<PAGE> 1
AIM SUMMIT FUND, INC.
Supplement dated August 22, 1995
to the Statement of Additional Information
dated March 1, 1995
The following sentence is inserted on Page 16 after the first sentence
of the second paragraph under the caption "Share Purchases, Redemptions and
Repurchases - Valuation of Shares" in the Statement of Additional Information:
"Exchange listed convertible debt securities are valued at the mean
between the last bid and asked prices obtained from broker-dealers."
<PAGE> 2
STATEMENT OF
ADDITIONAL INFORMATION
AIM SUMMIT FUND, INC.
11 Greenway Plaza
Suite 1919
Houston, Texas 77046
(713) 626-1919
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT
A PROSPECTUS, AND IT SHOULD BE READ IN CONJUNCTION
WITH A PROSPECTUS OF THE ABOVE-NAMED FUND,
A COPY OF WHICH MAY BE OBTAINED FREE OF CHARGE FROM
AUTHORIZED DEALERS OR BY WRITING
A I M DISTRIBUTORS, INC., P.O. BOX 4264,
HOUSTON, TEXAS 77210-4264 OR BY
CALLING (713) 626-1919 (IN HOUSTON) OR
(800) 995-4246 (ELSEWHERE).
--------------------
STATEMENT OF ADDITIONAL INFORMATION DATED MARCH 1, 1995
RELATING TO THE PROSPECTUS DATED MARCH 1, 1995
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
GENERAL INFORMATION ABOUT THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Fund and its Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Investment Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
The Sub-Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Transfer Agent and Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
TAX AND DIVIDEND INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Qualification as a Regulated Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Excise Tax on Regulated Investment Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Fund Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Sale or Redemption of Fund Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Foreign Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Effect of Future Legislation; Local Tax Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SHARE PURCHASES, REDEMPTIONS AND REPURCHASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Purchases and Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Suspension of Right of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Valuation of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
The Distribution Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
INVESTMENT PROGRAM AND RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Investment Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Foreign Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Rule 144A Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Risks as to Futures Contracts and Related Call Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Portfolio Transactions and Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FS
</TABLE>
<PAGE> 4
INTRODUCTION
AIM Summit Fund, Inc. (formerly, Summit Investors Fund, Inc.) (the
"Fund") is a mutual fund. The rules and regulations of the United States
Securities and Exchange Commission (the "SEC") require all mutual funds to
furnish prospective investors certain information concerning the activities of
the fund being considered for investment. This information is included in a
Prospectus dated March 1, 1995, which may be obtained without charge by written
request to A I M Distributors, Inc. ("AIM Distributors"). Investors may also
call AIM Distributors at (713) 626-1919 (in Houston) or (800) 995-4246
(elsewhere) or dealers authorized by AIM Distributors to distribute the Fund's
shares. Investors must receive a Prospectus before they invest.
The Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Fund. Some of
the information required to be in this Statement of Additional Information is
also included in the Fund's current prospectus and, in order to avoid
repetition, reference will be made to sections of the Prospectus. Additionally,
the Prospectus and this Statement of Additional Information omit certain
information contained in the registration statement filed with the SEC. Copies
of the registration statement, including items omitted from the Prospectus and
this Statement of Additional Information, may be obtained from the SEC by paying
the charges prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE FUND
THE FUND AND ITS CAPITAL STOCK
The Fund is an open-end, diversified management investment company
organized as a corporation under the laws of the State of Maryland on February
17, 1982. Shares of the Fund are redeemable at the net asset value thereof at
the option of the holders thereof. For information concerning the methods of
redemption and the rights of share ownership, consult the Prospectus under the
captions "General Information" and "Redemption of Shares."
The Board of Directors may classify or reclassify any unissued shares
into shares of any class or classes in addition to that already authorized by
setting or changing in any one or more respects, from time to time, prior to the
issuance of such shares, the preference, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualification, or terms or
conditions of redemption, of such shares. Any such classification or
reclassification will comply with the provisions of the Investment Company Act
of 1940, as amended (the "1940 Act").
DIRECTORS AND OFFICERS
The directors and officers of the Fund and their principal occupations
during the last five years are set forth below. All of the Fund's executive
officers hold similar offices with some or all of the other AIM Funds. Unless
otherwise indicated, the address of each director and officer is 11 Greenway
Plaza, Suite 1919, Houston, Texas 77046.
1
<PAGE> 5
*CHARLES T. BAUER, Chairman and Director (75)
Director and Chairman and Chief Executive Officer, A I M Management
Group Inc.; Chairman of the Board of Directors, A I M Advisors, Inc., A I M
Capital Management, Inc., A I M Distributors, Inc., A I M Fund Services, Inc.,
A I M Global Associates, Inc., A I M Global Holdings, Inc., A I M Institutional
Fund Services, Inc. and Fund Management Company; and Director, AIM Global
Advisors Limited, A I M Global Management Company Limited and AIM Global
Ventures Co.
BRUCE L. CROCKETT, Director (50)
COMSAT Corporation
6560 Rock Spring Drive
Bethesda, Maryland 20817
Director, President and Chief Executive Officer, COMSAT Corporation
(includes COMSAT World Systems, COMSAT Mobile Communications, COMSAT Video
Enterprises, COMSAT RSI and COMSAT International Ventures). Previously,
President and Chief Operating Officer, COMSAT Corporation; President, World
Systems Division, COMSAT Corporation; and Chairman, Board of Governors of
INTELSAT; (each of the COMSAT companies listed above is an international
communication, information and entertainment-distribution services company).
OWEN DALY II, Director (70)
Six Blythewood Road
Baltimore, Maryland 21210
Director, Cortland Trust Inc. (investment company). Formerly, Director,
CF & I Steel Corp., Monumental Life Insurance Company and Monumental General
Insurance Company; and Chairman of the Board of Equitable Bancorporation.
**CARL FRISCHLING, Director (58)
919 Third Avenue
New York, New York 10022
Partner, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel (law firm).
Formerly, Partner, Reid & Priest (law firm); and, prior thereto, Partner,
Spengler Carlson Gubar Brodsky & Frischling (law firm).
*ROBERT H. GRAHAM, Director and President (48)
Director, President and Chief Operating Officer, A I M Management Group
Inc.; Director and President, A I M Advisors, Inc.; Director and Executive Vice
President, A I M Distributors, Inc.; Director and Senior Vice President, A I M
Capital Management, Inc., A I M Fund Services, Inc., A I M Global Associates,
Inc., A I M Global Holdings, Inc., AIM Global Ventures Co., A I M Institutional
Fund Services, Inc. and Fund Management Company; and Senior Vice President, AIM
Global Advisors Limited.
- ---------------
* A director who is an "interested person," of the Fund and A I M
Advisors, Inc. as defined in the 1940 Act.
** A director who is an "interested person," of the Fund as defined in
the 1940 Act.
2
<PAGE> 6
JOHN F. KROEGER, Director (70)
Box 464
24875 Swan Road - Martingham
St. Michaels, Maryland 21663
Trustee, Flag Investors International Trust; and Director, Flag
Investors Emerging Growth Fund, Inc., Flag Investors Telephone Income Fund,
Inc., Flag Investors Quality Growth Fund, Inc., Flag Investors Total Return U.S.
Treasury Fund, Inc., Flag Investors Intermediate Term Income Fund, Inc., Managed
Municipal Fund, Inc., Flag Investors Value Builder Fund, Inc., Flag Investors
Maryland Intermediate Tax-Free Income Fund, Inc., Alex. Brown Cash Reserve Fund,
Inc. and North American Government Bond Fund, Inc. (investment companies).
Formerly, Consultant, Wendell & Stockel Associates, Inc. (consulting firm).
LEWIS F. PENNOCK, Director (52)
8955 Katy Freeway, Suite 204
Houston, Texas 77024
Attorney, private practice in Houston, Texas.
IAN W. ROBINSON, Director (71)
183 River Drive
Tequesta, Florida 33469
Formerly, Executive Vice President and Chief Financial Officer, Bell
Atlantic Management Services, Inc. (provider of centralized management services
to telephone companies); Executive Vice President, Bell Atlantic Corporation
(parent of seven telephone companies); and Vice President and Chief Financial
Officer, Bell Telephone Company of Pennsylvania and Diamond State Telephone
Company.
LOUIS S. SKLAR, Director (55)
Transco Tower, 50th Floor
2800 Post Oak Road
Houston, Texas 77056
Executive Vice President, Development and Operations, Hines Interests
Limited Partnership (real estate development).
GARY T. CRUM, Senior Vice President (47)
Director and President, A I M Capital Management, Inc.; Director and
Senior Vice President, A I M Management Group Inc., A I M Advisors, Inc., AIM
Global Advisors Limited, A I M Global Associates, Inc., A I M Global Holdings,
Inc., and AIM Global Ventures Co.; and Director, A I M Distributors, Inc.
3
<PAGE> 7
WILLIAM H. KLEH, Senior Vice President (49)
Director, Chairman and President, AIM Global Ventures Co.; Director and
Managing Director, AIM Global Advisors Limited; Director and President, A I M
Global Associates, Inc. and A I M Global Holdings, Inc.; Director and Senior
Vice President, A I M Advisors, Inc.; Director and Vice President, A I M Capital
Management, Inc. and Fund Management Company; Director, A I M Global Management
Company Limited; Senior Vice President, A I M Management Group Inc.; and Vice
President, A I M Distributors, Inc. and A I M Fund Services, Inc.
JOHN J. ARTHUR, Senior Vice President and Treasurer (50)
Senior Vice President and Treasurer, A I M Advisors, Inc.; Vice
President and Treasurer, A I M Management Group Inc., A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund Services, Inc., A I M Institutional
Fund Services, Inc. and Fund Management Company; and Vice President, AIM Global
Advisors Limited, A I M Global Associates, Inc., A I M Global Holdings, Inc. and
AIM Global Ventures Co.
JULIAN A. LERNER, Senior Vice President (70)
Senior Vice President, A I M Capital Management, Inc.
CAROL F. RELIHAN, Vice President and Secretary (40)
Vice President, General Counsel and Secretary, A I M Advisors, Inc.,
A I M Fund Services, Inc., A I M Institutional Fund Services, Inc., A I M
Management Group Inc. and Fund Management Company; Vice President and Secretary,
A I M Distributors, Inc., A I M Global Associates, Inc., and A I M Global
Holdings, Inc.; Vice President and Assistant Secretary, AIM Global Advisors
Limited and AIM Global Ventures Co.; and Secretary, A I M Capital Management,
Inc.
DANA R. SUTTON, Vice President and Assistant Treasurer (36)
Vice President and Fund Controller, A I M Advisors, Inc.; and Assistant
Vice President and Assistant Treasurer, Fund Management Company.
MELVILLE B. COX, Vice President (51)
Vice President, A I M Advisors, Inc., A I M Capital Management, Inc.,
A I M Fund Services, Inc. and A I M Institutional Fund Services, Inc.; and
Assistant Vice President, A I M Distributors, Inc. and Fund Management Company.
Formerly, Vice President, Charles Schwab & Co., Inc.; Assistant Secretary,
Charles Schwab Family of Funds and Schwab Investments; Chief Compliance Officer,
Charles Schwab Investment Management, Inc.; and Vice President, Integrated
Resources Life Insurance Co. and Capitol Life Insurance Co.
LANNY H. SACHNOWITZ, Vice President (30)
Vice President, A I M Capital Management, Inc.
4
<PAGE> 8
JONATHAN C. SCHOOLAR, Vice President (33)
Director and Senior Vice President, A I M Capital Management, Inc.; and
Vice President, A I M Advisors, Inc.
The Board of Directors has an Audit Committee, an Investments
Committee, and a Nominating and Compensation Committee.
The members of the Audit Committee are Messrs. Daly, Kroeger, Pennock
and Robinson. The Audit Committee is responsible for meeting with the Fund's
auditors to review audit procedures and results and to consider any matters
arising from an audit to be brought to the attention of the directors as a whole
with respect to the Fund's fund accounting or its internal accounting controls,
or for considering such matters as may from time to time be set forth in a
charter adopted by the Board of Directors and such committee.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly, Kroeger and Pennock. The Investments Committee is responsible for
reviewing portfolio compliance, brokerage allocation, portfolio investment
pricing issues, interim dividend and distribution issues, or considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Directors and such committee.
The members of the Nominating and Compensation Committee are Messrs.
Crockett, Daly, Kroeger, Pennock and Sklar. The Nominating and Compensation
Committee is responsible for considering and nominating individuals to stand for
election as directors who are not interested persons as long as the Fund
maintains a distribution plan pursuant to rule 12b-1 under the 1940 Act,
reviewing from time to time the compensation payable to the disinterested
directors, or considering such matters as may from time to time be set forth in
a charter adopted by the board and such committee.
Remuneration of Directors
Each director is reimbursed for expenses incurred in connection with
each meeting of the Board of Directors or any Committee attended. The directors
of the Fund who do not serve as officers of the Fund are compensated for their
services according to a fee schedule which recognizes the fact that they also
serve as directors or trustees of certain other investment companies advised or
managed by AIM. Each such director 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
during the fiscal year ended December 31, 1994 for each director of the Fund:
<TABLE>
<CAPTION>
============================================================================================
DIRECTOR AGGREGATE RETIREMENT TOTAL
COMPENSATION BENEFITS COMPENSATION
FROM FUND(1) ACCRUED FROM ALL AIM
BY ALL AIM FUNDS(3)
FUNDS(2)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer $ 0 $ 0 $ 0
- --------------------------------------------------------------------------------------------
Bruce L. Crockett 1,328.60 2,814.00 45,093.75
- --------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
===========================================================================================
DIRECTOR AGGREGATE RETIREMENT TOTAL
COMPENSATION BENEFITS COMPENSATION
FROM FUND(1) ACCRUED FROM ALL AIM
BY ALL AIM FUNDS(3)
FUNDS(2)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Owen Daly II 1,284.22 14,375.00 45,843.75
- -------------------------------------------------------------------------------------------
Carl Frischling 1,291.02 7,542.00 45,093.75
- -------------------------------------------------------------------------------------------
Robert H. Graham 0 0 0
- -------------------------------------------------------------------------------------------
John F. Kroeger 1,284.22 20,517.00 45,843.75
- -------------------------------------------------------------------------------------------
Lewis F. Pennock 1,284.22 5,093.00 45,843.75
- -------------------------------------------------------------------------------------------
Ian Robinson 1,265.28 10,396.00 45,093.75
- -------------------------------------------------------------------------------------------
Louis S. Sklar 1,291.02 4,682.00 45,093.75
- -------------------------------------------------------------------------------------------
</TABLE>
- ------------
(1) The total amount of compensation deferred by all Directors of the Fund
during the fiscal year ended December 31, 1994, including interest earned
thereon, was $5,350.75.
(2) During the fiscal year ended December 31, 1994, the total amount of expenses
allocated to the Fund in respect of such retirement benefits was $1,439.32.
(3) Messrs. Bauer, Daly, Graham, Kroeger and Pennock each serves as a Director
or Trustee of a total of 11 AIM Funds. Messrs. Crockett, Frischling, Robinson
and Sklar each serves as a Director or Trustee of a total of 10 AIM Funds. Data
reflect total compensation earned during the calendar year ended December 31,
1994.
AIM Funds Retirement Plan for Eligible Directors/Trustees
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each director (who is not a employee of any of
the AIM Funds, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director 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 "AIM Funds").
Each eligible director is entitled to receive an annual benefit from the AIM
Funds commencing on the first day of the calendar quarter coincident with or
following his date of retirement equal to 5% of such Director's compensation
paid by the AIM Funds multiplied by the number of such Director's years of
service (not in excess of 10 years of service) completed with respect to any of
the AIM Funds. Such benefit is payable to each eligible director in quarterly
installments for a period of no more than five years. If an eligible director
dies after attaining the normal retirement date but before receipt of any
benefits under the Plan commences, the director's surviving spouse (if any)
shall receive a quarterly survivor's benefit equal to 50% of the amount payable
to the deceased director, for no more than five years
6
<PAGE> 10
beginning the first day of the calendar quarter following the date of the
director's death. Payments under the Plan are not secured or funded by any AIM
Fund.
Set forth below is a table that shows the estimated annual benefits
payable to an eligible director upon retirement assuming various compensation
and years of service classifications. The estimated credited years of service
for Messrs. Crockett, Daly, Frischling, Kroeger, Pennock, Robinson and Sklar are
7, 8, 17, 17, 13, 7 and 5 years, respectively.
<TABLE>
<CAPTION>
Annual Compensation Paid By All AIM Funds
$40,000 $45,000 $50,000 $55,000
======================================================================================
<S> <C> <C> <C> <C> <C>
10 $20,000 $22,500 $25,000 $27,500
--------------------------------------------------------------------------------------
Number of 9 $18,000 $20,250 $22,500 $24,750
Years of --------------------------------------------------------------------------------------
Service With 8 $16,000 $18,000 $20,000 $22,000
the AIM --------------------------------------------------------------------------------------
Funds 7 $14,000 $15,750 $17,500 $19,250
--------------------------------------------------------------------------------------
6 $12,000 $13,500 $15,000 $16,500
--------------------------------------------------------------------------------------
5 $10,000 $11,250 $12,500 $13,750
======================================================================================
</TABLE>
Deferred Compensation Agreements
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of
this paragraph only, the "deferring directors") have each executed a Deferred
Compensation Agreement (collectively, the "Agreements"). Pursuant to the
Agreements, the deferring directors may elect to defer receipt of up to 100% of
their compensation payable by the Fund, and such amounts are placed into a
deferral account. Currently, the deferring directors may select various AIM
Funds in which all or part of his deferral account shall be deemed to be
invested. Distributions from the deferring directors' deferral accounts will be
paid in cash, in generally equal quarterly installments over a period of five
years beginning on the date the deferring director's retirement benefits
commence under the Plan. The Fund's Board of Directors, in its sole discretion,
may accelerate or extend the distribution of such deferral accounts after the
deferring director's termination of service as a director of the Fund. If a
deferring director 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 director's death. The Agreements are not funded and, with respect
to the payments of amounts held in the deferral accounts, the deferring
directors have the status of unsecured creditors of the Fund and of each other
AIM Fund from which they are deferring compensation.
During the fiscal year ended October 31, 1994, the Fund paid $8,439 in
legal fees to the law firm in which Mr. Frischling, a director of the Fund, was
previously a partner.
As of February 6, 1995, the directors and officers of the Fund as a
group owned beneficially less than 1% of the Fund's outstanding shares.
7
<PAGE> 11
THE INVESTMENT ADVISOR
The Fund has entered into an Investment Advisory Agreement dated as of
October 18, 1993 (the "Advisory Agreement") with A I M Advisors, Inc., ("AIM").
AIM is a wholly owned subsidiary of A I M Management Group Inc. ("AIM
Management"), 11 Greenway Plaza, Suite 1919, Houston, Texas 77046. Certain of
the directors and officers of AIM are also executive officers of the Fund and
their affiliations are shown under "Directors and Officers."
AIM and the Fund have adopted a Code of Ethics (the "Code") which
requires investment personnel (a) to pre-clear all personal securities
transactions, (b) to file reports regarding such transactions, and (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. The Code also prohibits investment
personnel from purchasing securities in an initial public offering. Personal
trading reports are reviewed periodically by AIM, and the Board of Directors
reviews annually such reports (including information on any substantial
violations of the Code). Violations of the Code may result in censure, monetary
penalties, suspension or termination of employment.
A I M Capital Management, Inc., a wholly owned subsidiary of AIM, is
engaged in the business of providing investment advisory services to investment
companies, corporations, institutions and other accounts. AIM Distributors, a
registered broker-dealer and a wholly owned subsidiary of AIM, acts as principal
underwriter of other registered investment companies advised or managed by AIM.
Pursuant to the terms of the Advisory Agreement, AIM: (a) supervises
all aspects of the operations of the Fund; (b) obtains and evaluates pertinent
information about significant developments and economic, statistical and
financial data, domestic, foreign or otherwise, whether affecting the economy
generally or the Fund, and whether concerning the individual issuers whose
securities are included in the Fund or the activities in which such issuers
engage, or with respect to securities which AIM considers desirable for
inclusion in the Fund; (c) determines which issuers and securities shall be
represented in the Fund's investment portfolio and regularly reports thereon to
the Fund's Board of Directors; and (d) formulates and implements continuing
programs for the purchases and sales of the securities of such issuers and
regularly reports thereon to the Fund's Board of Directors; and takes, on behalf
of the Fund, all actions which appear to the Fund necessary to carry into effect
such purchase and sale programs and supervisory functions as aforesaid,
including but not limited to the placing of orders for the purchase and sale of
securities for the Fund. Subject to the approval of the Board of Directors and
the shareholders of the Fund, AIM may delegate to a sub-advisor certain of its
duties, provided that AIM shall continue to supervise the performance of any
such sub-advisor.
As compensation for its services, AIM receives an annual fee,
calculated daily and paid monthly, at the annual rate of 1.00% of the first $10
million of the Fund's average daily net assets, 0.75% of the next $140 million
of the Fund's average daily net assets and 0.625% of the Fund's average daily
net assets in excess of $150 million. Although the advisory fee rate paid by the
Fund is higher than that paid by other investment companies, many of those
investment companies are a different size or have different objectives than the
Fund. The effective rate of fees and expenses paid by the Fund at its current
size is lower than that for other funds with similar investment objectives. The
Advisory Agreement provides that if, for any fiscal year of the Fund, the total
of all ordinary business expenses of the Fund, including all investment advisory
fees (but excluding brokerage commissions and fees, taxes and extraordinary
expenses) would exceed applicable expense limitations imposed by applicable
state securities laws, the amount of advisory fees payable to AIM will be
reduced by the amount of the excess. The amount of such
8
<PAGE> 12
reduction would be deducted from monthly payments otherwise due to AIM for its
annual advisory fee during such fiscal year.
The Advisory Agreement became effective on October 18, 1993 and will
continue in effect until June 30, 1995 and from year to year thereafter only if
such continuance is specifically approved at least annually by (i) the Fund's
Board of Directors or the vote of a "majority of the outstanding voting
securities" of the Fund (as defined in the 1940 Act) and (ii) the affirmative
vote of a majority of the directors who are not parties to the agreement or
"interested persons" of any such party (the "Non-Interested Directors") by votes
cast in person at a meeting called for such purpose. The Fund or AIM may
terminate the Advisory Agreement on 60 days' written notice without penalty. The
Advisory Agreement terminates automatically in the event of assignment, as
defined in the 1940 Act.
The Advisory Agreement provides that upon the request of the Fund's
Board of Directors, AIM may perform, or arrange for the performance of, certain
accounting, shareholder servicing and other administrative services to the Fund
that are not required to be performed by AIM under the Advisory Agreement. For
such services, AIM is entitled to receive from the Fund reimbursement of its
costs or such reasonable compensation as may be agreed upon by AIM and the
Company's Board of Directors upon a finding by the Board of Directors that the
provision of such services is in the best interests of the Fund and its
shareholders.
The Board of Directors has made such a finding and, accordingly, has
entered into an Administrative Services Agreement dated October 18, 1993 with
AIM (the "Administrative Services Agreement"). Under the Administrative Services
Agreement, AIM currently provides the services of a principal financial officer
and his staff, who maintain the financial accounts and books and records of the
Fund, including the calculation of the daily net asset value of the Fund, and
prepare tax returns and financial statements for the Fund and also is reimbursed
for any expenses related to providing such services, as well as the services of
staff responding to various shareholder inquiries. The Administrative Services
Agreement became effective on October 18, 1993 and will continue in effect until
June 30, 1995 and from year to year thereafter only if such continuance is
specifically approved at least annually by (i) the Fund's Board of Directors or
the vote of a "majority of the outstanding voting securities" of the Fund (as
defined in the 1940 Act) and (ii) the affirmative vote of a majority of the
Non-Interested Directors by votes cast in person at a meeting called for such
purpose. In addition, a sub-contract between AIM and A I M Fund Services, Inc.
("AFS"), a registered transfer agent and wholly owned subsidiary of AIM,
provides that AFS may perform certain shareholders services for the Fund which
are not required to be performed by AIM under the Advisory Agreement. Currently,
AFS provides certain shareholders services for the Fund. For such services,
while AFS is entitled to receive from AIM such reimbursement of its costs
associated with providing those services as may be approved by the Board of
Directors, AFS does not presently receive any such reimbursement.
During the fiscal year ended October 31, 1994, the fiscal period ended
October 31, 1993 and the fiscal year ended December 31, 1992, AIM received
management and advisory fees from the Fund of $4,712,695, $3,532,876 and
$3,508,009, respectively. See "Expenses."
For the fiscal year ended October 31, 1994, the fiscal period ended
October 31, 1993, and the fiscal year ended December 31, 1992 AIM was reimbursed
$45,256, $34,385 and $36,509, respectively, for costs associated with performing
administrative services.
9
<PAGE> 13
THE SUB-ADVISOR
NationsBank of Texas, N.A. ("NationsBank Texas"), 901 Main Street,
Dallas, Texas 75202, serves as the Fund's sub-advisor pursuant to a Sub-Advisory
Agreement dated October 18, 1993 (the "Sub-Advisory Agreement"). NationsBank
Corp., a bank holding company, holds 100% of the voting stock of NationsBank
Texas.
Pursuant to the terms of the Sub-Advisory Agreement, AIM has appointed
NationsBank Texas to provide certain investment advisory services to the Fund,
subject to the overall supervision by AIM and the Fund's Board of Directors. As
Sub-Advisor, NationsBank Texas shall: (a) obtain and evaluate pertinent
information about significant developments and economic, statistical and
financial data, domestic, foreign or otherwise, whether affecting the economy
generally or the Fund, and whether concerning the individual issuers whose
securities are included in the Fund or the activities in which such issuers
engage, or with respect to securities which it or AIM considers desirable for
inclusion in the Fund's investment portfolio; and (b) to the extent requested by
AIM, determine which issues and securities shall be represented in the Fund's
investment portfolio, formulate programs for the purchases and sales of such
securities and regularly report thereon to AIM. In performing these services,
NationsBank Texas, is required to comply with all applicable provisions of
federal or state law, including the applicable provisions of the 1940 Act and
the Investment Advisers Act of 1940, as amended (the "Advisers Act").
As compensation for its services, AIM pays NationsBank Texas an annual
fee, calculated daily and paid monthly, at an annual rate of 0.50% of the first
$10 million of the Fund's average daily net assets, 0.35% of the next $140
million of the Fund's average daily net assets and 0.225% of the Fund's average
daily net assets in excess of $150 million. NationsBank Texas has agreed to an
adjustment to the above contractual fee schedule so that it will accept a fee on
the Fund's average daily net assets in excess of $700 million of 0.15% of the
Fund's average daily net assets. The sub-advisor's fee is paid to NationsBank
Texas by AIM from the advisory fee which AIM receives from the Fund.
The Sub-Advisory Agreement became effective on October 18, 1993 and
will continue in effect until June 30, 1995, and from year to year thereafter
only if such continuance is specifically approved at least annually by (i) the
Fund's Board of Directors or a vote of "a majority of the outstanding voting
securities" of the Fund (as defined by the 1940 Act), and (ii) by the
affirmative vote of a majority of the Non-Interested Directors by votes cast in
person at a meeting called for such purpose.
For the fiscal year ended October 31, 1994, the fiscal period ended
October 31, 1993, and the fiscal year ended December 31, 1992, NationsBank Texas
and its predecessors received fees from AIM of $1,807,547, $1,376,778 and
$1,388,883, respectively. See "Expenses."
EXPENSES
All of the ordinary business expenses incurred in the operations of the
Fund and the offering of its shares shall be borne by the Fund unless
specifically provided otherwise in the Advisory Agreement. These expenses borne
by the Fund include but are not limited to brokerage commissions, taxes, legal,
auditing, or governmental fees, the cost of preparing share certificates,
custodian, transfer and shareholder service agent costs, expenses of issue,
sale, redemption and repurchase of shares, expenses of registering and
qualifying shares for sale, expenses relating to directors' and shareholders'
meetings, the cost of preparing and distributing reports and notices to
shareholders, the fees and other expenses incurred by the Fund in reports and
notices to shareholders, the fees and other expenses incurred by the Fund in
10
<PAGE> 14
connection with membership in investment company organizations and the cost of
pricing copies of prospectuses and statements of additional information
distributed to the Fund's shareholders.
If, for any fiscal year, the total of all ordinary business expenses of
the Fund, including all investment advisory fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary expenses, such as
litigation, would 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 shall be reduced by the amount of
such excess.
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company ("State Street Bank") acts as
transfer agent for the Fund's shares and as custodian for the Fund's portfolio
securities and cash. The transfer agent's administrative duties have been
delegated by State Street Bank to its partially-owned affiliate, Boston
Financial Data Services, Inc. ("BFDS"). State Street Bank and BFDS receive such
compensation from the Fund for their services in such capacities as are agreed
to from time to time by State Street Bank and the Fund. The address of State
Street Bank and of BFDS is P.O. Box 8300, Boston, Massachusetts 02266-8300.
REPORTS
At least semi-annually, the Fund will furnish shareholders with a list
of the investments held in the Fund's portfolio and its financial statements.
The annual financial statements will be audited by the Fund's independent
certified public accountants. The Board of Directors has selected KPMG Peat
Marwick LLP, 700 Louisiana, NationsBank Building, Houston, Texas 77002, as the
Fund's independent certified public accountants to audit the Fund's books and
review the Fund's tax returns.
TAX AND DIVIDEND INFORMATION
The following is only a summary of certain additional tax
considerations generally affecting the Fund and its shareholders that are not
described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussion here and in the Prospectus is not intended as a substitute for
careful tax planning. Because shares of the Fund may be purchased by the general
public only through Summit Investors Plans, the following discussion is
addressed only to individual (rather than corporate) investors.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Fund is not subject to federal
income tax on the portion of its net investment income (i.e., taxable interest,
dividends and other taxable ordinary income, net of expenses) and capital gain
net income (i.e., the excess of capital gains over capital losses) that it
distributes to shareholders, provided that it distributes at least 90% of its
investment company taxable income (i.e., net investment income and the excess of
net short-term capital gain over net long-term capital loss) for the taxable
year (the "Distribution Requirement"), and satisfies certain other requirements
of the Code that are described below. Distributions by the Fund made during the
taxable year or, under specified circumstances, within twelve months after the
close of
11
<PAGE> 15
the taxable year, will be considered distributions of income and gains of the
taxable year and can therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or options, futures or forward contracts thereon) held for less than
three months (the "Short-Short Gain Test"). However, foreign currency gains,
including those derived from options, futures and forwards, will not be
characterized as Short- Short Gain if they are directly related to the regulated
investment company's investments in stock or securities (or options or futures
thereon). Because of the Short-Short Gain Test, the Fund may have to limit the
sale of appreciated securities that it has held for less than three months.
However, the Short-Short Gain Test will not prevent the Fund from disposing of
investments at a loss, since the recognition of a loss before the expiration of
the three-month holding period is disregarded. Interest (including original
issue discount) received by the Fund at maturity or upon the disposition of a
security held for less than three months will not be treated as gross income
derived from the sale or other disposition of such security within the meaning
of the Short-Short Gain Test. However, income that is attributable to realized
market appreciation will be treated as gross income from the sale or other
disposition of securities for this purpose.
In general, gain or loss recognized by the Fund on the disposition of
an asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by the Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation.
In general, for purposes of determining whether capital gain or loss
recognized by a Fund on the disposition of an asset is long-term or short-term,
the holding period of the asset may be affected if (i) the asset is used to
close a "short sale" (which includes for certain purposes the acquisition of a
put option) or is substantially identical to another asset so used, (ii) the
asset is otherwise held by the Fund as part of a "straddle" (which term
generally excludes a situation where the asset is stock and the Fund grants a
qualified covered call option (which, among other things, must not be
deep-in-the-money) with respect thereto) or (iii) the asset is stock and the
Fund grants an in-the-money qualified covered call option with respect thereto.
However, for purposes of the Short-Short Gain Test, the holding period of the
asset disposed of may be reduced only in the case of clause (i) above. In
addition, the Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.
Treasury regulations permit a regulated investment company, in
determining its investment company taxable income and net capital gain (i.e.,
the excess of net long-term capital gain over net short-term capital loss) for
any taxable year, to elect (unless it has made a taxable year election for
excise tax purposes as discussed below) to treat any net capital loss and any
net foreign currency loss incurred after October 31 as if they had been incurred
in the succeeding year.
12
<PAGE> 16
In addition to satisfying the requirements described above, the Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses.
If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the Fund's current and accumulated earnings
and profits.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on regulated investment
companies that fail to distribute in each calendar year an amount equal to 98%
of ordinary taxable income for the calendar year and 98% of capital gain net
income for the one-year period ended on October 31 of such calendar year (or, at
the election of a regulated investment company having a taxable year ending
November 30 or December 31, for its taxable year (a "taxable year election")).
The balance of such income must be distributed during the next calendar year.
For the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated investment company must (1)
reduce its capital gain net income (but not below its net capital gain) by the
amount of any net ordinary loss for any calendar year and (2) unless it has made
a taxable year election, exclude foreign currency gains and losses incurred
after October 31 of any year in determining the amount of ordinary taxable
income for the current calendar year (and, instead, include such gains and
losses in determining ordinary taxable income for the succeeding calendar year).
The Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that the Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.
FUND DISTRIBUTIONS
The Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal income
tax purposes.
The Fund may either retain or distribute to shareholders its net
capital gain for each taxable year. The Fund currently intends to distribute any
such amounts. If net capital gain is distributed and designated as a capital
gain dividend, it will be taxable to shareholders as long-term capital gain,
regardless of the
13
<PAGE> 17
length of time the shareholder has held his shares or whether such gain was
recognized by the Fund prior to the date on which the shareholder acquired his
shares. Conversely, if the Fund elects to retain its net capital gain, the Fund
will be taxed thereon (except to the extent of any available capital loss
carryovers) at the 35% corporate tax rate. If the Fund elects to retain its net
capital gain, it is expected that the Fund also will elect to have shareholders
treated as if each received a distribution of its pro rata share of such gain,
with the result that each shareholder will be required to report its pro rata
share of such gain on its tax return as long-term capital gain, will receive a
refundable tax credit for its pro rata share of tax paid by the Fund on the
gain, and will increase the tax basis for its shares by an amount equal to the
deemed distribution less the tax credit.
Distributions by the Fund that do not constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital to
the extent of (and in reduction of) the shareholder's tax basis in his shares;
any excess will be treated as gain from the sale of his shares, as discussed
below.
Distributions by the Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund. Shareholders receiving a distribution in the form
of additional shares will be treated as receiving a distribution in an amount
equal to the fair market value of the shares received, determined as of the
reinvestment date. In addition, if the net asset value at the time a shareholder
purchases shares of the Fund reflects undistributed net investment income or
recognized capital gain net income, or unrealized appreciation in the value of
the assets of the Fund, distributions of such amounts will be taxable to the
shareholder in the manner described above, although such distributions
economically constitute a return of capital to the shareholder.
Ordinarily, shareholders are required to take distributions by the Fund
into account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
The Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends, and
the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding by the Internal Revenue Service for failure
to report the receipt of interest or dividend income properly, or (3) who has
failed to certify to the Fund that he is not subject to backup withholding or
that it is an "exempt recipient."
SALE OR REDEMPTION OF FUND SHARES
A shareholder will recognize gain or loss on the sale or redemption of
shares of the Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of the Fund will be considered capital
gain or loss and will be long-term capital gain or loss if the shares were held
for longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares. For this purpose, the special holding period rules of Code Section
246(c)(3) and (4) generally will apply in determining the holding period of
shares. Long-term capital
14
<PAGE> 18
gains of noncorporate taxpayers are currently taxed at a maximum rate 11.6%
lower than the maximum rate applicable to ordinary income. Capital losses in any
year are deductible only to the extent of capital gains plus, in the case of a
noncorporate taxpayer, $3,000 of ordinary income.
If a shareholder (i) incurs a sales load in acquiring shares of the
Fund, (ii) disposes of such shares less than 91 days after they are acquired and
(iii) subsequently acquires shares of the same or another Fund at a reduced
sales load pursuant to a right to reinvest at such reduced sales load acquired
in connection with the acquisition of the shares disposed of, then the sales
load on the shares disposed of (to the extent of the reduction in the sales load
on the shares subsequently acquired) shall not be taken into account in
determining gain or loss on the shares disposed of but shall be treated as
incurred on the acquisition of the shares subsequently acquired.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, foreign trust or estate ("foreign shareholder"),
depends on whether the income from the Fund is "effectively connected" with a
U.S. trade or business carried on by such shareholder.
If the income from the Fund is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, ordinary income dividends
will be subject to U.S. withholding tax at the rate of 30% (or lower treaty
rate) upon the gross amount of the dividend. Such a foreign shareholder would
generally be exempt from U.S. federal income tax on gains realized on the sale
of shares of the Fund, capital gain dividends and amounts retained by the Fund
that are designated as undistributed capital gains.
If the income from the Fund is effectively connected with a U.S. trade
or business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
In the case of foreign shareholders, the Fund may be required to
withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding tax (or taxable at a reduced treaty rate)
unless such shareholders furnish the Fund with proper notification of their
foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the Fund,
including the applicability of foreign taxes.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS
The foregoing general discussion of U.S. federal income tax
consequences is based on the Code and the regulations issued thereunder as in
effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court decisions may significantly
change the conclusions expressed herein, and any such changes or decisions may
have a retroactive effect with respect to the transactions contemplated herein.
15
<PAGE> 19
Rules of state and local taxation of ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are urged
to consult their tax advisers as to the consequences of these and other state
and local tax rules affecting investment in the Fund.
SHARE PURCHASES, REDEMPTIONS AND REPURCHASES
PURCHASES AND REDEMPTIONS
The terms of offering of Fund shares and the methods of accomplishing
redemption are set forth in full in the Fund's Prospectus and in the Summit
Investors Plans' Prospectus.
SUSPENSION OF RIGHT OF REDEMPTION
The right of redemption may be suspended or the date of payment
postponed when (a) trading on the New York Stock Exchange is restricted, as
determined by applicable rules and regulations of the SEC; (b) the New York
Stock Exchange 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 disposal of portfolio securities or the
valuation of the net assets of the Fund not reasonably practicable.
VALUATION OF SHARES
In accordance with the current rules and regulations of the SEC, the
net asset value of a Fund share is determined once daily as of 4:15 p.m. Eastern
Time on each day on which the New York Stock Exchange is open for trading by
dividing the value of the Fund's securities, cash and other assets (including
accrued expenses but excluding capital and surplus), by the number of shares
outstanding. In the event the New York Stock Exchange closes early (i.e. before
4:00 p.m. Eastern Time) on a particular day, the net asset value of a Fund share
is determined 15 minutes following the close of the New York Stock Exchange on
such day. Determination of the Fund's net asset value per share is made in
accordance with generally accepted accounting principles.
Except as provided in the next sentence, a security listed or traded on
an exchange is valued at its last sale price on the exchange where the security
is principally traded, or lacking any sales on a particular day, the security is
valued at the mean between the closing bid and asked prices on that day. Each
security traded in the over-the-counter market (but not including securities
reported on the NASDAQ National Market System) is valued at the mean between the
last bid and asked prices based upon quotes furnished by market makers for such
securities. Each security reported on the NASDAQ National Market System is
valued at the last sale price on the valuation date. Securities for which market
quotations are not readily available are valued at fair values as determined in
good faith by or under the supervision of the Fund's officers in a manner
specifically authorized by the Board of Directors of the Fund. Notwithstanding
the above, short-term obligations with maturities of 60 days or less are valued
at amortized cost.
Generally, trading in foreign securities, as well as corporate bonds,
U.S. Government securities and money market instruments, is substantially
completed each day at various times prior to the close of
16
<PAGE> 20
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 Directors.
THE DISTRIBUTION AGREEMENT
Information concerning the Fund's distributor, AIM Distributors, and
the continuous offering of the Fund's shares is set forth in the Prospectus
under the caption "Sales of Shares." The Distribution Agreement provides that
AIM Distributors will pay promotional expenses, including the incremental costs
of printing prospectuses, statements of additional information, annual reports
and other periodic reports for distribution to persons who are not shareholders
of the Fund and the costs of preparing and distributing any other supplemental
sales literature. AIM Distributors has not undertaken to sell any specified
number of shares of the Fund. The Fund or AIM Distributors may terminate the
Distribution Agreement on 60 days' written notice without penalty. The
Distribution Agreement will terminate automatically in the event of assignment.
INVESTMENT PROGRAM AND RESTRICTIONS
INVESTMENT PROGRAM
The Fund's investment objective and the methods by which the Fund seeks
to achieve that objective is set forth in the Prospectus under the caption
"Investment Program." It is the current policy of the Fund not to purchase or
own the common stock of any company which, in the opinion of AIM, derives a
substantial portion of its revenues from the manufacture of alcoholic beverages
or tobacco products or the operation of gambling establishments. In the opinion
of management based upon current conditions, such policy will not have a
significant effect on the investment performance of the Fund. This policy may be
modified or rescinded by the Fund's Board of Directors without shareholder
approval.
FOREIGN SECURITIES
The Fund has reserved the investment flexibility to invest up to 20% of
its total assets in foreign securities. For purposes of computing such
limitation American Depository Receipts, European Depository Receipts and other
securities representing underlying securities of foreign issuers shall be
treated as foreign securities. Investments by the Fund in securities of foreign
corporations may involve considerations and risks that are different in certain
respects from an investment in securities of U.S. companies. Such risks include
possible imposition of withholding taxes on interest or dividends, possible
adoption of foreign governmental restrictions on repatriation of income or
capital invested, or other adverse political or economic developments.
Additionally, it may be more difficult to enforce the rights of a security
holder against a foreign corporation, and information about the operations of
foreign corporations may be more difficult to obtain and evaluate.
17
<PAGE> 21
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements. A repurchase agreement
is an instrument under which the Fund acquires ownership of a debt security and
the seller (usually a broker or a bank) agrees, at the time of the sale, to
repurchase the obligation at a mutually agreed upon time and price, thereby
determining the yield during the Fund's holding period. In the event of
bankruptcy or other default of a seller of a repurchase agreement, the Fund may
experience both delays in liquidating the underlying securities and losses,
including: (a) a possible decline in the value of the underlying security during
the period in which the Fund seeks to enforce its rights thereto; (b) a possible
subnormal level of income and lack of access to income during this period; and
(c) expenses of enforcing its rights. Repurchase agreements entered into by the
Fund are collateralized by United States Government securities and the value of
repurchase agreements is marked to market daily in order to minimize the Fund's
risk. Repurchase agreements usually are for short periods, such as one or two
days, but may be entered into for longer periods of time.
RULE 144A SECURITIES
The Fund may purchase securities which, while privately placed, are
eligible for purchase and sale pursuant to Rule 144A under the Securities Act of
1933 (the "1933 Act"). This Rule permits certain qualified institutional buyers,
such as the Fund, to trade in privately placed securities even though such
securities are not registered under the 1933 Act. AIM, under the supervision of
the Fund's Board of Directors, will consider whether securities purchased under
Rule 144A are illiquid and thus subject to the Fund's restriction of investing
no more than 15% of its assets 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, the Fund's holdings of illiquid
securities will be reviewed to determine what, if any, action is required to
assure that the Fund does not invest more than 15% of its assets in illiquid
securities. Investing in Rule 144A securities could have the effect of
increasing the amount of the Fund's investments in illiquid securities if
qualified institutional buyers are unwilling to purchase such securities. At the
present time, it is not possible to predict with certainty how the market for
Rule 144A securities will develop.
FUTURES CONTRACTS
The Fund may purchase stock index futures contracts. In cases of
purchases of stock index futures contracts, an amount of cash and cash
equivalents, equal to the market value of the stock index futures contracts
(less any related margin deposits), will be deposited in a segregated account
with the Fund's custodian to collateralize the position and ensure that the use
of such stock index futures contract is unleveraged. Unlike when the Fund
purchases or sells a security, no price is paid or received by the Fund upon the
purchase or sale of a stock index futures contract. Initially, the Fund will be
required to deposit with its custodian for the account of the broker a stated
amount, as called for by the particular contract, of cash or U.S. Treasury
bills. This amount is known as "initial margin." The nature of initial margin in
futures transactions is different from that of margin in securities transactions
in that stock index futures contract margin does not involve the borrowing of
funds by the customer to finance the transactions.
18
<PAGE> 22
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 stock index futures contract
fluctuates making the long and short positions in the futures contract more or
less valuable, a process known as "marking-to-market." For example, when the
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 the 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. At any time prior to expiration of the
stock index futures contract, the Fund may elect to close the position by taking
an opposite position which will operate to terminate the Fund's position in the
stock index 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 gain.
Stock Index Futures Contracts
A stock index assigns relative values to the common stocks included in
the index and the index fluctuates with changes in the market values of the
common stocks so included. A stock index futures contract is an agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the stock
index value at the close of the last trading day of the contract and the price
at which the futures contract is originally struck. No physical delivery of the
underlying stocks in the index is made. Currently, stock index futures contracts
can be purchased or sold primarily with respect to broad based stock indices
such as the S&P's 500 Stock Index, the New York Stock Exchange Composite Index,
the American Stock Exchange Major Market Index, the NASDAQ -- 100 Stock Index
and the Value Line Stock Index. The stock indices listed above consist of a
spectrum of stocks not limited to any one industry such as utility stocks.
Utility stocks, at most, would be expected to comprise a minority of the stocks
comprising the portfolio of the index. The Fund will only enter into stock index
futures contracts as a hedge against changes resulting from market conditions in
the values of the securities held or which it intends to purchase. When the Fund
anticipates a significant market or market sector advance, the purchase of a
stock index futures contract affords a hedge against not participating in such
advance. Conversely, in anticipation of or in a general market or market sector
decline that adversely affects the market values of the Fund's portfolio of
securities, the Fund may sell stock index futures contracts.
RISKS AS TO FUTURES CONTRACTS AND RELATED CALL OPTIONS
There are several risks in connection with the use of stock index
futures contracts and related call options as hedging devices. One risk arises
because of the imperfect correlation between movements in the price of hedging
instruments and movements in the price of the stocks, which are the subject of
the hedge. If the price of a hedging instrument moves less than the price of the
stocks, 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
stocks, the Fund will experience either a loss or gain on the hedging instrument
which will not be completely offset by movements in the price of the stocks,
which are the subject of the hedge. The use of call 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 call option.
Successful use of hedging instruments by the Fund is also subject to
AIM's ability to predict correctly movements in the direction of the stock
market, of interest rates or of particular stock indices.
19
<PAGE> 23
Because of possible price distortions in the futures and options markets and
because of the imperfect correlation between movements in the prices of hedging
instruments and the investments being hedged, even a correct forecast by AIM of
general market trends may not result in a completely successful hedging
transaction.
It is also possible that where the Fund has sold stock index 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 its portfolio may
decline. If this occurred, the Fund would lose money on the stock index futures
contracts and also experience a decline in the value of its portfolio
securities.
Positions in futures contracts or options may be closed out only on an
exchange on which such contracts are traded. Although the Fund intends to
purchase or sell stock index futures contracts 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 a board of trade will exist for any particular
contract at any particular time. If there is not a liquid market, it may not be
possible to close a stock index futures or option position at such time. In the
event of adverse price movements under those circumstances, the Fund would
continue to be required to make daily cash payments of maintenance margin on its
futures positions. The extent to which the Fund may engage in stock index
futures contracts will be limited by Internal Revenue Code requirements for
qualification as a regulated investment company and the Fund's intent to
continue to qualify as such. The result of a hedging program cannot be foreseen
and may cause the Fund to suffer losses which it would not otherwise sustain.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The factors governing AIM's decisions to place orders to buy and sell
securities are set forth in the Prospectus under the caption "Management of the
Fund -- Portfolio Transactions and Brokerage." Under Section 28(e) of the
Securities Exchange Act of 1934, an investment advisor who exercises investment
discretion shall not be "deemed to have acted unlawfully or to have breached its
fiduciary duty" solely because under certain circumstances it has caused the
account to pay a higher commission than the lowest available. To obtain the
benefit of Section 28(e), AIM must make a good faith determination that the
commissions paid are "reasonable in relation to the value of the brokerage and
research services provided...viewed in terms of either that particular
transaction or its overall responsibilities with respect to the accounts as to
which it exercises investment discretion and that the services provided by a
broker provide AIM and any sub-advisor with lawful and appropriate assistance in
the performance of their investment decision-making responsibilities."
Accordingly, the price to the Fund in any transaction may be less favorable than
that available from another broker/dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered.
Those broker/dealers utilized by the Fund may furnish statistical,
research and other information or services which are deemed by AIM or any
sub-advisor or its affiliates to be beneficial to the Fund's investment program
or which they otherwise may lawfully and appropriately use in their investment
advisory capacities. Such services supplement the research of AIM or such sub-
advisor. Research services may include the following: statistical and background
information on U.S. and foreign economies, money market fixed income markets,
equity markets, specific industry groups and individual companies; information
on federal, state, local and foreign political developments; portfolio
management strategies; performance information on securities, indexes and
investment accounts; information concerning prices of securities; the providing
of equipment used to communicate research information; the arranging of meetings
with management of companies; and the providing of access to consultants who
supply research information. Such information may be communicated
electronically, orally or in written form. Research
20
<PAGE> 24
services may also include: the providing of equipment used to communicate
research information; the arranging of meetings with management of companies and
the providing of access to consultants who supply research information.
The outside research assistance is useful to AIM and any sub-advisor
since the brokers as a group tend to follow a broader universe of securities and
other matters than the staffs of AIM or any sub-advisor can follow. In addition,
this research provides AIM and any sub-advisor with a diverse perspective on
financial markets. Research services which are provided to AIM and any sub-
advisor by brokers are available for the benefit of all accounts managed or
advised by AIM and any sub-advisor. In some cases, the research services are
available only from the broker providing such services. In other cases, the
research services may be obtainable from alternative sources in return for cash
payments. AIM is of the opinion that because the broker research supplements
rather than replaces its research, the receipt of such research does not tend to
decrease its expenses, but tends to improve the quality of its investment
advice. However, to the extent that AIM or any sub-advisor would have purchased
any such research services had such services not been provided by brokers, the
expenses of such services to AIM or any sub-advisor could be considered to have
been reduced accordingly. Certain research services furnished by broker/dealers
may be useful to AIM or any sub-advisor with clients other than the Fund.
Similarly, any research services received by AIM or any sub-advisor through the
placement of portfolio transactions of other clients may be of value to AIM or
any sub-advisor in fulfilling its obligations to the Fund. AIM is of the opinion
that this material is beneficial in supplementing AIM's and/or any sub-advisor's
research and analysis; and therefore, it may benefit the Fund by improving the
quality of the investment advisor's advice. The advisory fee paid by the Fund is
not reduced because AIM or any sub-advisor receives such services.
Some broker/dealers may indicate that the provision of research
services is dependent upon the generation of certain specified levels of
commissions and underwriting concessions by AIM's and any sub-advisor's clients,
including the Fund.
AIM may from time to time determine target levels of commission
business for AIM to transact with various brokers on behalf of its clients
(including the Fund) over a certain time period. The target levels will be
determined based upon the following factors, among others: (1) the execution
services provided by the broker; (2) the research services provided by the
broker; and (3) the broker's attitude toward and interest in mutual funds in
general and in the Fund and other mutual funds managed or advised by AIM,
affiliates of AIM, or any sub-advisor. No specific formula will be used in
connection with any of the foregoing considerations in determining the target
levels. However, if a broker has indicated a certain level of desired
commissions in return for certain research services provided by the broker, this
factor will be taken into consideration by AIM.
Subject to the overall objective of obtaining best price and execution
for the Fund, and consistent with the National Association of Securities
Dealers' Rules of Fair Practice, AIM may also consider sales of shares of the
Fund and of the other AIM Funds as a factor in the selection of broker/dealers
to execute portfolio transactions for the Fund.
AIM will seek, whenever possible, to recapture for the benefit of the
Fund any commission, fees, brokerage or similar payments paid by the Fund on
portfolio transactions. Normally, the only fee which may be recaptured is the
soliciting dealer fees on the tender of an account's portfolio securities in a
tender or exchange offer.
21
<PAGE> 25
For the fiscal year ended October 31, 1994, fiscal period ended October
31, 1993, and the fiscal year ended December 31, 1992, the Fund paid brokerage
commissions of $2,549,248, $2,252,080 and $1,639,348, respectively. During the
fiscal year ended Ocotber 31, 1994, AIM directed certain of the Fund's brokerage
transactions to certain broker-dealers that provided AIM with research,
statistical and other information. Such transactions amounted to $132,057,780
and the related brokerage commissions were $232,483. Substantially all of such
commissions were directed to broker-dealers that provided AIM with certain
research, statistical and other information. No brokerage commissions were paid
by the Fund to any broker who is an affiliated person of the Fund, an affiliated
person of such person or an affiliated person of the Fund, the Fund's principal
underwriter, or AIM.
Provisions of the 1940 Act and rules and regulations thereunder have
been construed to prohibit the Fund from purchasing securities or instruments
from, or selling securities or instruments to, any holder of 5% or more of the
voting securities of any investment company managed or advised by AIM. The Fund
has obtained an order of exemption from the SEC which permits the Fund to engage
in certain transactions with such 5% holder, if the Fund complies with
conditions and procedures designed to ensure that such transactions are executed
at fair market value and present no conflicts of interest.
AIM and its affiliates manage several other investment companies (the
"AIM Funds"), some of which may have investment objectives similar to those of
the Fund. It is possible that, at times, identical securities will be
appropriate for investment by the Fund and by one or more of the AIM Funds. The
position of each account, however, in the securities of the same issue, may vary
and the length of time that each account may choose to hold its investment in
the securities of the same issue may likewise vary. The timing and amount of
purchase by each account will also be determined by its cash position. If the
purchase or sale of securities consistent with the investment policies of the
Fund and one or more of the AIM Funds is considered at or about the same time,
transactions in such securities will be allocated among the Fund and the AIM
Funds in a manner deemed equitable by AIM. AIM may combine such transactions, in
accordance with applicable laws and regulations, in order to obtain the best net
price and most favorable execution. Simultaneous transactions could, however,
adversely affect the ability of the Fund to obtain or dispose of the full amount
of a security which it seeks to purchase or sell.
The Fund may invest in securities traded in the over-the-counter market
and may deal directly with broker/dealers who make markets in such securities.
Such transactions generally are entered into with broker/dealers acting as
principals for their own accounts.
Under the 1940 Act, persons affiliated with the Fund are prohibited
from dealing with the Fund as principal in any purchase or sale of securities
unless an exemptive order allowing such transactions is obtained from the SEC.
The Board of Directors has adopted procedures pursuant to Rule 17a-7 under the
1940 Act relating to portfolio transactions between the Fund and other accounts
advised by AIM, and the Fund may from time to time enter into transactions in
accordance with such Rule and procedures.
From time to time, an identical security may be sold by an AIM Fund or
another investment account advised by AIM or AIM Capital and simultaneously
purchased by another investment account advised by AIM or AIM Capital when such
transactions comply with applicable rules and regulations and are deemed
consistent with the investment objective(s) and policies of the investment
accounts advised by AIM or AIM Capital involved. Procedures pursuant to Rule
17a-7 under the 1940 Act regarding transactions between investment accounts
advised by AIM or AIM Capital have been adopted by the Board of
Directors/Trustees, in the Company. Although such transactions may result in
custodian, tax or other related expenses, no brokerage commissions or other
direct transaction costs are generated by transactions among the investment
accounts advised by AIM or AIM Capital.
22
<PAGE> 26
INVESTMENT RESTRICTIONS
The Fund's investment program is subject to a number of investment
restrictions which reflect self-imposed standards as well as federal and state
regulatory limitations. These restrictions are designed to minimize certain
risks associated with investing in specified types of securities or engaging in
certain transactions and to limit the amount of the Fund's assets which may be
concentrated in any specific industry or issue. The most significant of these
investment restrictions applicable to the Fund's investment program are set
forth in the Prospectus under the caption "Investment Program -- Investment
Restrictions." In addition to those restrictions set forth in the Prospectus,
the Fund will not:
(1) purchase or hold securities of any issuer if the Fund has knowledge
that the officers and directors of the Fund and its investment advisor
collectively own beneficially more than 5% of the outstanding
securities of such issuer (Individual holdings of less than 1/2 of 1%
will not be counted for the purpose of this restriction.);
(2) borrow money or issue senior securities, except that the Fund may
borrow from banks for temporary or emergency purposes in amounts up to
10% of the value of its total assets at the time of borrowing (This
provision is included solely to facilitate the orderly sale of
portfolio securities to accommodate abnormally heavy redemption
requests if they should occur and is not for leverage purposes. Any
borrowings by the Fund will be repaid prior to the purchase of
additional portfolio securities.);
(3) underwrite securities issued by any other person;
(4) invest in real estate or purchase oil, gas or mineral interests,
except that this restriction does not apply to marketable securities
secured by real estate or interests therein or issued by issuers which
invest in real estate or interests therein, or to securities issued by
companies engaged in the exploration, development, production,
refining, transporting and marketing of oil, gas or minerals;
(5) buy or sell commodities or commodity futures contracts;
(6) make loans of money or securities other than (a) through the purchase
of securities in accordance with the Fund's investment program, and
(b) by entering into repurchase agreements; provided that the Fund may
lend its portfolio securities so long as the value of securities
loaned by it does not exceed an amount equal to 33 1/3% of the Fund's
total assets;
(7) purchase securities on margin, except to the extent necessary for the
clearance of its securities transactions;
(8) make short sales of securities or maintain a short position in
securities unless at all times when a short position is open, the Fund
owns at least an equal amount of such securities or owns securities
convertible into or exchangeable for at least an equal amount of such
securities, and unless not more than 10% of the Fund's total assets
(taken at current value) is held as collateral for such short sales at
any one time;
(9) invest in companies for the purpose of exercising control or
management;
23
<PAGE> 27
(10) acquire for value the securities of any other investment companies,
other than in connection with a merger, consolidation, reorganization
or acquisition of assets, except that the Fund may invest up to 5% of
its assets in securities of other investment companies. The Fund will
not purchase more than 3% of the outstanding voting stock of any
investment company; or
(11) purchase or sell puts or purchase calls.
The foregoing investment restrictions are matters of fundamental policy
which may not be changed without the vote of a majority of the Fund's
outstanding shares, as defined in "General Information -- Organization and
Description of Common Stock" in the Prospectus. In addition to the foregoing
restrictions, the Fund is subject to the following policies, which may be
amended by its Board of Directors:
(1) The Fund may not invest more than 5% of its net assets in warrants or
rights nor more than 2% of its net assets in warrants or rights which
are not listed on the New York or American Stock Exchanges, except
that warrants or rights acquired in units or attached to other
securities are not subject to the foregoing limitation;
(2) The Fund may not invest more than 5% of its total assets in securities
of issuers, which, with their predecessors, have been in business for
less than three years;
(3) The Fund may not invest more than 5% of its total assets in financial
futures contracts or related call options.
In order to permit the sale of Fund shares in certain states, the Fund
may from time to time make commitments more restrictive than the restrictions
described above. For example, as of the date of this Statement of Additional
Information, the Fund has undertaken that it will not invest more than 15% of
its average net assets at the time of purchase in investments which are not
readily marketable (Texas), the Fund will not invest more than 35% of its assets
in high yield or "junk" bonds (Indiana), and the Fund will not purchase or
retain securities of any issuer if the officers or directors of the Fund, its
advisors or managers owning beneficially more than one half of one percent of
the securities of an issuer together own beneficially more than five percent of
the securities of that issuer nor will the Fund invest in the securities of
other investment companies, except by purchase in the open market where no
commission or profit to a sponsor or dealer results from the purchase other than
the customary broker's commission, or except when the purchase is part of a plan
of merger, consolidation, reorganization or acquisition (Ohio).
In addition, the Fund has undertaken to comply with California Rule
260.140.84, relating to aggregate annual expenses and California Rule
260.140.85, relating to short sales or margin securities, writing, buying or
selling puts and calls on securities, stock index futures, options on stock
index futures, financial futures contracts or options thereon, and other
investment practices deemed highly speculative by California. Should the Fund
determine that any such commitment is no longer in the best interests of the
Fund and its shareholders, it will revoke the commitment by terminating sales of
its shares in the state involved.
24
<PAGE> 28
FINANCIAL STATEMENTS
FS
<PAGE> 29
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Summit Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of the AIM
Summit Fund, Inc., including the schedule of investments, as of October 31,
1994, and the related statement of operations for the year then ended, the
statement of changes in net assets for the year then ended and the ten months
ended October 31, 1993, and the financial highlights for the year then ended,
the ten months ended October 31, 1993 and each of the years in the eight-year
period ended December 31, 1992. 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 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
October 31, 1994, 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
Summit Fund, Inc. as of October 31, 1994, the results of its operations for the
year then ended, the changes in its net assets for the year then ended and the
ten months ended October 31, 1993, and the financial highlights for the year
then ended, the ten months ended October 31, 1993 and each of the years in the
eight-year period ended December 31, 1992, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Houston, Texas
December 9, 1994
FS-1
<PAGE> 30
SCHEDULE OF INVESTMENTS
October 31, 1994
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
COMMON STOCKS - 97.29%
BASIC INDUSTRIES - 4.64%
CHEMICALS - 3.75%
120,000 Dow Chemical Co. $ 8,820,000
- -----------------------------------------------------------------
130,000 Eastman Chemical Co. 7,020,000
- -----------------------------------------------------------------
180,000 Hanna (M.A.) Co. 4,612,500
- -----------------------------------------------------------------
250,000 Wellman Inc 8,218,750
- -----------------------------------------------------------------
28,671,250
- -----------------------------------------------------------------
METALS (NONFERROUS) - 0.89%
80,000 Aluminum Company of America 6,820,000
- -----------------------------------------------------------------
Total Basic Industries 35,491,250
- -----------------------------------------------------------------
BUSINESS SERVICES - 10.68%
COMPUTER SOFTWARE & SERVICES - 7.10%
100,000 Acclaim Entertainment, Inc.(a) 1,737,500
- -----------------------------------------------------------------
60,000 Adobe Systems, Inc. 2,160,000
- -----------------------------------------------------------------
80,000 Autodesk Inc. 2,760,000
- -----------------------------------------------------------------
140,000 Ceridian Corp.(a) 3,640,000
- -----------------------------------------------------------------
210,000 Computer Associates International, Inc. 10,421,250
- -----------------------------------------------------------------
200,000 General Motors Corp. - Class E 7,325,000
- -----------------------------------------------------------------
80,000 Lotus Development Corp.(a) 3,060,000
- -----------------------------------------------------------------
80,000 Microsoft Corp.(a) 5,040,000
- -----------------------------------------------------------------
80,000 Oracle Systems Corp.(a) 3,680,000
- -----------------------------------------------------------------
100,000 Parametric Technology Corp.(a) 3,600,000
- -----------------------------------------------------------------
160,000 Sterling Software, Inc.(a) 5,000,000
- -----------------------------------------------------------------
60,000 Sybase, Inc.(a) 3,142,500
- -----------------------------------------------------------------
60,000 Synopsys, Inc.(a) 2,767,500
- -----------------------------------------------------------------
54,333,750
- -----------------------------------------------------------------
OILFIELD SERVICES - 0.38%
50,000 Schlumberger Ltd. 2,937,500
- -----------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 0.98%
100,000 ALC Communications Corp.(a) 3,787,500
- -----------------------------------------------------------------
60,000 Telefonaktiebolaget LM Ericsson - ADR 3,656,250
- -----------------------------------------------------------------
7,443,750
- -----------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 31
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
MISCELLANEOUS - 2.22%
240,000 Equifax, Inc. $ 6,990,000
- -----------------------------------------------------------------
130,000 Omnicom Group, Inc. 6,922,500
- -----------------------------------------------------------------
80,000 Value Health, Inc.(a) 3,110,000
- -----------------------------------------------------------------
17,022,500
- -----------------------------------------------------------------
Total Business Services 81,737,500
- -----------------------------------------------------------------
CAPITAL GOODS - 30.24%
AEROSPACE/DEFENSE - 0.41%
80,000 Loral Corp. 3,170,000
- -----------------------------------------------------------------
COMPUTER & OFFICE EQUIPMENT - 8.89%
100,000 Apple Computer, Inc. 4,318,750
- -----------------------------------------------------------------
50,000 Cabletron Systems, Inc.(a) 2,512,500
- -----------------------------------------------------------------
60,000 Chipcom Corp.(a) 3,615,000
- -----------------------------------------------------------------
180,000 COMPAQ Computer Corp.(a) 7,222,500
- -----------------------------------------------------------------
150,000 Diebold, Inc. 6,337,500
- -----------------------------------------------------------------
400,000 EMC Corp.(a) 8,600,000
- -----------------------------------------------------------------
120,000 Exabyte Corp.(a) 2,640,000
- -----------------------------------------------------------------
80,000 Hewlett-Packard Co. 7,820,000
- -----------------------------------------------------------------
140,000 International Business Machines Corp. 10,430,000
- -----------------------------------------------------------------
60,000 Komag, Inc.(a) 1,490,625
- -----------------------------------------------------------------
120,000 3Com Corp.(a) 4,830,000
- -----------------------------------------------------------------
80,000 Xerox Corp. 8,200,000
- -----------------------------------------------------------------
68,016,875
- -----------------------------------------------------------------
ELECTRICAL EQUIPMENT - 3.60%
120,000 Eaton Corp. 6,285,000
- -----------------------------------------------------------------
60,000 Emerson Electric Co. 3,645,000
- -----------------------------------------------------------------
360,000 General Electric Co. 17,595,000
- -----------------------------------------------------------------
27,525,000
- -----------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 1.69%
160,000 Cypress Semiconductor Corp.(a) 3,340,000
- -----------------------------------------------------------------
40,000 KLA Instruments Corp.(a) 2,110,000
- -----------------------------------------------------------------
60,000 Sensormatic Electronics Corp. 2,257,500
- -----------------------------------------------------------------
160,000 Teradyne, Inc.(a) 5,260,000
- -----------------------------------------------------------------
12,967,500
- -----------------------------------------------------------------
</TABLE>
FS-3
<PAGE> 32
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
ELECTRONICS (SEMICONDUCTORS/COMPONENTS) - 8.92%
56,300 Adaptec Inc.(a) $ 1,308,975
- -----------------------------------------------------------------------
90,000 AMP Inc. 6,806,250
- -----------------------------------------------------------------------
160,000 Analog Devices, Inc.(a) 5,720,000
- -----------------------------------------------------------------------
80,000 Applied Materials, Inc.(a) 4,160,000
- -----------------------------------------------------------------------
100,000 Atmel Corp.(a) 3,687,500
- -----------------------------------------------------------------------
200,000 Cisco Systems, Inc.(a) 6,025,000
- -----------------------------------------------------------------------
100,000 LAM Research Corp.(a) 4,500,000
- -----------------------------------------------------------------------
210,000 LSI Logic Corp.(a) 8,925,000
- -----------------------------------------------------------------------
160,000 Micron Technology Inc. 6,340,000
- -----------------------------------------------------------------------
60,000 Molex, Inc. 2,670,000
- -----------------------------------------------------------------------
80,000 Novellus Systems(a) 4,360,000
- -----------------------------------------------------------------------
80,000 Raychem Corp. 2,960,000
- -----------------------------------------------------------------------
120,000 Solectron Corp.(a) 3,345,000
- -----------------------------------------------------------------------
60,000 Texas Instruments Inc. 4,492,500
- -----------------------------------------------------------------------
100,000 Zilog, Inc.(a) 2,875,000
- -----------------------------------------------------------------------
68,175,225
- -----------------------------------------------------------------------
MACHINE TOOLS & RELATED PRODUCTS - 0.43%
120,000 Cincinnati Milacron, Inc. 3,285,000
- -----------------------------------------------------------------------
MACHINERY - 2.50%
90,000 Briggs and Stratton Corp. 6,255,000
- -----------------------------------------------------------------------
120,000 Caterpillar, Inc. 7,170,000
- -----------------------------------------------------------------------
60,000 Clark Equipment Co.(a) 4,207,500
- -----------------------------------------------------------------------
40,000 Varity Corp.(a) 1,530,000
- -----------------------------------------------------------------------
19,162,500
- -----------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 2.16%
100,000 Aspect Telecommunications Corp.(a) 3,450,000
- -----------------------------------------------------------------------
160,000 DSC Communications Corp.(a) 4,920,000
- -----------------------------------------------------------------------
220,000 ECI Telecom Ltd. 4,262,500
- -----------------------------------------------------------------------
80,000 Tellabs, Inc.(a) 3,900,000
- -----------------------------------------------------------------------
16,532,500
- -----------------------------------------------------------------------
TRANSPORTATION EQUIPMENT - 0.43%
160,000 Brunswick Corp. 3,280,000
- -----------------------------------------------------------------------
MISCELLANEOUS - 0.65%
90,000 Dover Corp. 4,995,000
- -----------------------------------------------------------------------
MULTIPLE INDUSTRY - 0.56%
60,000 TRW Inc. 4,275,000
- -----------------------------------------------------------------------
Total Capital Goods 231,384,600
- -----------------------------------------------------------------------
</TABLE>
FS-4
<PAGE> 33
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
CONSUMER DURABLES - 8.86%
AUTO PARTS - 1.30%
230,000 Echlin Inc. $ 7,072,500
- ---------------------------------------------------------------------
120,000 Gentex Corp.(a) 2,880,000
- ---------------------------------------------------------------------
9,952,500
- ---------------------------------------------------------------------
AUTOMOBILE - 1.82%
140,000 Chrysler Corp. 6,825,000
- ---------------------------------------------------------------------
240,000 Ford Motor Co. 7,080,000
- ---------------------------------------------------------------------
13,905,000
- ---------------------------------------------------------------------
HOUSEHOLD APPLIANCES/FURNISHINGS - 1.68%
360,000 Maytag Corp. 5,715,000
- ---------------------------------------------------------------------
160,000 Premark International, Inc. 7,160,000
- ---------------------------------------------------------------------
12,875,000
- ---------------------------------------------------------------------
MEDICAL EQUIPMENT & SUPPLIES - 1.96%
320,000 Baxter International Inc. 8,320,000
- ---------------------------------------------------------------------
80,000 Cordis Corp.(a) 4,610,000
- ---------------------------------------------------------------------
60,000 Stryker Corp. 2,055,000
- ---------------------------------------------------------------------
14,985,000
- ---------------------------------------------------------------------
PERSONAL ITEMS - 0.53%
160,000 Black & Decker Corp. 4,020,000
- ---------------------------------------------------------------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 0.75%
120,000 Eastman Kodak Co. 5,775,000
- ---------------------------------------------------------------------
RESIDENTIAL CONSTRUCTION - 0.17%
80,000 Schuler Homes, Inc.(a) 1,280,000
- ---------------------------------------------------------------------
MULTIPLE INDUSTRY - 0.65%
120,000 Armstrong World Industries Inc. 4,980,000
- ---------------------------------------------------------------------
Total Consumer Durables 67,772,500
- ---------------------------------------------------------------------
CONSUMER NONDURABLES - 8.49%
COSMETICS/TOILETRIES - 0.66%
80,000 Avon Products, Inc. 5,060,000
- ---------------------------------------------------------------------
DRUGS - 2.26%
280,000 Abbott Laboratories 8,680,000
- ---------------------------------------------------------------------
60,000 Schering-Plough Corp. 4,275,000
- ---------------------------------------------------------------------
160,000 Teva Pharmaceuticals Industries Ltd. - ADR 4,360,000
- ---------------------------------------------------------------------
17,315,000
- ---------------------------------------------------------------------
FOOD PROCESSING - 0.80%
180,000 IBP, Inc. 6,142,500
- ---------------------------------------------------------------------
</TABLE>
FS-5
<PAGE> 34
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
HOUSEHOLD PRODUCTS - 1.14%
140,000 Procter & Gamble Co. $ 8,750,000
- --------------------------------------------------------------------------
PUBLISHING - 0.99%
100,000 McGraw-Hill, Inc. 7,475,000
- --------------------------------------------------------------------------
TEXTILES - 0.33%
50,000 VF Corp. 2,531,250
- --------------------------------------------------------------------------
MULTIPLE INDUSTRY - 2.31%
120,000 Gillette Co. (The) 8,925,000
- --------------------------------------------------------------------------
160,000 Johnson & Johnson 8,740,000
- --------------------------------------------------------------------------
17,665,000
- --------------------------------------------------------------------------
Total Consumer Nondurables 64,938,750
- --------------------------------------------------------------------------
CONSUMER SERVICES - 7.09%
BROADCAST MEDIA - 0.98%
90,000 Capital Cities/ABC, Inc. 7,481,250
- --------------------------------------------------------------------------
HEALTH CARE, EXCLUDING HOSPITAL MANAGEMENT - 3.59%
100,000 Columbia Hospital Corp. 4,162,500
- --------------------------------------------------------------------------
100,000 Health Systems International Inc. - Class A(a) 2,687,500
- --------------------------------------------------------------------------
120,000 Healthcare Compare Corp.(a) 3,345,000
- --------------------------------------------------------------------------
120,000 Healthsouth Rehabilitation Corp.(a) 4,560,000
- --------------------------------------------------------------------------
160,000 Mid-Atlantic Medical Services, Inc.(a) 3,700,000
- --------------------------------------------------------------------------
80,000 Physician Corp. of America(a) 1,930,000
- --------------------------------------------------------------------------
150,000 U.S. Healthcare Inc. 7,087,500
- --------------------------------------------------------------------------
27,472,500
- --------------------------------------------------------------------------
HOSPITAL MANAGEMENT - 2.06%
120,000 Health Management Associates, Inc. - Class A(a) 3,120,000
- --------------------------------------------------------------------------
140,000 Horizon Health Care Corp.(a) 3,867,500
- --------------------------------------------------------------------------
160,000 Humana Inc.(a) 3,900,000
- --------------------------------------------------------------------------
120,000 Integrated Health Services, Inc.(a) 4,890,000
- --------------------------------------------------------------------------
15,777,500
- --------------------------------------------------------------------------
MISCELLANEOUS - 0.46%
80,000 Block (H & R) Inc. 3,550,000
- --------------------------------------------------------------------------
Total Consumer Services 54,281,250
- --------------------------------------------------------------------------
ENERGY - 1.73%
OIL & GAS - 1.73%
100,000 Mobil Corp. 8,600,000
- --------------------------------------------------------------------------
40,000 Royal Dutch Petroleum Co. - ADR 4,660,000
- --------------------------------------------------------------------------
Total Energy 13,260,000
- --------------------------------------------------------------------------
</TABLE>
FS-6
<PAGE> 35
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
FINANCIAL - 7.52%
BANKING - 3.33%
80,000 BankAmerica Corp. $ 3,480,000
- ----------------------------------------------------------------------------
190,000 Chase Manhattan Corp. 6,840,000
- ----------------------------------------------------------------------------
120,000 First Interstate Bancorp 9,600,000
- ----------------------------------------------------------------------------
100,000 Mellon Bank Corp. 5,562,500
- ----------------------------------------------------------------------------
25,482,500
- ----------------------------------------------------------------------------
INSURANCE - 1.00%
120,000 American General Corp. 3,300,000
- ----------------------------------------------------------------------------
120,000 Lincoln National Corp. 4,350,000
- ----------------------------------------------------------------------------
7,650,000
- ----------------------------------------------------------------------------
PERSONAL CREDIT - 0.93%
40,000 ADVANTA Corp. 1,050,000
- ----------------------------------------------------------------------------
80,000 Household International, Inc. 2,810,000
- ----------------------------------------------------------------------------
120,000 MBNA Corp. 3,210,000
- ----------------------------------------------------------------------------
7,070,000
- ----------------------------------------------------------------------------
MISCELLANEOUS - 2.26%
160,000 Federal National Mortgage Association 12,160,000
- ----------------------------------------------------------------------------
160,000 Student Loan Marketing Association 5,140,000
- ----------------------------------------------------------------------------
17,300,000
- ----------------------------------------------------------------------------
Total Financial 57,502,500
- ----------------------------------------------------------------------------
RETAIL - 8.53%
DEPARTMENT STORES - 2.11%
80,000 Meyer (Fred), Inc.(a) 2,580,000
- ----------------------------------------------------------------------------
150,000 Penney (J.C.) Co., Inc. 7,593,750
- ----------------------------------------------------------------------------
120,000 Sears Roebuck & Co. 5,940,000
- ----------------------------------------------------------------------------
16,113,750
- ----------------------------------------------------------------------------
FOOD STORES - 1.01%
60,000 Albertson's, Inc. 1,800,000
- ----------------------------------------------------------------------------
200,000 Safeway Inc.(a) 5,900,000
- ----------------------------------------------------------------------------
7,700,000
- ----------------------------------------------------------------------------
GENERAL MERCHANDISE, EXCLUDING DEPARTMENT, STORES - 1.50%
320,000 Kmart Corp. 5,240,000
- ----------------------------------------------------------------------------
140,000 Waban Inc.(a) 2,485,000
- ----------------------------------------------------------------------------
160,000 Wal-Mart Stores, Inc. 3,760,000
- ----------------------------------------------------------------------------
11,485,000
- ----------------------------------------------------------------------------
</TABLE>
FS-7
<PAGE> 36
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
RESTAURANTS - 0.78%
80,000 McDonald's Corp. $ 2,300,000
- --------------------------------------------------------------
120,000 Outback Steakhouse, Inc.(a) 3,705,000
- --------------------------------------------------------------
6,005,000
- --------------------------------------------------------------
SPECIALTY STORES - 3.13%
100,000 Eckerd Corp.(a) 3,100,000
- --------------------------------------------------------------
120,000 General Nutrition, Inc.(a) 3,060,000
- --------------------------------------------------------------
100,000 Gymboree Corp.(a) 3,250,000
- --------------------------------------------------------------
100,000 Home Depot, Inc. 4,550,000
- --------------------------------------------------------------
120,000 Lowes Companies Inc. 4,770,000
- --------------------------------------------------------------
80,000 Michaels Stores, Inc.(a) 3,245,000
- --------------------------------------------------------------
40,000 Nordstrom, Inc. 1,970,000
- --------------------------------------------------------------
23,945,000
- --------------------------------------------------------------
Total Retail 65,248,750
- -------------------------------------------------------------
TRANSPORTATION - 1.55%
RAILROAD - 1.14%
80,000 Conrail, Inc. 4,350,000
- --------------------------------------------------------------
60,000 CSX Corp. 4,350,000
- --------------------------------------------------------------
8,700,000
- --------------------------------------------------------------
TRUCKING - 0.41%
140,000 Consolidated Freightways, Inc.(a) 3,132,500
- --------------------------------------------------------------
Total Transportation 11,832,500
- --------------------------------------------------------------
UTILITIES - 4.82%
NATURAL GAS - 0.76%
200,000 Williams Companies, Inc. (The) 5,800,000
- --------------------------------------------------------------
TELEPHONE - 3.75%
200,000 Alltel Corp. 5,175,000
- --------------------------------------------------------------
160,000 American Telephone & Telegraph Co. 8,800,000
- --------------------------------------------------------------
160,000 MCI Communications Corp. 3,680,000
- --------------------------------------------------------------
140,000 Southwestern Bell Corp. 5,862,500
- --------------------------------------------------------------
160,000 Sprint Corp. 5,220,000
- -------------------------------------------------------------
28,737,500
- --------------------------------------------------------------
MULTIPLE INDUSTRY - 0.31%
80,000 WMX Technologies Inc. 2,350,000
- --------------------------------------------------------------
Total Utilities 36,887,500
- --------------------------------------------------------------
</TABLE>
FS-8
<PAGE> 37
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C>
WHOLESALE - 0.98%
DURABLE GOODS - 0.59%
120,000 Arrow Electronics, Inc.(a) $ 4,530,000
- -------------------------------------------------------------------
NONDURABLE GOODS - 0.39%
120,000 Office Depot, Inc.(a) 2,970,000
- -------------------------------------------------------------------
Total Wholesale 7,500,000
- -------------------------------------------------------------------
OTHER - 2.16%
DIVERSIFIED - 1.58%
160,000 Allied-Signal, Inc. 5,540,000
- -------------------------------------------------------------------
110,000 Du Pont (E.I.) de Nemours & Co. 6,558,750
- -------------------------------------------------------------------
12,098,750
- -------------------------------------------------------------------
NONRESIDENTIAL CONSTRUCTION - 0.58%
120,000 Halliburton Co. 4,440,000
- -------------------------------------------------------------------
Total Other 16,538,750
- -------------------------------------------------------------------
Total Common Stocks 744,375,850
- -------------------------------------------------------------------
PRINCIPAL AMOUNT
REPURCHASE AGREEMENTS - 4.59%(b)
$ 2,085,914 Goldman, Sachs & Co., 4.78%, 11/01/94(c) 2,085,914
- -------------------------------------------------------------------
33,000,000 Goldman, Sachs & Co., 4.85%, 11/01/94(d) 33,000,000
- -------------------------------------------------------------------
Total Repurchase Agreements 35,085,914
- -------------------------------------------------------------------
TOTAL INVESTMENTS - 101.88% 779,461,764
- -------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - (1.88%) (14,389,076)
- -------------------------------------------------------------------
NET ASSETS - 100.00% $765,072,688
===================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession
by the Fund upon entering into the repurchase agreement. The
collateral is marked to market daily to ensure its market value as
being 102 percent of the sales price of the repurchase agreement.
(c) Joint repurchase agreement entered into 10/31/94 with a maturing
value of $114,492,117. Collateralized by $119,992,000 U.S.
Treasury obligations, 5.125% to 8.00% due 06/30/98 to 11/15/24.
The aggregate market value of the collateral at 10/31/94 was
$116,879,377. The Fund's pro-rata interest in the collateral at
10/31/94 was $2,129,690.
(d) Joint repurchase agreement entered into 10/31/94 with a maturing
value of $390,052,542. Collateralized by $384,015,000 U.S.
Treasury obligations, 4.375% to 12.375% due 11/15/95 to 11/15/24.
The aggregate market value of the collateral at 10/31/94 was
$398,183,007. The Fund's pro-rata interest in the collateral at
10/31/94 was $33,692,408.
See Notes to Financial Statements.
FS-9
<PAGE> 38
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1994
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at market value (cost $691,887,078) $ 779,461,764
- ----------------------------------------------------------------
Receivables for:
Investments sold 16,024,841
- ----------------------------------------------------------------
Capital stock sold 58,767
- ----------------------------------------------------------------
Dividends and interest 828,323
- ----------------------------------------------------------------
Investment for deferred compensation plan 4,297
- ----------------------------------------------------------------
Other assets 22,155
- ----------------------------------------------------------------
Total assets 796,400,147
- ----------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 30,473,733
- ----------------------------------------------------------------
Capital stock reacquired 248,230
- ----------------------------------------------------------------
Deferred compensation 4,297
- ----------------------------------------------------------------
Accrued advisory fees 415,356
- ----------------------------------------------------------------
Accrued accounting service fees 3,768
- ----------------------------------------------------------------
Accrued directors' fees 2,818
- ----------------------------------------------------------------
Accrued operating expenses 179,257
- ----------------------------------------------------------------
Total liabilities 31,327,459
- ----------------------------------------------------------------
Net assets applicable to shares outstanding $ 765,072,688
================================================================
CAPITAL SHARES, $.01 PAR VALUE PER SHARE:
Authorized 1,000,000,000
- ----------------------------------------------------------------
Outstanding 78,222,581
================================================================
Net asset value and redemption price per share $ 9.78
================================================================
</TABLE>
See Notes to Financial Statements.
FS-10
<PAGE> 39
STATEMENT OF OPERATIONS
For the year ended October 31, 1994
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Dividends $ 11,575,995
- -----------------------------------------------------------------------------------
Interest 1,098,362
- -----------------------------------------------------------------------------------
Total investment income 12,674,357
- -----------------------------------------------------------------------------------
EXPENSES:
Advisory fees 4,712,695
- -----------------------------------------------------------------------------------
Custodian fees 117,132
- -----------------------------------------------------------------------------------
Transfer agent fees 19,086
- -----------------------------------------------------------------------------------
Accounting service fees 45,256
- -----------------------------------------------------------------------------------
Directors' fees 9,047
- -----------------------------------------------------------------------------------
Other 281,500
- -----------------------------------------------------------------------------------
Total expenses 5,184,716
- -----------------------------------------------------------------------------------
Net investment income 7,489,641
- -----------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES:
Net realized gain on sales of investment securities 30,323,385
- -----------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment securities (31,641,947)
- -----------------------------------------------------------------------------------
Net gain (loss) on investment securities (1,318,562)
- -----------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 6,171,079
===================================================================================
</TABLE>
See Notes to Financial Statements.
FS-11
<PAGE> 40
STATEMENT OF CHANGES IN NET ASSETS
For the year ended October 31, 1994 and
the ten months ended October 31, 1993
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
OPERATIONS:
Net investment income $ 7,489,641 $ 6,033,186
- -----------------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities 30,323,385 38,620,204
- -----------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment securities (31,641,947) 9,875,670
- -----------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 6,171,079 54,529,060
- -----------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (6,514,217) --
- -----------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains (43,881,387) --
- -----------------------------------------------------------------------------------------------------
Net equalization credits 2,423,169 1,057,565
- -----------------------------------------------------------------------------------------------------
Net increase from capital stock transactions 101,293,556 45,664,662
- -----------------------------------------------------------------------------------------------------
Net increase in net assets 59,492,200 101,251,287
- -----------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 705,580,488 604,329,201
- -----------------------------------------------------------------------------------------------------
End of period $765,072,688 $705,580,488
=====================================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $625,370,433 $524,076,877
- -----------------------------------------------------------------------------------------------------
Undistributed net investment income 22,266,954 18,868,361
- -----------------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment securities 29,860,615 43,418,617
- -----------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities 87,574,686 119,216,633
- -----------------------------------------------------------------------------------------------------
$765,072,688 $705,580,488
=====================================================================================================
</TABLE>
See Notes to Financial Statements.
FS-12
<PAGE> 41
NOTES TO FINANCIAL STATEMENTS
October 31, 1994
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Summit Fund, Inc. (the "Fund") is a Maryland corporation registered
under the Investment Company Act of 1940, as amended, as a diversified,
open-end management investment company. 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 is valued
at its last sales price on the exchange where the security is principally
traded, or lacking any sales on a particular day, the security is valued at
the mean between the closing bid and asked prices on that day. Each security
traded in the over-the-counter market (but not including securities reported
on the NASDAQ National Market System) is valued at the mean between the last
bid and asked prices based upon quotes furnished by market makers for such
securities. Each security reported on the NASDAQ National Market System is
valued at the last sales price on the valuation date. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the supervision of the Fund's officers
in a manner specifically authorized by the Board of Directors of the Fund.
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 and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
D. Equalization - The Fund follows 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 income when
the transaction is recorded so that the undistributed net investment income
per share is unaffected by sales or redemptions of Fund shares.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into an investment advisory agreement with A I M Advisors,
Inc. ("AIM"). Under the terms of the advisory agreement, the Fund pays AIM a fee
at an annual rate of 1.0% of the first $10 million of the Fund's average daily
net assets, 0.75% of the next $140 million of the Fund's average daily net
assets and 0.625% of the Fund's average daily net assets in excess of $150
million. Under the terms of a sub-advisory agreement between AIM and NationsBank
of Texas, N.A. ("NationsBank"), AIM pays NationsBank a fee at an annual rate of
0.50% of the first $10 million of the Fund's average daily net assets, 0.35% of
the next $140 million of the Fund's average daily net assets and 0.225% of the
Fund's average daily net assets in excess of $150 million. Effective January 1,
1994, NationsBank agreed to voluntarily waive a portion of its sub-advisory fee
paid by AIM to NationsBank. NationsBank will receive a fee calculated at the
annual rate of 0.50% of the first $10 million of the Fund's average daily net
assets, 0.35% of the next $140 million of the Fund's average daily net assets,
0.225% of the next $550 million of the Fund's average daily net assets and 0.15%
of the Fund's average daily net assets in excess of $700 million. The waiver is
entirely voluntary and the Board of Directors would be advised of any decision
to discontinue the waiver. During the year ended October 31, 1994, NationsBank
waived sub-advisory fees of $15,433. These agreements require AIM to reduce its
fees or, if necessary, make payments to the Fund to the extent required to
satisfy any expense limitations imposed by the securities laws or regulations
thereunder of any state in which the Fund's shares are qualified for sale.
The Fund, pursuant to an administrative services agreement with AIM, has agreed
to reimburse AIM for certain costs incurred in providing accounting services to
the Fund. During the year ended October 31, 1994, the Fund reimbursed AIM
$45,256 for such services.
FS-13
<PAGE> 42
NOTE 2 - CONTINUED
During the year ended October 31, 1994, the Fund paid legal fees of $8,439 for
services rendered by Reid & Priest as counsel to the Board of Directors. In
September 1994, the firm of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel was
appointed as counsel to the Board of Directors. A member of that firm is a
director of the Company.
Substantially all shares of the Fund are held of record by State Street Bank &
Trust Company as custodian for Summit Investors Plans, a unit investment trust
that is sponsored by A I M Distributors, Inc. (an affiliated company of AIM).
Certain officers and directors of the Fund are officers of AIM and A I M
Distributors, Inc.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of the Fund. The Fund may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1994, was
$915,296,876 and $842,608,508, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 1994, on a tax basis, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $100,307,898
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (13,300,354)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $ 87,007,544
===============================================================================
</TABLE>
Cost of investments for tax purposes is $692,454,220.
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding for the year ended October 31,
1994, and the ten months ended October 31, 1993 were as follows:
<TABLE>
<CAPTION>
1994 1993
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold 11,078,117 $104,089,393 9,169,113 $ 88,177,681
- ----------------------------------------------------------------------------------------
Issued as reinvestment of dividends 5,136,785 48,593,992 -- --
- ----------------------------------------------------------------------------------------
Reacquired (5,457,028) (51,389,829) (4,422,592) (42,513,019)
- ----------------------------------------------------------------------------------------
10,757,874 $101,293,556 4,746,521 $ 45,664,662
========================================================================================
</TABLE>
FS-14
<PAGE> 43
NOTE 6 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share of the
Fund outstanding during the year ended October 31, 1994, the ten
months ended October 31, 1993 and each of the years in the eight-year
period ended December 31, 1992.
<TABLE>
<CAPTION>
OCTOBER 31,
----------------------
1994 1993
-------- --------
<S> <C> <C>
Net asset value, beginning of period $ 10.46 $ 9.64
- --------------------------------------- -------- --------
Income from investment operations:
Net investment income 0.10 0.09
- --------------------------------------- -------- --------
Net gains (losses) on securities
(both realized and unrealized) (0.04) 0.73
- --------------------------------------- -------- --------
Total from investment operations 0.06 0.82
- --------------------------------------- -------- --------
Less distributions:
Dividends from net investment income (0.10) --
- --------------------------------------- -------- --------
Distributions from capital gains (0.64) --
- --------------------------------------- -------- --------
Total distributions (0.74) --
- --------------------------------------- -------- --------
Net asset value, end of period $ 9.78 $ 10.46
======================================= ======== ========
Total return(b) 0.61% 8.51%
======================================= ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $765,073 $705,580
======================================= ======== ========
Ratio of expenses to average net assets 0.72%(c) 0.79%(d)
======================================= ======== ========
Ratio of net investment income to
average net assets 1.04%(c) 1.13%(d)
======================================= ======== ========
Portfolio turnover rate 121.69% 115.76%
======================================= ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------------------------
1992 1991 1990 1989 1988(a) 1987 1986 1985
-------- -------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.09 $ 7.56 $ 7.79 $ 6.57 $ 5.70 $ 6.68 $ 6.49 $ 5.03
- --------------------------------------- -------- -------- -------- -------- -------- -------- ------- -------
Income from investment operations:
Net investment income 0.11 0.14 0.15 0.16 0.16 0.09 0.08 0.06
- --------------------------------------- -------- -------- -------- -------- -------- -------- ------- -------
Net gains (losses) on securities
(both realized and unrealized) 0.35 3.16 (0.08) 1.86 0.84 (0.40) 0.82 1.45
- --------------------------------------- -------- -------- -------- -------- -------- -------- ------- -------
Total from investment operations 0.46 3.30 0.07 2.02 1.00 (0.31) 0.90 1.51
- --------------------------------------- -------- -------- -------- -------- -------- -------- ------- -------
Less distributions:
Dividends from net investment income (0.11) (0.13) (0.16) (0.16) (0.13) (0.10) (0.05) (0.04)
- --------------------------------------- -------- -------- -------- -------- -------- -------- ------- -------
Distributions from capital gains (0.80) (0.64) (0.14) (0.64) -- (0.57) (0.66) (0.01)
- --------------------------------------- -------- -------- -------- -------- -------- -------- ------- -------
Total distributions (0.91) (0.77) (0.30) (0.80) (0.13) (0.67) (0.71) (0.05)
- --------------------------------------- -------- -------- -------- -------- -------- -------- ------- -------
Net asset value, end of period $ 9.64 $ 10.09 $ 7.56 $ 7.79 $ 6.57 $ 5.70 $ 6.68 $ 6.49
======================================= ======== ======== ======== ======== ======== ======== ======= =======
Total return(b) 4.50% 43.64% 0.93% 30.92% 17.65% (4.66)% 14.05% 30.15%
======================================= ======== ======== ======== ======== ======== ======== ======= =======
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $604,329 $517,835 $316,043 $262,655 $164,996 $101,541 $72,458 $38,469
======================================= ======== ======== ======== ======== ======== ======== ======= =======
Ratio of expenses to average net assets 0.76% 0.75% 0.80% 0.82% 1.04% 0.98% 1.16% 1.48%
======================================= ======== ======== ======== ======== ======== ======== ======= =======
Ratio of net investment income to
average net assets 1.09% 1.48% 2.02% 2.14% 2.57% 1.06% 1.15% 2.88%
======================================= ======== ======== ======== ======== ======== ======== ======= =======
Portfolio turnover rate 97.41% 109.04% 142.60% 97.26% 114.94% 81.99% 118.23% 92.90%
======================================= ======== ======== ======== ======== ======== ======== ======= =======
</TABLE>
(a) The Fund changed investment advisers on October 5, 1988.
(b) For periods less than one year, total return is not annualized.
(c) Ratios are based on average net assets of $720,031,149.
(d) Annualized.
FS-15
