUNDS GROUP
CLASS B SHARES
AIM Balanced Fund
AIM Global Utilities Fund
AIM Select Growth Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Value Fund"
All other terms and provisions of the Agreement not amended herein
shall remain in full force and effect.
Dated: May 1, 1998
AIM FUNDS GROUP
Attest: /s/ SAMUEL D. SIRKO By: /s/ ROBERT H. GRAHAM
---------------------------------- --------------------------------
Assistant Secretary President
(SEAL)
A I M DISTRIBUTORS, INC.
Attest: /s/ SAMUEL D. SIRKO By: /s/ MICHAEL J. CEMO
---------------------------------- --------------------------------
Assistant Secretary President
(SEAL)
<PAGE> 1
EXHIBIT e(8)(b)
AMENDMENT NO. 1
AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
(CLASS A SHARES, CLASS C SHARES AND AIM CASH RESERVE SHARES)
The Amended Restated Master Distribution Agreement (the "Agreement"),
dated August 4, 1997, by and between AIM Funds Group, a Delaware business
trust, and A I M Distributors, Inc., a Delaware corporation, is hereby amended
as follows:
Appendix A of the Agreement is hereby deleted in its entirety and
replaced with the following:
"APPENDIX A
TO
MASTER DISTRIBUTION AGREEMENT
OF
AIM FUNDS GROUP
CLASS A SHARES
- --------------
AIM Balanced Fund
AIM Global Utilities Fund
AIM Select Growth Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Municipal Bond Fund
AIM Value Fund
CLASS C SHARES
- --------------
AIM Balanced Fund
AIM Global Utilities Fund
AIM Select Growth Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Value Fund
AIM CASH RESERVE SHARES
- -----------------------
AIM Money Market Fund"
<PAGE> 2
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Dated: December 21, 1998
AIM FUNDS GROUP
Attest: /s/ SAMUEL D. SIRKO By: /s/ ROBERT H. GRAHAM
---------------------------- ---------------------------
Assistant Secretary President
(SEAL)
A I M DISTRIBUTORS, INC.
Attest: /s/ SAMUEL D. SIRKO By: /s/ MICHAEL J. CEMO
---------------------------- ---------------------------
Assistant Secretary President
(SEAL)
-2-
<PAGE> 1
EXHIBIT h(9)(b)
AMENDMENT NO. 1
MASTER ADMINISTRATIVE SERVICES AGREEMENT
The Master Administrative Services Agreement (the "Agreement"), dated
February 28, 1997, by and between A I M Advisors, Inc., a Delaware corporation,
and AIM Funds Group, a Delaware business trust, is hereby amended as follows:
Appendix A of the Agreement is hereby deleted in its entirety and
replaced with the following:
"AIM FUNDS GROUP
APPENDIX A TO MASTER ADMINISTRATIVE SERVICES AGREEMENT
AIM Balanced Fund
AIM Global Utilities Fund
AIM Select Growth Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Value Fund"
All other terms and provisions of the Agreement not amended herein
shall remain in full force and effect.
Dated: May 1, 1998
A I M ADVISORS, INC.
Attest: /s/ SAMUEL D. SIRKO By: /s/ ROBERT H. GRAHAM
---------------------------- ---------------------------------
Assistant Secretary President
(SEAL)
AIM FUNDS GROUP
Attest: /s/ SAMUEL D. SIRKO By: /s/ ROBERT H. GRAHAM
---------------------------- ---------------------------------
Assistant Secretary President
(SEAL)
<PAGE> 1
EXHIBIT j(1)
CONSENT OF COUNSEL
AIM FUNDS GROUP
We hereby consent to the use of our name and to the reference to our firm
under the caption "Miscellaneous Information-Legal Matters" in the Statement of
Additional Information for 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, which is included in Post-Effective Amendment No. 76 to the Registration
Statement under the Securities Act of 1933, as amended (No. 2-27334) and
Amendment No. 76 to the Registration Statement under the Investment Company Act
of 1940, as amended (No. 811-1540) on Form N-1A of AIM Funds Group.
/s/ Ballard Spahr Andrews & Ingersoll, LLP
------------------------------------------
Ballard Spahr Andrews & Ingersoll, LLP
Philadelphia, Pennsylvania
April 14, 1999
<PAGE> 1
EXHIBIT j(2)
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees and Shareholders
AIM Funds Group:
We consent to the use of our reports on 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 (series portfolios of AIM Funds Group) dated February 5, 1999
included herein and the references to our firm under the headings "Financial
Highlights" in the Prospectuses and "Audit Reports" in the Statement of
Additional Information.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
April 14, 1999
<PAGE> 1
EXHIBIT m(7)(b)
AMENDMENT NO. 1
SECOND
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM FUNDS GROUP
(CLASS B SHARES)
(SECURITIZATION FEATURE)
The Second Amended and Restated Master Distribution Plan (the "Plan"), dated as
of June 30, 1997, pursuant to Rule 12b-1 of AIM Funds Group, a Delaware
business trust, is hereby amended as follows:
Schedule A of the Plan is hereby deleted in its entirety and replaced with
the following:
"SCHEDULE A
TO
MASTER DISTRIBUTION PLAN
OF
AIM FUNDS GROUP
(CLASS B SHARES)
(DISTRIBUTION FEE)
<TABLE>
<CAPTION>
MAXIMUM
ASSET-BASED SERVICE AGGREGATE
FUND SALES CHARGE FEE FEE
---- ------------ --- ---
<S> <C> <C> <C>
AIM Balanced Fund 0.75% 0.25% 1.00%
AIM Global Utilities Fund 0.75% 0.25% 1.00%
AIM Select Growth Fund 0.75% 0.25% 1.00%
AIM High Yield Fund 0.75% 0.25% 1.00%
AIM Income Fund 0.75% 0.25% 1.00%
AIM Intermediate Government Fund 0.75% 0.25% 1.00%
AIM Money Market Fund 0.75% 0.25% 1.00%
AIM Municipal Bond Fund 0.75% 0.25% 1.00%
AIM Value Fund 0.75% 0.25% 1.00%"
</TABLE>
<PAGE> 2
All other terms and provisions of the Plan not amended herein shall remain in
full force and effect.
Dated: May 1, 1998
AIM FUNDS GROUP
(on behalf of its Class B Shares)
Attest: /s/ SAMUEL D. SIRKO By: /s/ ROBERT H. GRAHAM
-------------------------- -------------------------------
Assistant Secretary President
-2-
<PAGE> 1
EXHIBIT m(8)(b)
AMENDMENT NO. 1
THIRD
AMENDED AND RESTATED
MASTER DISTRIBUTION PLAN
OF
AIM FUNDS GROUP
(CLASS A SHARES, CLASS C SHARES AND AIM CASH RESERVE SHARES)
The Third Amended and Restated Master Distribution Plan (the "Plan"),
dated as of June 30, 1998, pursuant to Rule 12b-1 of AIM Funds Group, a
Delaware business trust, is hereby amended as follows:
Schedule A of the Plan is hereby deleted in its entirety and replaced with
the following:
"SCHEDULE A
TO
MASTER DISTRIBUTION PLAN
OF
AIM FUNDS GROUP
(DISTRIBUTION FEE)
The Fund shall pay the Distributor as full compensation for all services
rendered and all facilities furnished under the Distribution Plan for each
Portfolio (or Class thereof) designated below, a Distribution Fee* determined
by applying the annual rate set forth below as to each Portfolio (or Class
thereof) to the average daily net assets of the Portfolio (or Class thereof)
for the plan year, computed in a manner used for the determination of the
offering price of shares of the Portfolio.
<TABLE>
<CAPTION>
MINIMUM
ASSET
PORTFOLIO BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
CLASS A SHARES CHARGE FEE FEE
-------------- ------ ----- -----
<S> <C> <C> <C>
AIM Balanced Fund 0.00% 0.25% 0.25%
AIM Global Utilities Fund 0.00% 0.25% 0.25%
AIM Select Growth Fund 0.00% 0.25% 0.25%
AIM High Yield Fund 0.00% 0.25% 0.25%
AIM Income Fund 0.00% 0.25% 0.25%
AIM Intermediate Government Fund 0.00% 0.25% 0.25%
AIM Municipal Bond Fund 0.00% 0.25% 0.25%
AIM Value Fund 0.00% 0.25% 0.25%
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
MINIMUM
ASSET
BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
CLASS C SHARES CHARGE FEE FEE
-------------- ------ ----- -----
<S> <C> <C> <C>
AIM Balanced Fund 0.75% 0.25% 1.00%
AIM Global Utilities Fund 0.75% 0.25% 1.00%
AIM Select Growth Fund 0.75% 0.25% 1.00%
AIM High Yield Fund 0.75% 0.25% 1.00%
AIM Income Fund 0.75% 0.25% 1.00%
AIM Intermediate Government Fund 0.75% 0.25% 1.00%
AIM Money Market Fund 0.75% 0.25% 1.00%
AIM Municipal Bond Fund 0.75% 0.25% 1.00%
AIM Value Fund 0.75% 0.25% 1.00%
AIM CASH RESERVE SHARES
-----------------------
AIM Money Market Fund 0.00% 0.25% 0.25%
</TABLE>
The Distributor will waive part or all of its Distribution Fee as to a
Portfolio (or Class thereof) to the extent that the ordinary business expenses
of the Portfolio exceed the expense limitation as to the Portfolio (if any) as
contained in the Master Investment Advisory Agreement between the Company and A
I M Advisors, Inc.
- -----------------
* The Distribution Fee is payable apart from the sales charge, if any, as
stated in the current prospectus for the applicable Portfolio (or Class
thereof). "
All other terms and provisions of the Plan not amended herein shall remain
in full force and effect.
Dated: December 21, 1998
AIM FUNDS GROUP
(on behalf of its Class A Shares,
Class C Shares and
AIM Cash Reserve Shares)
Attest: /s/ SAMUEL D. SIRKO By: /s/ ROBERT H. GRAHAM
------------------------------ -------------------------------
Assistant Secretary President
-2-
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from the AIM Balanced Fund
Class A Shares December 31, 1998 annual report.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> AIM BALANCED FUND CLASS A SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 1,923,193,386
<INVESTMENTS-AT-VALUE> 2,307,572,144
<RECEIVABLES> 32,234,634
<ASSETS-OTHER> 98,716
<OTHER-ITEMS-ASSETS> 319,763
<TOTAL-ASSETS> 2,340,225,257
<PAYABLE-FOR-SECURITIES> 4,878,740
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,788,518
<TOTAL-LIABILITIES> 13,667,258
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,957,247,969
<SHARES-COMMON-STOCK> 82,472,294
<SHARES-COMMON-PRIOR> 45,778,308
<ACCUMULATED-NII-CURRENT> 5,899,149
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (35,281,724)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 398,692,605
<NET-ASSETS> 2,326,557,999
<DIVIDEND-INCOME> 11,932,232
<INTEREST-INCOME> 53,301,282
<OTHER-INCOME> 0
<EXPENSES-NET> (22,581,768)
<NET-INVESTMENT-INCOME> 42,651,746
<REALIZED-GAINS-CURRENT> (34,961,701)
<APPREC-INCREASE-CURRENT> 202,514,022
<NET-CHANGE-FROM-OPS> 210,204,067
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (38,435,217)
<DISTRIBUTIONS-OF-GAINS> (5,277,080)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 50,034,887
<NUMBER-OF-SHARES-REDEEMED> (14,760,415)
<SHARES-REINVESTED> 1,419,514
<NET-CHANGE-IN-ASSETS> 1,147,025,763
<ACCUMULATED-NII-PRIOR> 20,023,353
<ACCUMULATED-GAINS-PRIOR> 4,957,057
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,043,320
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 22,618,516
<AVERAGE-NET-ASSETS> 976,072,030
<PER-SHARE-NAV-BEGIN> 25.78
<PER-SHARE-NII> 0.71
<PER-SHARE-GAIN-APPREC> 2.45
<PER-SHARE-DIVIDEND> (0.65)
<PER-SHARE-DISTRIBUTIONS> (0.06)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 28.23
<EXPENSE-RATIO> 0.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE AIM BALANCED FUND
CLASS B SHARES DECEMBER 31, 1998 ANNUAL REPORT.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> AIM BALANCED FUND CLASS B SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 1,923,193,386
<INVESTMENTS-AT-VALUE> 2,307,572,144
<RECEIVABLES> 32,234,634
<ASSETS-OTHER> 98,716
<OTHER-ITEMS-ASSETS> 319,763
<TOTAL-ASSETS> 2,340,225,257
<PAYABLE-FOR-SECURITIES> 4,878,740
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,788,518
<TOTAL-LIABILITIES> 13,667,258
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,957,247,969
<SHARES-COMMON-STOCK> 82,472,294
<SHARES-COMMON-PRIOR> 45,778,308
<ACCUMULATED-NII-CURRENT> 5,899,149
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (35,281,724)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 398,692,605
<NET-ASSETS> 2,326,557,999
<DIVIDEND-INCOME> 11,932,232
<INTEREST-INCOME> 53,301,282
<OTHER-INCOME> 0
<EXPENSES-NET> (22,581,768)
<NET-INVESTMENT-INCOME> 42,651,746
<REALIZED-GAINS-CURRENT> (34,961,701)
<APPREC-INCREASE-CURRENT> (202,514,022)
<NET-CHANGE-FROM-OPS> 210,204,067
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (38,435,217)
<DISTRIBUTIONS-OF-GAINS> (5,277,080)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 50,034,887
<NUMBER-OF-SHARES-REDEEMED> (14,760,415)
<SHARES-REINVESTED> 1,419,514
<NET-CHANGE-IN-ASSETS> 1,147,025,763
<ACCUMULATED-NII-PRIOR> 20,023,353
<ACCUMULATED-GAINS-PRIOR> 4,957,057
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,043,320
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 22,618,516
<AVERAGE-NET-ASSETS> 694,890,554
<PER-SHARE-NAV-BEGIN> 25.75
<PER-SHARE-NII> 0.51
<PER-SHARE-GAIN-APPREC> 2.42
<PER-SHARE-DIVIDEND> (0.44)
<PER-SHARE-DISTRIBUTIONS> (0.06)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 28.18
<EXPENSE-RATIO> 1.76
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE AIM BALANCED FUND
CLASS C SHARES DECEMBER 31, 1998 ANNUAL REPORT.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> AIM BALANCED FUND CLASS C SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 1,923,193,386
<INVESTMENTS-AT-VALUE> 2,307,572,144
<RECEIVABLES> 32,234,634
<ASSETS-OTHER> 98,716
<OTHER-ITEMS-ASSETS> 319,763
<TOTAL-ASSETS> 2,340,225,257
<PAYABLE-FOR-SECURITIES> 4,878,740
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,788,518
<TOTAL-LIABILITIES> 13,667,258
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,957,247,969
<SHARES-COMMON-STOCK> 82,472,294
<SHARES-COMMON-PRIOR> 45,778,308
<ACCUMULATED-NII-CURRENT> 5,899,149
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (35,281,724)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 398,692,605
<NET-ASSETS> 2,326,557,999
<DIVIDEND-INCOME> 11,932,232
<INTEREST-INCOME> 53,301,282
<OTHER-INCOME> 0
<EXPENSES-NET> (22,581,768)
<NET-INVESTMENT-INCOME> 42,651,746
<REALIZED-GAINS-CURRENT> (34,961,701)
<APPREC-INCREASE-CURRENT> 202,514,022
<NET-CHANGE-FROM-OPS> 210,204,067
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (38,435,217)
<DISTRIBUTIONS-OF-GAINS> (5,277,080)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 50,034,887
<NUMBER-OF-SHARES-REDEEMED> (14,760,415)
<SHARES-REINVESTED> 1,419,514
<NET-CHANGE-IN-ASSETS> 1,147,025,763
<ACCUMULATED-NII-PRIOR> 20,023,353
<ACCUMULATED-GAINS-PRIOR> 4,957,057
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,043,320
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 22,618,516
<AVERAGE-NET-ASSETS> 62,701,487
<PER-SHARE-NAV-BEGIN> 25.76
<PER-SHARE-NII> 0.45
<PER-SHARE-GAIN-APPREC> 2.50
<PER-SHARE-DIVIDEND> (0.44)
<PER-SHARE-DISTRIBUTIONS> (0.06)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 28.21
<EXPENSE-RATIO> 1.73
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from the AIM Global
Utilities Fund Class A Shares December 31, 1998 annual report.
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> AIM GLOBAL UTILITIES FUND CLASS A SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 198,416,205
<INVESTMENTS-AT-VALUE> 311,166,578
<RECEIVABLES> 1,845,775
<ASSETS-OTHER> 38,834
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 313,051,187
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,525,663
<TOTAL-LIABILITIES> 1,525,663
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 198,796,429
<SHARES-COMMON-STOCK> 14,838,123
<SHARES-COMMON-PRIOR> 14,276,621
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (68,800)
<ACCUMULATED-NET-GAINS> 46,323
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 112,751,572
<NET-ASSETS> 311,525,524
<DIVIDEND-INCOME> 5,939,307
<INTEREST-INCOME> 4,083,371
<OTHER-INCOME> 0
<EXPENSES-NET> (3,858,951)
<NET-INVESTMENT-INCOME> 6,163,727
<REALIZED-GAINS-CURRENT> 11,466,949
<APPREC-INCREASE-CURRENT> 25,167,621
<NET-CHANGE-FROM-OPS> 42,798,297
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,974,239)
<DISTRIBUTIONS-OF-GAINS> (11,424,349)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,345,927
<NUMBER-OF-SHARES-REDEEMED> (3,557,063)
<SHARES-REINVESTED> 772,638
<NET-CHANGE-IN-ASSETS> 36,659,230
<ACCUMULATED-NII-PRIOR> 78,008
<ACCUMULATED-GAINS-PRIOR> 567,427
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,652,662
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,863,063
<AVERAGE-NET-ASSETS> 187,100,175
<PER-SHARE-NAV-BEGIN> 19.26
<PER-SHARE-NII> 0.48
<PER-SHARE-GAIN-APPREC> 2.53
<PER-SHARE-DIVIDEND> (0.46)
<PER-SHARE-DISTRIBUTIONS> (0.80)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 21.01
<EXPENSE-RATIO> 1.06
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from the AIM Global
Utilities Fund Class B Shares December 31, 1998 annual report.
</LEGEND>
<SERIES>
<NUMBER> 5
<NAME> AIM GLOBAL UTILITIES FUND CLASS B SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 198,416,205
<INVESTMENTS-AT-VALUE> 311,166,578
<RECEIVABLES> 1,845,775
<ASSETS-OTHER> 38,834
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 313,051,187
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,525,663
<TOTAL-LIABILITIES> 1,525,663
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 198,796,429
<SHARES-COMMON-STOCK> 14,838,123
<SHARES-COMMON-PRIOR> 14,276,621
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (68,800)
<ACCUMULATED-NET-GAINS> 46,323
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 112,751,572
<NET-ASSETS> 311,525,524
<DIVIDEND-INCOME> 5,939,307
<INTEREST-INCOME> 4,083,371
<OTHER-INCOME> 0
<EXPENSES-NET> (3,858,951)
<NET-INVESTMENT-INCOME> 6,163,727
<REALIZED-GAINS-CURRENT> 11,466,949
<APPREC-INCREASE-CURRENT> 25,167,621
<NET-CHANGE-FROM-OPS> 42,798,297
<EQUALIZATION> 9
<DISTRIBUTIONS-OF-INCOME> (5,974,239)
<DISTRIBUTIONS-OF-GAINS> (11,424,349)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,345,927
<NUMBER-OF-SHARES-REDEEMED> (3,557,063)
<SHARES-REINVESTED> 772,638
<NET-CHANGE-IN-ASSETS> 36,659,230
<ACCUMULATED-NII-PRIOR> 78,008
<ACCUMULATED-GAINS-PRIOR> 567,427
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,652,662
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,863,063
<AVERAGE-NET-ASSETS> 101,900,371
<PER-SHARE-NAV-BEGIN> 19.24
<PER-SHARE-NII> 0.33
<PER-SHARE-GAIN-APPREC> 2.53
<PER-SHARE-DIVIDEND> (0.32)
<PER-SHARE-DISTRIBUTIONS> (0.80)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 20.98
<EXPENSE-RATIO> 1.81
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE AIM GLOBAL
UTILITIES FUND CLASS C SHARES DECEMBER 31, 1998 ANNUAL REPORT.
</LEGEND>
<SERIES>
<NUMBER> 6
<NAME> AIM GLOBAL UTILITIES FUND CLASS C SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 198,416,205
<INVESTMENTS-AT-VALUE> 311,166,578
<RECEIVABLES> 1,845,775
<ASSETS-OTHER> 38,834
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 313,051,187
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,525,663
<TOTAL-LIABILITIES> 1,525,663
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 198,796,429
<SHARES-COMMON-STOCK> 14,838,123
<SHARES-COMMON-PRIOR> 14,276,621
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (68,800)
<ACCUMULATED-NET-GAINS> 46,323
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 112,751,572
<NET-ASSETS> 311,525,524
<DIVIDEND-INCOME> 5,939,307
<INTEREST-INCOME> 4,083,371
<OTHER-INCOME> 0
<EXPENSES-NET> (3,858,951)
<NET-INVESTMENT-INCOME> 6,163,727
<REALIZED-GAINS-CURRENT> 11,466,949
<APPREC-INCREASE-CURRENT> 25,167,621
<NET-CHANGE-FROM-OPS> 42,798,297
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,974,239)
<DISTRIBUTIONS-OF-GAINS> (11,424,349)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,345,927
<NUMBER-OF-SHARES-REDEEMED> (3,557,063)
<SHARES-REINVESTED> 772,638
<NET-CHANGE-IN-ASSETS> 36,659,230
<ACCUMULATED-NII-PRIOR> 78,008
<ACCUMULATED-GAINS-PRIOR> 567,427
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,652,662
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,863,063
<AVERAGE-NET-ASSETS> 1,531,963
<PER-SHARE-NAV-BEGIN> 19.24
<PER-SHARE-NII> 0.33
<PER-SHARE-GAIN-APPREC> 2.52
<PER-SHARE-DIVIDEND> (0.32)
<PER-SHARE-DISTRIBUTIONS> (0.80)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 20.97
<EXPENSE-RATIO> 1.81
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from the AIM High Yield
Fund Class A Shares December 31, 1998 annual report.
</LEGEND>
<SERIES>
<NUMBER> 7
<NAME> AIM HIGH YIELD FUND CLASS A SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 3,772,373,650
<INVESTMENTS-AT-VALUE> 3,554,427,993
<RECEIVABLES> 91,475,539
<ASSETS-OTHER> 182,334
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,646,085,866
<PAYABLE-FOR-SECURITIES> 904,456
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 40,172,275
<TOTAL-LIABILITIES> 41,076,731
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,011,736,919
<SHARES-COMMON-STOCK> 411,308,200
<SHARES-COMMON-PRIOR> 340,663,405
<ACCUMULATED-NII-CURRENT> 5,490,138
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (194,272,265)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (217,945,657)
<NET-ASSETS> 3,605,009,135
<DIVIDEND-INCOME> 1,259,674
<INTEREST-INCOME> 380,935,260
<OTHER-INCOME> 0
<EXPENSES-NET> (45,938,701)
<NET-INVESTMENT-INCOME> 336,256,233
<REALIZED-GAINS-CURRENT> (188,887,632)
<APPREC-INCREASE-CURRENT> (359,473,146)
<NET-CHANGE-FROM-OPS> (212,104,545)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (335,606,066)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 226,380,736
<NUMBER-OF-SHARES-REDEEMED> (176,341,084)
<SHARES-REINVESTED> 20,605,143
<NET-CHANGE-IN-ASSETS> 144,679,709
<ACCUMULATED-NII-PRIOR> 4,691,600
<ACCUMULATED-GAINS-PRIOR> (18,493,312)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 17,600,312
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 46,155,776
<AVERAGE-NET-ASSETS> 1,808,645,166
<PER-SHARE-NAV-BEGIN> 10.16
<PER-SHARE-NII> 0.92
<PER-SHARE-GAIN-APPREC> (1.40)
<PER-SHARE-DIVIDEND> (0.91)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.77
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from the AIM High Yield
Fund Class B Shares December 31, 1998 annual report.
</LEGEND>
<SERIES>
<NUMBER> 8
<NAME> AIM HIGH YIELD FUND CLASS B SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 3,772,373,650
<INVESTMENTS-AT-VALUE> 3,554,427,993
<RECEIVABLES> 91,475,539
<ASSETS-OTHER> 182,334
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,646,085,866
<PAYABLE-FOR-SECURITIES> 904,456
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 40,172,275
<TOTAL-LIABILITIES> 41,076,731
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,011,736,919
<SHARES-COMMON-STOCK> 411,308,200
<SHARES-COMMON-PRIOR> 340,663,405
<ACCUMULATED-NII-CURRENT> 5,490,138
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (194,272,265)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (217,945,657)
<NET-ASSETS> 3,605,009,135
<DIVIDEND-INCOME> 1,259,674
<INTEREST-INCOME> 380,935,260
<OTHER-INCOME> 0
<EXPENSES-NET> (45,938,701)
<NET-INVESTMENT-INCOME> 336,256,233
<REALIZED-GAINS-CURRENT> (188,887,632)
<APPREC-INCREASE-CURRENT> (359,473,146)
<NET-CHANGE-FROM-OPS> (212,104,545)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (335,606,066)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 226,380,736
<NUMBER-OF-SHARES-REDEEMED> (176,341,084)
<SHARES-REINVESTED> 20,605,143
<NET-CHANGE-IN-ASSETS> 144,679,709
<ACCUMULATED-NII-PRIOR> 4,691,600
<ACCUMULATED-GAINS-PRIOR> (18,493,312)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 17,600,312
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 46,155,776
<AVERAGE-NET-ASSETS> 1,826,458,676
<PER-SHARE-NAV-BEGIN> 10.16
<PER-SHARE-NII> 0.84
<PER-SHARE-GAIN-APPREC> (1.40)
<PER-SHARE-DIVIDEND> (0.84)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.76
<EXPENSE-RATIO> 1.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from the AIM High Yield
Fund Class C Shares December 31, 1998 annual report.
</LEGEND>
<SERIES>
<NUMBER> 9
<NAME> AIM HIGH YIELD FUND CLASS C SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 3,772,373,650
<INVESTMENTS-AT-VALUE> 3,554,427,993
<RECEIVABLES> 91,475,539
<ASSETS-OTHER> 182,334
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,646,085,866
<PAYABLE-FOR-SECURITIES> 904,456
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 40,172,275
<TOTAL-LIABILITIES> 41,076,731
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,011,736,919
<SHARES-COMMON-STOCK> 411,308,200
<SHARES-COMMON-PRIOR> 340,663,405
<ACCUMULATED-NII-CURRENT> 5,490,138
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (194,272,265)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (217,945,657)
<NET-ASSETS> 3,605,009,135
<DIVIDEND-INCOME> 1,259,674
<INTEREST-INCOME> 380,935,260
<OTHER-INCOME> 0
<EXPENSES-NET> (45,938,701)
<NET-INVESTMENT-INCOME> 336,256,233
<REALIZED-GAINS-CURRENT> (188,887,632)
<APPREC-INCREASE-CURRENT> (359,473,146)
<NET-CHANGE-FROM-OPS> (212,104,545)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (335,606,066)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 226,380,736
<NUMBER-OF-SHARES-REDEEMED> (176,341,084)
<SHARES-REINVESTED> 20,605,143
<NET-CHANGE-IN-ASSETS> 144,679,709
<ACCUMULATED-NII-PRIOR> 4,691,600
<ACCUMULATED-GAINS-PRIOR> (18,493,312)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 17,600,312
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 46,155,776
<AVERAGE-NET-ASSETS> 76,076,559
<PER-SHARE-NAV-BEGIN> 10.14
<PER-SHARE-NII> 0.82
<PER-SHARE-GAIN-APPREC> (1.38)
<PER-SHARE-DIVIDEND> (0.84)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.74
<EXPENSE-RATIO> 1.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from the AIM Income Fund
Class A Shares December 31, 1998 annual report.
</LEGEND>
<SERIES>
<NUMBER> 10
<NAME> AIM INCOME FUND CLASS A SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 610,671,930
<INVESTMENTS-AT-VALUE> 627,125,739
<RECEIVABLES> 14,246,936
<ASSETS-OTHER> 115,542
<OTHER-ITEMS-ASSETS> 275,091
<TOTAL-ASSETS> 641,763,308
<PAYABLE-FOR-SECURITIES> 313,693
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,384,103
<TOTAL-LIABILITIES> 3,697,796
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 624,536,057
<SHARES-COMMON-STOCK> 76,166,357
<SHARES-COMMON-PRIOR> 54,766,358
<ACCUMULATED-NII-CURRENT> 68,804
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,384,384)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,845,035
<NET-ASSETS> 638,065,512
<DIVIDEND-INCOME> 905,180
<INTEREST-INCOME> 40,914,357
<OTHER-INCOME> 0
<EXPENSES-NET> (6,335,442)
<NET-INVESTMENT-INCOME> 35,484,095
<REALIZED-GAINS-CURRENT> (2,670,536)
<APPREC-INCREASE-CURRENT> (8,393,729)
<NET-CHANGE-FROM-OPS> 24,419,830
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (33,993,941)
<DISTRIBUTIONS-OF-GAINS> (3,986,821)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36,045,060
<NUMBER-OF-SHARES-REDEEMED> (18,242,818)
<SHARES-REINVESTED> 3,597,757
<NET-CHANGE-IN-ASSETS> 169,035,681
<ACCUMULATED-NII-PRIOR> (57,239)
<ACCUMULATED-GAINS-PRIOR> 1,908,862
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,375,487
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,345,948
<AVERAGE-NET-ASSETS> 373,145,874
<PER-SHARE-NAV-BEGIN> 8.57
<PER-SHARE-NII> 0.57
<PER-SHARE-GAIN-APPREC> (0.16)
<PER-SHARE-DIVIDEND> (0.55)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.38
<EXPENSE-RATIO> 0.91
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from the AIM Income Fund
Class B Shares December 31, 1998 annual report.
</LEGEND>
<SERIES>
<NUMBER> 11
<NAME> AIM INCOME FUND CLASS B SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 610,671,930
<INVESTMENTS-AT-VALUE> 627,125,739
<RECEIVABLES> 14,246,936
<ASSETS-OTHER> 115,542
<OTHER-ITEMS-ASSETS> 275,091
<TOTAL-ASSETS> 641,763,308
<PAYABLE-FOR-SECURITIES> 313,693
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,384,103
<TOTAL-LIABILITIES> 3,697,796
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 624,536,057
<SHARES-COMMON-STOCK> 76,166,357
<SHARES-COMMON-PRIOR> 54,766,358
<ACCUMULATED-NII-CURRENT> 68,804
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,384,384)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,845,035
<NET-ASSETS> 638,065,512
<DIVIDEND-INCOME> 905,180
<INTEREST-INCOME> 40,914,357
<OTHER-INCOME> 0
<EXPENSES-NET> (6,335,442)
<NET-INVESTMENT-INCOME> 35,484,095
<REALIZED-GAINS-CURRENT> (2,670,536)
<APPREC-INCREASE-CURRENT> (8,393,729)
<NET-CHANGE-FROM-OPS> 24,419,830
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (33,993,941)
<DISTRIBUTIONS-OF-GAINS> (3,986,821)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36,045,060
<NUMBER-OF-SHARES-REDEEMED> (18,242,818)
<SHARES-REINVESTED> 3,597,757
<NET-CHANGE-IN-ASSETS> 169,035,681
<ACCUMULATED-NII-PRIOR> (57,239)
<ACCUMULATED-GAINS-PRIOR> 1,908,862
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,375,487
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,345,948
<AVERAGE-NET-ASSETS> 167,031,738
<PER-SHARE-NAV-BEGIN> 8.55
<PER-SHARE-NII> 0.50
<PER-SHARE-GAIN-APPREC> (0.15)
<PER-SHARE-DIVIDEND> (0.48)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.37
<EXPENSE-RATIO> 1.66
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from the AIM Income Fund
Class C Shares December 31, 1998 annual report.
</LEGEND>
<SERIES>
<NUMBER> 12
<NAME> AIM INCOME FUND CLASS C SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 610,671,930
<INVESTMENTS-AT-VALUE> 627,125,739
<RECEIVABLES> 14,246,936
<ASSETS-OTHER> 115,542
<OTHER-ITEMS-ASSETS> 275,091
<TOTAL-ASSETS> 641,763,308
<PAYABLE-FOR-SECURITIES> 313,693
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,384,103
<TOTAL-LIABILITIES> 3,697,796
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 624,536,057
<SHARES-COMMON-STOCK> 76,166,357
<SHARES-COMMON-PRIOR> 54,766,358
<ACCUMULATED-NII-CURRENT> 68,804
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,384,384)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,845,035
<NET-ASSETS> 638,065,512
<DIVIDEND-INCOME> 905,180
<INTEREST-INCOME> 40,914,357
<OTHER-INCOME> 0
<EXPENSES-NET> (6,335,442)
<NET-INVESTMENT-INCOME> 35,484,095
<REALIZED-GAINS-CURRENT> (2,670,536)
<APPREC-INCREASE-CURRENT> (8,393,729)
<NET-CHANGE-FROM-OPS> 24,419,830
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (33,993,941)
<DISTRIBUTIONS-OF-GAINS> (3,986,821)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36,045,060
<NUMBER-OF-SHARES-REDEEMED> (18,242,818)
<SHARES-REINVESTED> 3,597,757
<NET-CHANGE-IN-ASSETS> 169,035,681
<ACCUMULATED-NII-PRIOR> (57,239)
<ACCUMULATED-GAINS-PRIOR> 1,908,862
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,375,487
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,345,948
<AVERAGE-NET-ASSETS> 9,961,552
<PER-SHARE-NAV-BEGIN> 8.54
<PER-SHARE-NII> 0.50
<PER-SHARE-GAIN-APPREC> (0.15)
<PER-SHARE-DIVIDEND> (0.48)
<PER-SHARE-DISTRIBUTIONS> (0.05)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.36
<EXPENSE-RATIO> 1.66
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE AIM INTERMEDIATE
GOVERNMENT FUND CLASS A SHARES DECEMBER 31, 1998 ANNUAL REPORT.
</LEGEND>
<SERIES>
<NUMBER> 13
<NAME> AIM INTERMEDIATE GOVERNMENT FUND CLASS A SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 683,826,841
<INVESTMENTS-AT-VALUE> 690,260,357
<RECEIVABLES> 15,397,916
<ASSETS-OTHER> 97,252
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 705,755,525
<PAYABLE-FOR-SECURITIES> 175,422,691
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,775,320
<TOTAL-LIABILITIES> 184,198,011
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 524,340,223
<SHARES-COMMON-STOCK> 54,441,929
<SHARES-COMMON-PRIOR> 27,338,670
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (42,488)
<ACCUMULATED-NET-GAINS> (9,173,737)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,433,516
<NET-ASSETS> 521,557,514
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 26,948,269
<OTHER-INCOME> 0
<EXPENSES-NET> (5,467,188)
<NET-INVESTMENT-INCOME> 21,481,081
<REALIZED-GAINS-CURRENT> 6,570,449
<APPREC-INCREASE-CURRENT> (2,570,929)
<NET-CHANGE-FROM-OPS> 25,480,601
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (21,937,582)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 63,933,193
<NUMBER-OF-SHARES-REDEEMED> (38,610,226)
<SHARES-REINVESTED> 1,780,292
<NET-CHANGE-IN-ASSETS> 263,014,308
<ACCUMULATED-NII-PRIOR> (32,484)
<ACCUMULATED-GAINS-PRIOR> (15,413,635)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,611,515
<INTEREST-EXPENSE> 851,004
<GROSS-EXPENSE> 5,471,141
<AVERAGE-NET-ASSETS> 191,512,442
<PER-SHARE-NAV-BEGIN> 9.46
<PER-SHARE-NII> 0.62
<PER-SHARE-GAIN-APPREC> 0.13
<PER-SHARE-DIVIDEND> (0.63)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.58
<EXPENSE-RATIO> 0.96
<AVG-DEBT-OUTSTANDING> 13,966
<AVG-DEBT-PER-SHARE> 0.69
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE AIM INTERMEDIATE
GOVERNMENT FUND CLASS B SHARES DECEMBER 31, 1998 ANNUAL REPORT.
</LEGEND>
<SERIES>
<NUMBER> 14
<NAME> AIM INTERMEDIATE GOVERNMENT FUND CLASS B SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 683,826,841
<INVESTMENTS-AT-VALUE> 690,260,357
<RECEIVABLES> 15,397,916
<ASSETS-OTHER> 97,252
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 705,755,525
<PAYABLE-FOR-SECURITIES> 175,422,691
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,775,320
<TOTAL-LIABILITIES> 184,198,011
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 524,340,223
<SHARES-COMMON-STOCK> 54,441,929
<SHARES-COMMON-PRIOR> 27,338,670
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (42,488)
<ACCUMULATED-NET-GAINS> (9,173,737)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,433,516
<NET-ASSETS> 521,557,514
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 26,948,269
<OTHER-INCOME> 0
<EXPENSES-NET> (5,467,188)
<NET-INVESTMENT-INCOME> 21,481,081
<REALIZED-GAINS-CURRENT> 6,570,449
<APPREC-INCREASE-CURRENT> (2,570,929)
<NET-CHANGE-FROM-OPS> 25,480,601
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (21,937,582)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 63,933,193
<NUMBER-OF-SHARES-REDEEMED> (38,610,226)
<SHARES-REINVESTED> 1,780,292
<NET-CHANGE-IN-ASSETS> 263,014,308
<ACCUMULATED-NII-PRIOR> (32,484)
<ACCUMULATED-GAINS-PRIOR> (15,413,635)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,611,515
<INTEREST-EXPENSE> 851,004
<GROSS-EXPENSE> 5,471,141
<AVERAGE-NET-ASSETS> 136,546,632
<PER-SHARE-NAV-BEGIN> 9.46
<PER-SHARE-NII> 0.55
<PER-SHARE-GAIN-APPREC> 0.13
<PER-SHARE-DIVIDEND> (0.55)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.59
<EXPENSE-RATIO> 1.72
<AVG-DEBT-OUTSTANDING> 9,957
<AVG-DEBT-PER-SHARE> 0.69
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from the AIM Intermediate
Government Fund Class C Shares December 31, 1998 annual report.
</LEGEND>
<SERIES>
<NUMBER> 15
<NAME> AIM INTERMEDIATE GOVERNMENT FUND CLASS C SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 683,826,841
<INVESTMENTS-AT-VALUE> 690,260,357
<RECEIVABLES> 15,397,916
<ASSETS-OTHER> 97,252
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 705,755,525
<PAYABLE-FOR-SECURITIES> 175,422,691
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,775,320
<TOTAL-LIABILITIES> 184,198,011
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 524,340,223
<SHARES-COMMON-STOCK> 54,441,929
<SHARES-COMMON-PRIOR> 27,338,670
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (42,488)
<ACCUMULATED-NET-GAINS> (9,173,737)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,433,516
<NET-ASSETS> 521,557,514
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 26,948,269
<OTHER-INCOME> 0
<EXPENSES-NET> (5,467,188)
<NET-INVESTMENT-INCOME> 21,481,081
<REALIZED-GAINS-CURRENT> 6,570,449
<APPREC-INCREASE-CURRENT> (2,570,929)
<NET-CHANGE-FROM-OPS> 25,480,601
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (21,937,582)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 63,933,193
<NUMBER-OF-SHARES-REDEEMED> (38,610,226)
<SHARES-REINVESTED> 1,780,292
<NET-CHANGE-IN-ASSETS> 263,014,308
<ACCUMULATED-NII-PRIOR> (32,484)
<ACCUMULATED-GAINS-PRIOR> (15,413,635)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,611,515
<INTEREST-EXPENSE> 851,004
<GROSS-EXPENSE> 5,471,141
<AVERAGE-NET-ASSETS> 24,819,682
<PER-SHARE-NAV-BEGIN> 9.44
<PER-SHARE-NII> 0.56
<PER-SHARE-GAIN-APPREC> 0.11
<PER-SHARE-DIVIDEND> (0.55)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.56
<EXPENSE-RATIO> 1.72
<AVG-DEBT-OUTSTANDING> 1,810
<AVG-DEBT-PER-SHARE> 0.69
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from the AIM Money Market
Fund Class B Shares December 31, 1998 annual report.
</LEGEND>
<SERIES>
<NUMBER> 16
<NAME> AIM MONEY MARKET FUND CLASS B SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 1,484,612,020
<INVESTMENTS-AT-VALUE> 1,484,612,020
<RECEIVABLES> 112,491,027
<ASSETS-OTHER> 428,401
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,597,531,448
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 80,534,791
<TOTAL-LIABILITIES> 80,534,791
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,516,959,549
<SHARES-COMMON-STOCK> 1,516,959,549
<SHARES-COMMON-PRIOR> 844,439,320
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 37,108
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,516,996,657
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 59,499,145
<OTHER-INCOME> 0
<EXPENSES-NET> (12,604,891)
<NET-INVESTMENT-INCOME> 46,894,254
<REALIZED-GAINS-CURRENT> 2,781
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 46,897,035
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (46,894,254)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20,371,957,716
<NUMBER-OF-SHARES-REDEEMED> (19,736,745,598)
<SHARES-REINVESTED> 37,308,111
<NET-CHANGE-IN-ASSETS> 672,523,010
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,891,106
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,616,463
<AVERAGE-NET-ASSETS> 176,756,795
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.04)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.81
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from the AIM Money Market
Fund Class C Shares December 31, 1998 annual report.
</LEGEND>
<SERIES>
<NUMBER> 17
<NAME> AIM MONEY MARKET FUND CLASS C SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 1,484,612,020
<INVESTMENTS-AT-VALUE> 1,484,612,020
<RECEIVABLES> 112,491,027
<ASSETS-OTHER> 428,401
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,597,531,448
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 80,534,791
<TOTAL-LIABILITIES> 80,534,791
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,516,959,549
<SHARES-COMMON-STOCK> 1,516,959,549
<SHARES-COMMON-PRIOR> 844,439,320
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 37,108
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,516,996,657
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 59,499,145
<OTHER-INCOME> 0
<EXPENSES-NET> (12,604,891)
<NET-INVESTMENT-INCOME> 46,894,254
<REALIZED-GAINS-CURRENT> 2,781
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 46,897,035
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (46,894,254)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20,371,957,716
<NUMBER-OF-SHARES-REDEEMED> (19,736,745,598)
<SHARES-REINVESTED> 37,308,111
<NET-CHANGE-IN-ASSETS> 672,523,010
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,891,106
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,616,463
<AVERAGE-NET-ASSETS> 17,638,255
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.04
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.04)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.81
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from the AIM Money Market
Fund Class Cash Reserve Shares December 31, 1998 annual report.
</LEGEND>
<SERIES>
<NUMBER> 18
<NAME> AIM MONEY MARKET FUND CLASS CASH RESERVE SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 1,484,612,020
<INVESTMENTS-AT-VALUE> 1,484,612,020
<RECEIVABLES> 112,491,027
<ASSETS-OTHER> 428,401
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,597,531,448
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 80,534,791
<TOTAL-LIABILITIES> 80,534,791
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,516,959,549
<SHARES-COMMON-STOCK> 1,516,959,549
<SHARES-COMMON-PRIOR> 844,439,320
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 37,108
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,516,996,657
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 59,499,145
<OTHER-INCOME> 0
<EXPENSES-NET> (12,604,891)
<NET-INVESTMENT-INCOME> 46,894,254
<REALIZED-GAINS-CURRENT> 2,781
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 46,897,035
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (46,894,254)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20,371,957,716
<NUMBER-OF-SHARES-REDEEMED> (19,736,745,598)
<SHARES-REINVESTED> 37,308,111
<NET-CHANGE-IN-ASSETS> 672,523,010
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,891,106
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 12,616,463
<AVERAGE-NET-ASSETS> 419,781,232
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from the AIM Municipal Bond
Fund Class A Shares December 31, 1998 annual report.
</LEGEND>
<SERIES>
<NUMBER> 19
<NAME> AIM MUNICIPAL BOND FUND CLASS A SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 379,395,507
<INVESTMENTS-AT-VALUE> 406,530,698
<RECEIVABLES> 8,355,477
<ASSETS-OTHER> 120,905
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 415,007,080
<PAYABLE-FOR-SECURITIES> 3,223,120
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,790,743
<TOTAL-LIABILITIES> 5,013,863
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 383,815,745
<SHARES-COMMON-STOCK> 49,059,780
<SHARES-COMMON-PRIOR> 43,917,067
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (73,902)
<ACCUMULATED-NET-GAINS> (883,817)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 27,135,191
<NET-ASSETS> 409,993,217
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 22,383,574
<OTHER-INCOME> 0
<EXPENSES-NET> (3,627,412)
<NET-INVESTMENT-INCOME> 18,756,162
<REALIZED-GAINS-CURRENT> 595,427
<APPREC-INCREASE-CURRENT> (197,391)
<NET-CHANGE-FROM-OPS> 19,154,198
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (18,862,942)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19,010,232
<NUMBER-OF-SHARES-REDEEMED> (15,098,937)
<SHARES-REINVESTED> 1,231,418
<NET-CHANGE-IN-ASSETS> 43,514,410
<ACCUMULATED-NII-PRIOR> (71,348)
<ACCUMULATED-GAINS-PRIOR> (1,479,244)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,738,038
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,631,673
<AVERAGE-NET-ASSETS> 322,592,733
<PER-SHARE-NAV-BEGIN> 8.34
<PER-SHARE-NII> 0.42
<PER-SHARE-GAIN-APPREC> 0.01
<PER-SHARE-DIVIDEND> (0.42)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.35
<EXPENSE-RATIO> 0.82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from the AIM Municipal Bond
Fund Class B Shares December 31, 1998 annual report.
</LEGEND>
<SERIES>
<NUMBER> 20
<NAME> AIM MUNICIPAL BOND FUND CLASS B SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 379,395,507
<INVESTMENTS-AT-VALUE> 406,530,698
<RECEIVABLES> 8,355,477
<ASSETS-OTHER> 120,905
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 415,007,080
<PAYABLE-FOR-SECURITIES> 3,223,120
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,790,743
<TOTAL-LIABILITIES> 5,013,863
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 383,815,745
<SHARES-COMMON-STOCK> 49,059,780
<SHARES-COMMON-PRIOR> 43,917,067
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (73,902)
<ACCUMULATED-NET-GAINS> (883,817)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 27,135,191
<NET-ASSETS> 409,993,217
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 22,383,574
<OTHER-INCOME> 0
<EXPENSES-NET> (3,627,412)
<NET-INVESTMENT-INCOME> 18,756,162
<REALIZED-GAINS-CURRENT> 595,427
<APPREC-INCREASE-CURRENT> (197,391)
<NET-CHANGE-FROM-OPS> 19,154,198
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (18,862,942)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19,010,232
<NUMBER-OF-SHARES-REDEEMED> (15,098,937)
<SHARES-REINVESTED> 1,231,418
<NET-CHANGE-IN-ASSETS> 43,514,410
<ACCUMULATED-NII-PRIOR> (71,348)
<ACCUMULATED-GAINS-PRIOR> (1,479,244)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,738,038
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,631,673
<AVERAGE-NET-ASSETS> 56,881,310
<PER-SHARE-NAV-BEGIN> 8.36
<PER-SHARE-NII> 0.36
<PER-SHARE-GAIN-APPREC> 0.01
<PER-SHARE-DIVIDEND> (0.36)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.37
<EXPENSE-RATIO> 1.57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from the AIM Municipal Bond
Fund Class C Shares December 31, 1998 annual report.
</LEGEND>
<SERIES>
<NUMBER> 21
<NAME> AIM MUNICIPAL BOND FUND CLASS C SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 379,395,507
<INVESTMENTS-AT-VALUE> 406,530,698
<RECEIVABLES> 8,355,477
<ASSETS-OTHER> 120,905
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 415,007,080
<PAYABLE-FOR-SECURITIES> 3,223,120
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,790,743
<TOTAL-LIABILITIES> 5,013,863
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 383,815,745
<SHARES-COMMON-STOCK> 49,059,780
<SHARES-COMMON-PRIOR> 43,917,067
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (73,902)
<ACCUMULATED-NET-GAINS> (883,817)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 27,135,191
<NET-ASSETS> 409,993,217
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 22,383,574
<OTHER-INCOME> 0
<EXPENSES-NET> (3,627,412)
<NET-INVESTMENT-INCOME> 18,756,162
<REALIZED-GAINS-CURRENT> 595,427
<APPREC-INCREASE-CURRENT> (197,391)
<NET-CHANGE-FROM-OPS> 19,154,198
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (18,862,942)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19,010,232
<NUMBER-OF-SHARES-REDEEMED> (15,098,937)
<SHARES-REINVESTED> 1,231,418
<NET-CHANGE-IN-ASSETS> 43,514,410
<ACCUMULATED-NII-PRIOR> (71,348)
<ACCUMULATED-GAINS-PRIOR> (1,479,244)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,738,038
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,631,673
<AVERAGE-NET-ASSETS> 5,035,467
<PER-SHARE-NAV-BEGIN> 8.35
<PER-SHARE-NII> 0.36
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.36)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.35
<EXPENSE-RATIO> 1.57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from the AIM Select Growth
Fund Class A Shares December 31, 1998 annual report.
</LEGEND>
<SERIES>
<NUMBER> 22
<NAME> AIM SELECT GROWTH FUND CLASS A SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 481,973,157
<INVESTMENTS-AT-VALUE> 747,947,949
<RECEIVABLES> 16,964,216
<ASSETS-OTHER> 126,693
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 765,038,858
<PAYABLE-FOR-SECURITIES> 5,243,174
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,148,914
<TOTAL-LIABILITIES> 8,392,088
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 494,529,257
<SHARES-COMMON-STOCK> 40,358,440
<SHARES-COMMON-PRIOR> 40,850,011
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (71,168)
<ACCUMULATED-NET-GAINS> (4,913,364)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 267,102,045
<NET-ASSETS> 756,646,770
<DIVIDEND-INCOME> 2,559,950
<INTEREST-INCOME> 3,261,372
<OTHER-INCOME> 0
<EXPENSES-NET> (10,355,006)
<NET-INVESTMENT-INCOME> (4,533,684)
<REALIZED-GAINS-CURRENT> 17,616,351
<APPREC-INCREASE-CURRENT> 148,755,001
<NET-CHANGE-FROM-OPS> 161,837,668
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (20,351,569)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 37,005,648
<NUMBER-OF-SHARES-REDEEMED> (38,603,592)
<SHARES-REINVESTED> 1,106,373
<NET-CHANGE-IN-ASSETS> 133,103,853
<ACCUMULATED-NII-PRIOR> (34,200)
<ACCUMULATED-GAINS-PRIOR> 6,119,260
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,362,261
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,367,173
<AVERAGE-NET-ASSETS> 280,671,673
<PER-SHARE-NAV-BEGIN> 15.67
<PER-SHARE-NII> (0.04)
<PER-SHARE-GAIN-APPREC> 4.24
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.52)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.35
<EXPENSE-RATIO> 1.11
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from the AIM Select Growth
Fund Class B Shares December 31, 1998 annual report.
</LEGEND>
<SERIES>
<NUMBER> 23
<NAME> AIM SELECT GROWTH FUND CLASS B SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 481,973,157
<INVESTMENTS-AT-VALUE> 747,947,949
<RECEIVABLES> 16,964,216
<ASSETS-OTHER> 126,693
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 765,038,858
<PAYABLE-FOR-SECURITIES> 5,243,174
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,148,914
<TOTAL-LIABILITIES> 8,392,088
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 494,529,257
<SHARES-COMMON-STOCK> 40,358,440
<SHARES-COMMON-PRIOR> 40,850,011
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (71,168)
<ACCUMULATED-NET-GAINS> (4,913,364)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 267,102,045
<NET-ASSETS> 756,646,770
<DIVIDEND-INCOME> 2,559,950
<INTEREST-INCOME> 3,261,372
<OTHER-INCOME> 0
<EXPENSES-NET> (10,355,006)
<NET-INVESTMENT-INCOME> (4,533,684)
<REALIZED-GAINS-CURRENT> 17,616,351
<APPREC-INCREASE-CURRENT> 148,755,001
<NET-CHANGE-FROM-OPS> 161,837,668
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (20,351,569)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 37,005,648
<NUMBER-OF-SHARES-REDEEMED> (38,603,592)
<SHARES-REINVESTED> 1,106,373
<NET-CHANGE-IN-ASSETS> 133,103,853
<ACCUMULATED-NII-PRIOR> (34,200)
<ACCUMULATED-GAINS-PRIOR> 6,119,260
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,362,261
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,367,173
<AVERAGE-NET-ASSETS> 371,022,634
<PER-SHARE-NAV-BEGIN> 14.98
<PER-SHARE-NII> (0.17)
<PER-SHARE-GAIN-APPREC> 4.04
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.52)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.33
<EXPENSE-RATIO> 1.93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE AIM SELECT GROWTH
FUND CLASS C SHARES DECEMBER 31, 1998 ANNUAL REPORT.
</LEGEND>
<SERIES>
<NUMBER> 24
<NAME> AIM SELECT GROWTH FUND CLASS C SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 481,973,157
<INVESTMENTS-AT-VALUE> 747,947,949
<RECEIVABLES> 16,964,216
<ASSETS-OTHER> 126,693
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 765,038,858
<PAYABLE-FOR-SECURITIES> 5,243,174
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,148,914
<TOTAL-LIABILITIES> 8,392,088
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 494,529,257
<SHARES-COMMON-STOCK> 40,358,440
<SHARES-COMMON-PRIOR> 40,850,011
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (71,168)
<ACCUMULATED-NET-GAINS> (4,913,364)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 267,102,045
<NET-ASSETS> 756,646,770
<DIVIDEND-INCOME> 2,559,950
<INTEREST-INCOME> 3,261,372
<OTHER-INCOME> 0
<EXPENSES-NET> (10,355,006)
<NET-INVESTMENT-INCOME> (4,533,684)
<REALIZED-GAINS-CURRENT> 17,616,351
<APPREC-INCREASE-CURRENT> 148,755,001
<NET-CHANGE-FROM-OPS> 161,837,668
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (20,351,569)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 37,005,648
<NUMBER-OF-SHARES-REDEEMED> (38,603,592)
<SHARES-REINVESTED> 1,106,373
<NET-CHANGE-IN-ASSETS> 133,103,853
<ACCUMULATED-NII-PRIOR> (34,200)
<ACCUMULATED-GAINS-PRIOR> 6,119,260
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,362,261
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,367,173
<AVERAGE-NET-ASSETS> 4,267,476
<PER-SHARE-NAV-BEGIN> 14.98
<PER-SHARE-NII> (0.17)
<PER-SHARE-GAIN-APPREC> 4.03
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.52)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.32
<EXPENSE-RATIO> 1.93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE AIM VALUE FUND
CLASS A SHARES DECEMBER 31, 1998 ANNUAL REPORT.
</LEGEND>
<SERIES>
<NUMBER> 25
<NAME> AIM VALUE FUND CLASS A SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 13,109,426,037
<INVESTMENTS-AT-VALUE> 18,758,301,513
<RECEIVABLES> 60,226,590
<ASSETS-OTHER> 5,944,905
<OTHER-ITEMS-ASSETS> 6,108
<TOTAL-ASSETS> 18,824,479,116
<PAYABLE-FOR-SECURITIES> 34,538,469
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 74,684,177
<TOTAL-LIABILITIES> 109,222,646
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,965,142,636
<SHARES-COMMON-STOCK> 471,594,668
<SHARES-COMMON-PRIOR> 423,334,607
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (391,429)
<ACCUMULATED-NET-GAINS> 96,971,065
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,653,534,198
<NET-ASSETS> 18,715,256,470
<DIVIDEND-INCOME> 126,900,270
<INTEREST-INCOME> 71,253,935
<OTHER-INCOME> 0
<EXPENSES-NET> (222,198,790)
<NET-INVESTMENT-INCOME> (24,044,585)
<REALIZED-GAINS-CURRENT> 1,197,383,660
<APPREC-INCREASE-CURRENT> 3,328,905,060
<NET-CHANGE-FROM-OPS> 4,502,244,135
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (18,008,475)
<DISTRIBUTIONS-OF-GAINS> (1,154,384,076)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 111,537,598
<NUMBER-OF-SHARES-REDEEMED> (92,801,134)
<SHARES-REINVESTED> 29,523,597
<NET-CHANGE-IN-ASSETS> 5,105,307,959
<ACCUMULATED-NII-PRIOR> 17,752,405
<ACCUMULATED-GAINS-PRIOR> 151,380,707
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 98,360,939
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 225,869,316
<AVERAGE-NET-ASSETS> 7,602,379,116
<PER-SHARE-NAV-BEGIN> 32.42
<PER-SHARE-NII> 0.09
<PER-SHARE-GAIN-APPREC> 10.38
<PER-SHARE-DIVIDEND> (0.09)
<PER-SHARE-DISTRIBUTIONS> (2.61)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 40.19
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE AIM VALUE FUND
CLASS B SHARES DECEMBER 31, 1998 ANNUAL REPORT.
</LEGEND>
<SERIES>
<NUMBER> 26
<NAME> AIM VALUE FUND CLASS B SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 13,109,426,037
<INVESTMENTS-AT-VALUE> 18,758,301,513
<RECEIVABLES> 60,226,590
<ASSETS-OTHER> 5,944,905
<OTHER-ITEMS-ASSETS> 6,108
<TOTAL-ASSETS> 18,824,479,116
<PAYABLE-FOR-SECURITIES> 34,538,469
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 74,684,177
<TOTAL-LIABILITIES> 109,222,646
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,965,142,636
<SHARES-COMMON-STOCK> 471,594,668
<SHARES-COMMON-PRIOR> 423,334,607
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (391,429)
<ACCUMULATED-NET-GAINS> 96,971,065
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,653,534,198
<NET-ASSETS> 18,715,256,470
<DIVIDEND-INCOME> 126,900,270
<INTEREST-INCOME> 71,253,935
<OTHER-INCOME> 0
<EXPENSES-NET> (222,198,790)
<NET-INVESTMENT-INCOME> (24,044,585)
<REALIZED-GAINS-CURRENT> 1,197,383,660
<APPREC-INCREASE-CURRENT> 3,328,905,060
<NET-CHANGE-FROM-OPS> 4,502,244,135
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (18,008,475)
<DISTRIBUTIONS-OF-GAINS> (1,154,384,076)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 111,537,598
<NUMBER-OF-SHARES-REDEEMED> (92,801,134)
<SHARES-REINVESTED> 29,523,597
<NET-CHANGE-IN-ASSETS> 5,105,307,959
<ACCUMULATED-NII-PRIOR> 17,752,405
<ACCUMULATED-GAINS-PRIOR> 151,380,707
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 98,360,939
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 225,869,316
<AVERAGE-NET-ASSETS> 7,981,928,079
<PER-SHARE-NAV-BEGIN> 31.89
<PER-SHARE-NII> (0.18)
<PER-SHARE-GAIN-APPREC> 10.14
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (2.61)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 39.24
<EXPENSE-RATIO> 1.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information from the AIM Value Fund
Class C Shares December 31, 1998 annual report.
</LEGEND>
<SERIES>
<NUMBER> 27
<NAME> AIM VALUE FUND CLASS C SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 13,109,426,037
<INVESTMENTS-AT-VALUE> 18,758,301,513
<RECEIVABLES> 60,226,590
<ASSETS-OTHER> 5,944,905
<OTHER-ITEMS-ASSETS> 6,108
<TOTAL-ASSETS> 18,824,479,116
<PAYABLE-FOR-SECURITIES> 34,538,469
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 74,684,177
<TOTAL-LIABILITIES> 109,222,646
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,965,142,636
<SHARES-COMMON-STOCK> 471,594,668
<SHARES-COMMON-PRIOR> 423,334,607
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (391,429)
<ACCUMULATED-NET-GAINS> 96,971,065
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,653,534,198
<NET-ASSETS> 18,715,256,470
<DIVIDEND-INCOME> 126,900,270
<INTEREST-INCOME> 71,253,935
<OTHER-INCOME> 0
<EXPENSES-NET> (222,198,790)
<NET-INVESTMENT-INCOME> (24,044,585)
<REALIZED-GAINS-CURRENT> 1,197,383,660
<APPREC-INCREASE-CURRENT> 3,328,905,060
<NET-CHANGE-FROM-OPS> 4,502,244,135
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (18,008,475)
<DISTRIBUTIONS-OF-GAINS> (1,154,384,076)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 111,537,598
<NUMBER-OF-SHARES-REDEEMED> (92,801,134)
<SHARES-REINVESTED> 29,523,597
<NET-CHANGE-IN-ASSETS> 5,105,307,959
<ACCUMULATED-NII-PRIOR> 17,752,405
<ACCUMULATED-GAINS-PRIOR> 151,380,707
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 98,360,939
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 225,869,316
<AVERAGE-NET-ASSETS> 111,442,755
<PER-SHARE-NAV-BEGIN> 31.90
<PER-SHARE-NII> (0.19)
<PER-SHARE-GAIN-APPREC> 10.16
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (2.61)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 39.26
<EXPENSE-RATIO> 1.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
