<PAGE> 1
AIM ADVISOR FUNDS, INC.
AIM Advisor Cash Management Fund
AIM Advisor Income Fund
11 Greenway Plaza, Suite 100
Houston, TX 77046
January 2, 1998
Dear Shareholder:
Enclosed is a combined proxy statement and prospectus seeking approval of a
proposed combination of AIM Advisor Cash Management Fund ("Cash Management") of
AIM Advisor Funds, Inc. ("AAFI"), with AIM Money Market Fund ("Money Market")
of AIM Funds Group ("AFG"), and a proposed combination of AIM Advisor Income
Fund ("Income Fund") of AAFI with AIM Intermediate Government Fund ("Inter-
mediate Government") of AFG.
As discussed in the accompanying document, it is proposed that these funds
be combined in order to achieve greater efficiency of operation, economies of
scale and possible cost savings for shareholders. The Board of Directors of
AAFI concluded that it was desirable to eliminate the duplication of services
of Cash Management and Income Fund that have similar investment goals as Money
Market and Intermediate Government, respectively. The accompanying document
describes the proposed transaction and compares the policies and expenses of
the above funds for your evaluation.
Both reorganizations have been structured as tax-free transactions. No
sales charges will be imposed in connection with these transactions.
Shareholders are being asked to approve an Agreement and Plan of
Reorganization of their respective fund. After careful consideration, the Board
of Directors of AAFI has unanimously approved this proposal and recommends that
you read the enclosed materials carefully and then vote FOR the proposal.
Your vote is important. Please take a moment now to sign and return your
proxy cards in the enclosed postage paid return envelope. If we do not hear
from you after a reasonable amount of time you may receive a telephone call
from our proxy solicitor, Shareholder Communications Corporation, reminding you
to vote your shares.
Thank you for your cooperation and continued support.
Sincerely,
Charles T. Bauer
Chairman
<PAGE> 2
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
ENCLOSED YOU WILL FIND ONE OR TWO PROXY CARDS RELATING TO EACH OF THE FUNDS
FOR WHICH YOU ARE ENTITLED TO VOTE. PLEASE INDICATE YOUR VOTING INSTRUCTIONS
ON EACH OF THE ENCLOSED PROXY CARDS, DATE AND SIGN THEM, AND RETURN THEM IN THE
ENVELOPE PROVIDED. IF YOU SIGN, DATE AND RETURN A PROXY CARD BUT GIVE NO VOTING
INSTRUCTIONS, YOUR SHARES WILL BE VOTED "FOR" THE PROPOSALS INDICATED ON THE
CARDS. IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE ASK
YOUR COOPERATION IN MAILING IN YOUR PROXY CARDS PROMPTLY. UNLESS PROXY CARDS
ARE SIGNED BY THE APPROPRIATE PERSONS AS INDICATED IN THE INSTRUCTIONS BELOW,
THEY WILL NOT BE VOTED.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense involved in validating your vote if you fail
to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Account: Either party may sign, but the name of the party signing
should conform exactly to the name shown in the registration on the proxy
card.
3. All Other Accounts: The capacity of the individual signing the proxy card
should be indicated unless it is reflected in the form of registration. For
example:
<TABLE>
<CAPTION>
Registration Valid Signature
------------ ---------------
<S> <C>
Trust Accounts
(1) ABC Trust Account. . . . . . . . . . . . . . . . . . . . . . . Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78. . . . . . . . . . . . . . Jane B. Doe
Partnership Accounts
(1) The XYZ Partnership. . . . . . . . . . . . . . . . . . . . . . Jane B. Smith, Partner
(2) Smith and Jones, Limited Partnership . . . . . . . . . . . . . Jane B. Smith, General
Partner
Custodial or Estate Accounts
(1) John B. Smith, Cust. f/b/o John B. Smith, Jr.
UGMA/UTMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . John B. Smith
(2) Estate of John B. Smith . . . . . . . . . . . . . . . . . . . John B. Smith, Jr., Executor
Corporate Accounts
(1) ABC Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . ABC Corp.
John Doe, Treasurer
(2) ABC Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . John Doe, Treasurer
(3) ABC Corp., c/o John Doe, Treasurer. . . . . . . . . . . . . . John Doe
(4) ABC Corp. Profit Sharing Plan . . . . . . . . . . . . . . . . John Doe, Trustee
</TABLE>
<PAGE> 3
AIM ADVISOR FUNDS, INC.
AIM ADVISOR CASH MANAGEMENT FUND
AIM ADVISOR INCOME FUND
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 17, 1998
TO THE SHAREHOLDERS OF AIM Advisor Cash Management Fund and AIM Advisor Income
Fund portfolios of AIM Advisor Funds, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of AIM
Advisor Cash Management Fund ("Cash Management") and AIM Advisor Income Fund
("Income Fund"), both investment portfolios of AIM Advisor Funds, Inc.
("AAFI"), will be held at 11 Greenway Plaza, Suite 100, Houston, Texas on
February 17, 1998, at 3:00 p.m., local time, for the following purposes:
1. For Cash Management, to approve an Agreement and Plan of
Reorganization (the "Cash Management Agreement") between AAFI, on
behalf of Cash Management and AIM Funds Group ("AFG"), on behalf of
its portfolio, AIM Money Market Fund ("Money Market"), and the
consummation of the transactions contemplated therein ("Cash
Management Reorganization"). The Cash Management Agreement and the
Cash Management Reorganization will result in the combination of
Cash Management and Money Market. Pursuant to the Cash Management
Agreement, substantially all of the assets of Cash Management will
be transferred to Money Market. Upon such transfer, AFG will issue
directly to Cash Management's Class A and Class C shareholders, AIM
Cash Reserve Shares ("Cash Reserve shares") of Money Market having
an aggregate net asset value equal to the value of the Cash
Management assets transferred to Money Market. It is expected that
the value of each shareholder's account with Money Market
immediately after the Cash Management Reorganization will be the
same as the value of such shareholder's account with Cash
Management immediately prior to the Cash Management Reorganization.
The Cash Management Reorganization has been structured as a
tax-free transaction . No sales charge will be imposed in
connection with the Cash Management Reorganization.
2. For Income Fund, to approve an Agreement and Plan of Reorganization
(the "Income Fund Agreement") between AAFI, on behalf of Income
Fund and AFG, on behalf of its portfolio, AIM Intermediate
Government Fund ("Intermediate Government"), and the consummation
of the transactions contemplated therein (the "Income Fund
Reorganization"). The Income Fund Agreement and the Income Fund
Reorganization will result in the combination of Income Fund and
Intermediate Government. Pursuant to the Income Fund Agreement,
substantially all of the assets of Income Fund will be transferred
to Intermediate Government. Upon such transfer, AFG will issue,
directly to Income Fund's Class A shareholders, Intermediate
Government Class A shares having an aggregate net asset value equal
to the value of the Income Fund assets attributable to the Income
Fund Class A shares transferred to Intermediate Government, and AFG
will issue directly to Income Fund's Class C shareholders,
Intermediate Government Class C shares having an aggregate net
asset value equal to the value of the Income Fund assets
attributable to the Income Fund Class C shares transferred to
Intermediate Government. It is expected that the
<PAGE> 4
value of each shareholder's account with Intermediate Government
immediately after the Income Fund Reorganization will be the same
as the value of such shareholder's account with Income Fund
immediately prior to the Income Fund Reorganization. The Income
Fund Reorganization has been structured as a tax-free transaction.
No sales charge will be imposed in connection with the Income Fund
Reorganization.
3. To transact any other business, not currently contemplated, that
may properly come before the Special Meeting, in the discretion of
the proxies or their substitutes.
Each of the Cash Management Reorganization and the Income Fund
Reorganization (collectively, the "Reorganizations") is described in the
attached Combined Proxy Statement and Prospectus.
Shareholders of record as of the close of business on December 10, 1997,
are entitled to notice of, and to vote at, the Special Meeting or any
adjournment thereof.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE THE ACCOMPANYING PROXY WHICH IS BEING SOLICITED BY THE MANAGEMENT OF
AAFI. THIS IS IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM AT THE SPECIAL
MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY THE
SUBSEQUENT EXECUTION AND SUBMISSION OF A REVISED PROXY, BY GIVING WRITTEN
NOTICE OF REVOCATION TO AAFI AT ANY TIME BEFORE THE PROXY IS EXERCISED OR BY
VOTING IN PERSON AT THE SPECIAL MEETING.
Charles T. Bauer
Chairman of the Board of Directors
January 2, 1998
<PAGE> 5
AIM ADVISOR CASH MANAGEMENT FUND AIM MONEY MARKET FUND
AIM ADVISOR INCOME FUND AIM INTERMEDIATE GOVERNMENT FUND
(PORTFOLIOS OF AIM ADVISOR FUNDS, INC.) (PORTFOLIOS OF AIM FUNDS GROUP)
COMBINED PROXY STATEMENT AND PROSPECTUS
Dated: January 2, 1998
This document is being furnished in connection with the Special
Meeting of Shareholders of AIM Advisor Cash Management Fund ("Cash Management")
and AIM Advisor Income Fund ("Income Fund"), both investment portfolios of AIM
Advisor Funds, Inc. ("AAFI") to be held on February 17, 1998 (the "Special
Meeting"). At the Special Meeting, the shareholders of Cash Management are
being asked to consider and approve a proposed Agreement and Plan of
Reorganization (the "Cash Management Agreement") between AAFI, acting on behalf
of Cash Management and AIM Funds Group ("AFG"), acting on behalf of AIM Money
Market Fund ("Money Market"), a portfolio of AFG, and the consummation of the
transactions contemplated therein (the "Cash Management Reorganization"). THE
BOARD OF DIRECTORS OF AAFI HAS UNANIMOUSLY APPROVED THE CASH MANAGEMENT
AGREEMENT AND CASH MANAGEMENT REORGANIZATION AS BEING FAIR TO, AND IN THE BEST
INTEREST OF, CASH MANAGEMENT SHAREHOLDERS. At the Special Meeting, the
shareholders of Income Fund are being asked to consider and approve a proposed
Agreement and Plan of Reorganization (the "Income Fund Agreement") between
AAFI, acting on behalf of Income Fund and AFG, acting on behalf of AIM
Intermediate Government Fund ("Intermediate Government") a portfolio of AFG,
and the consummation of the transactions contemplated therein (the "Income Fund
Reorganization"). THE BOARD OF DIRECTORS OF AAFI HAS UNANIMOUSLY APPROVED THE
INCOME FUND AGREEMENT AND INCOME FUND REORGANIZATION AS BEING FAIR TO, AND IN
THE BEST INTEREST OF, INCOME FUND SHAREHOLDERS.
There can be no assurance that AIM Advisor Cash Management Fund or
AIM Money Market Fund will be able to maintain a stable net asset value of
$1.00 per share.
Pursuant to the Cash Management Agreement, substantially all of the
assets of Cash Management will be transferred to Money Market. Upon such
transfer, AFG will issue AIM Cash Reserve Shares ("Cash Reserve shares") of
Money Market directly to Class A and Class C shareholders of Cash Management.
Each shareholder of Cash Management will receive that number of Money Market
shares with an aggregate net asset value equal to the aggregate net asset value
of his or her shares of Cash Management. As soon as reasonably practicable
after the closing of the Cash Management Reorganization, Cash Management will
pay or make provision for payment for all of its liabilities, and its status as
a designated series of shares of AAFI will be terminated. It is expected that
the value of each shareholder's account with Money Market immediately after the
Cash Management Reorganization will be the same as the value of such
shareholder's account with Cash Management immediately prior to the Cash
Management Reorganization. The Cash Management Reorganization has been
structured as a tax-free transaction. No sales charge will be imposed in
connection with the Cash Management Reorganization.
Pursuant to the Income Fund Agreement, substantially all of the
assets of Income Fund will be transferred to Intermediate Government. Upon such
transfer, AFG will issue Class A shares of Intermediate Government directly to
Class A shareholders of Income Fund, and Class C shares of Intermediate
Government directly to Class C shareholders of Income Fund. Each shareholder of
Income Fund will receive that number of Intermediate Government shares with an
aggregate net asset value equal to the aggregate net asset value of his or her
shares of Income Fund. As soon as is reasonably practicable after the closing
of the Income Fund Reorganization, Income Fund will pay or make provision for
payment for all of its liabilities, and its status as a designated series of
shares of AAFI will be terminated. It is expected that the value of each
shareholder's account with Intermediate Government immediately after the Income
Fund Reorganization will be the same as the value of such shareholder's account
with Income Fund immediately prior to the Income Fund Reorganization. The
Income Fund Reorganization has been structured as a tax-free transaction. No
sales charge will be imposed in connection with the Income Fund Reorganization.
Money Market and Intermediate Government are each series portfolios
of AFG, an open-end, series management investment company. The investment
objective of Money Market is to provide as high a level of current income as is
consistent with the preservation of capital and liquidity. Money Market's
investment objective is similar to that of Cash Management. Both are money
market funds that invest in accordance with Rule 2a-7 under the Investment
Company Act of 1940, as amended (the "1940 Act") which generally restricts each
fund's investments to high quality short-term liquid securities that are
determined to present minimal credit risk, and sets specific limits on the
fund's dollar-weighted average portfolio maturity.
<PAGE> 6
Money Market and Cash Management are designed as cash management alternatives
for retail shareholders. The investment objective of Intermediate Government is
to achieve a high level of current income consistent with reasonable concern
for safety of principal by investing, under normal circumstances, at least 65%
of its total assets in debt securities issued, guaranteed or otherwise backed
by the United States Government. Intermediate Government purchases primarily
fixed-rate securities, including but not limited to, high coupon U. S.
Government Agency mortgage backed securities. The fund maintains a
dollar-weighted average portfolio maturity of between three and ten years.
Intermediate Government's investment objective is similar to that of Income
Fund, although the types of securities the two funds purchase to achieve their
objectives differ slightly, and Income Fund is permitted to invest a portion of
its assets in fixed-income corporate obligations that are not backed by the
United States Government. See "Comparison of Investment Objectives and
Policies" and "Risk Factors."
The principal executive offices of AAFI and AFG are located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046 (telephone: (800) 347-4246).
This Combined Proxy Statement and Prospectus ("Proxy
Statement/Prospectus") sets forth concisely the information that a shareholder
of Cash Management should know before voting on the Cash Management Agreement,
and a shareholder of Income Fund should know before voting on the Income Fund
Agreement. It should be read and retained for future reference.
The current Prospectus of Cash Management and Income Fund, dated
August 4, 1997 (the "AAFI Prospectus"), together with the related Statement of
Additional Information also dated August 4, 1997, are on file with the
Securities and Exchange Commission (the "SEC"). Such prospectus and statement
of additional information are incorporated by reference herein, and are
available without charge by writing to A I M Distributors, Inc., P. O. Box
4739, Houston, Texas 77210-4739 or by calling (800) 347-4246. The Prospectus of
Money Market and Intermediate Government dated August 4, 1997 (the "AFG
Prospectus") is attached as Appendix III to this Proxy Statement/Prospectus,
and the Statement of Additional Information also dated August 4, 1997 (the "AFG
SAI") has been filed with the SEC and is incorporated by reference herein. The
AFG SAI is available without charge by writing to A I M Distributors, Inc.,
P.O. Box 4739, Houston, Texas 77210-4739 or by calling (800) 347-4246.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
REASONS FOR THE REORGANIZATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Background and Reasons for the Reorganizations . . . . . . . . . . . . . . . . . . . . . 2
Approval by, and Recommendation of, Board of Directors of AAFI . . . . . . . . . . . . . 2
SYNOPSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Cash Management Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Income Fund Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Comparison of Money Market and Cash Management . . . . . . . . . . . . . . . . . . . . . 4
Comparison of Intermediate Government and Income Fund . . . . . . . . . . . . . . . . . 6
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . 12
Investment Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Investment Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Portfolio Managers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Management Discussion and Analysis of Performance . . . . . . . . . . . . . . . . . . 23
ADDITIONAL INFORMATION ABOUT THE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 23
Terms of the Reorganizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Other Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Federal Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Capital Loss Carryforward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
RIGHTS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Liability of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Election of Directors/Trustees; Annual Shareholder Meetings . . . . . . . . . . . . . 30
Terms of Directors/Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Removal of Directors/Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Special Meetings of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Liability of Directors/Trustees and Officers . . . . . . . . . . . . . . . . . . . . . 30
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Voting Rights of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Amendments to Organization Documents . . . . . . . . . . . . . . . . . . . . . . . . . 31
OWNERSHIP OF MONEY MARKET, INTERMEDIATE GOVERNMENT, CASH MANAGEMENT
AND INCOME FUND SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Control Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Ownership of Officers and Trustees/Directors . . . . . . . . . . . . . . . . . . . . . 35
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
(i)
<PAGE> 8
<TABLE>
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LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION . . . . . . . . . . . . . . . 36
ADDITIONAL INFORMATION ABOUT MONEY MARKET, INTERMEDIATE GOVERNMENT,
CASH MANAGEMENT AND INCOME FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
AGREEMENT AND PLAN OF REORGANIZATION FOR AIM ADVISOR
CASH MANAGEMENT FUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . APPENDIX I
AGREEMENT AND PLAN OF REORGANIZATION FOR AIM ADVISOR INCOME FUND . . . . . . . . . .APPENDIX II
AIM FUNDS GROUP PROSPECTUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . APPENDIX III
DISCUSSION OF PERFORMANCE OF INTERMEDIATE GOVERNMENT . . . . . . . . . . . . . . . .APPENDIX IV
DISCUSSION OF PERFORMANCE OF INCOME FUND. . . . . . . . . . . . . . . . . . . . . . .APPENDIX V
</TABLE>
The AIM Family of Funds--Registered Trademark--, The AIM Family of Funds and
Design (i.e., the AIM logo), AIM and Design, AIM, AIM Link, AIM Institutional
Funds, La Familia AIM de Fondos and La Familia AIM de Fondos and Design are
registered service marks and aimfunds.com and Invest With Discipline are service
marks of A I M Management Group Inc.
(ii)
<PAGE> 9
INTRODUCTION
This Proxy Statement/Prospectus is furnished in connection
with the solicitation of proxies by AAFI's Board of Directors from the
shareholders of Cash Management and Income Fund, for use at the Special Meeting
of Shareholders to be held at Eleven Greenway Plaza, Suite 100, Houston, Texas
77046 on February 17, 1998, at 3:00 p.m., local time (such meetings and any
adjournments thereof are referred to as the "Special Meeting").
AAFI has engaged the services of Shareholder Communications
Corporation ("SCC") to assist it in the solicitation of proxies for the Special
Meeting. AAFI expects to solicit proxies principally by mail, but AAFI or SCC
may also solicit proxies by telephone, facsimile, telegraph or personal
interview. AAFI's officers will not receive any additional or special
compensation for any such solicitation. Cash Management and Money Market will
bear their respective costs and expenses incurred in connection with the Cash
Management Reorganization. Income Fund and Intermediate Government will bear
their respective costs and expenses incurred in connection with the Income Fund
Reorganization.
All properly executed and unrevoked proxies received in time
for the Special Meeting will be voted in accordance with the instructions
contained therein; if no instructions are given, shares represented by proxies
will be voted FOR the proposal to approve the Cash Management Agreement and
Income Fund Agreement and in accordance with management's recommendation on
other matters. The presence in person or by proxy of a majority of outstanding
shares of Cash Management and Income Fund at the Special Meeting will
constitute a quorum ("Quorum"). Approval of the Cash Management Agreement
requires the affirmative vote of a majority of the outstanding shares of Cash
Management. Approval of the Income Fund Agreement requires the affirmative vote
of a majority of the outstanding shares of Income Fund. Abstentions and broker
non-votes will be counted as shares present at the Special Meeting for quorum
purposes and will have the effect of counting as a vote against the applicable
proposal. Any person giving a proxy has the power to revoke it at any time
prior to its exercise by executing a superseding proxy or by submitting a
notice of revocation to the Secretary of AAFI. In addition, although mere
attendance at the Special Meeting will not revoke a proxy, a shareholder
present at the Special Meeting may withdraw his proxy and vote in person.
Shareholders may also transact any other business not currently contemplated
that may properly come before the Special Meeting in the discretion of the
proxies or their substitutes.
Shareholders of record as of the close of business on
December 10, 1997 (the "Record Date"), are entitled to vote at the Special
Meeting. On the Record Date, there were outstanding 4,709,708.080 shares of Cash
Management and shares 476,649.075 of Income Fund. Each share is entitled to
one vote for each full share held, and a fractional vote for a fractional share
held.
AAFI intends to mail this Proxy Statement/Prospectus and the
accompanying proxy on or about January 2, 1998.
1
<PAGE> 10
REASONS FOR THE REORGANIZATIONS
BACKGROUND AND REASONS FOR THE REORGANIZATIONS
AAFI was organized in 1989 as a Maryland corporation under
the name INVESCO Advisor Funds, Inc. INVESCO Group Services, Inc., a
subsidiary of INVESCO PLC, acting through its subsidiaries, initially provided
investment advisory marketing, administration, fund accounting and distribution
services to INVESCO Advisor Funds, Inc.
On February 28, 1997, A I M Management Group Inc. merged
with an indirect subsidiary of INVESCO PLC, which then changed its name to
AMVESCAP PLC. A I M Management Group Inc., acting through its subsidiaries
("AIM Management"), provides investment advisory, marketing, administration,
fund accounting and distribution services to the AIM Family of
Funds--Registered Trademark-- (the "AIM Funds").
Following the merger, the board of directors of INVESCO
Advisor Funds, Inc. determined that it would be advisable to engage AIM
Management to provide investment advisory and other services to INVESCO Advisor
Funds, Inc. The shareholders of INVESCO Advisor Funds, Inc. voted in favor of
the change in service providers, which took effect August 4, 1997. INVESCO
Advisor Funds, Inc. changed its name to AIM Advisor Funds, Inc. on that date.
The proxy statement sent to the shareholders of INVESCO Advisor Funds, Inc.
dated June 7, 1997, noted "that possible future reorganizations of certain
Portfolios were being considered" as a consequence of the change in service
providers and "that such reorganization could result in changes in some types
of expenses."
A I M Advisors, Inc. ("AIM"), the investment advisor of
AAFI, evaluated AAFI's portfolios, and determined that two portfolios, Cash
Management and Income Fund, should be merged into existing AIM Funds. Cash
Management and Income Fund were determined to have investment policies and
objectives that are similar to two of the AIM Funds, Money Market and
Intermediate Government. AIM concluded that Cash Management and Income Fund
could not be effectively marketed as separate portfolios due to the similarity.
APPROVAL BY, AND RECOMMENDATION OF, BOARD OF DIRECTORS OF AAFI
The Board of Directors of AAFI considered and unanimously
approved the Cash Management Agreement and Cash Management Reorganization, and
the Income Fund Agreement and Income Fund Reorganization, subject to
shareholder approval, during meetings held on September 19 and 20, 1997. The
Board of AAFI believes the proposed Reorganizations offer shareholders the
benefit of potential economies of scale, among others.
In determining to recommend approval to the shareholders,
the Board of Directors of AAFI reviewed and requested information about Money
Market and Intermediate Government and the Reorganizations, met with certain
members of AIM senior management (including two of its founders, and its
general counsel), consulted with legal counsel, made inquiries and considered
the following factors, among others:
(i) a comparison of the performance of Cash Management
and Money Market, and of Income Fund and Intermediate
Government;
(ii) a comparison of the investment objectives, policies,
strategies and restrictions of Cash Management and
Money Market and of Income Fund and Intermediate
Government;
2
<PAGE> 11
(iii) the distribution performance, resources and
capabilities of A I M Distributors, Inc. ("AIM
Distributors"), and the economies of scale which
potentially may be achieved through larger and wider
distribution of shares of Money Market, which as of
November 10, 1997 had total assets of more than $911
million as compared to $5.5 million for Cash
Management and of Intermediate Government, which as
of November 10, 1997 had total assets of more than
$247 million as compared to $24 million for Income
Fund;
(iv) the distribution fees and expenses paid by Money
Market and Intermediate Government and the services
received for such fees and expenses; and
(v) the terms and conditions of the Cash Management
Agreement and the Cash Management Reorganization, and
of the Income Fund Agreement and the Income Fund
Reorganization including the structure of the
transactions as tax-free transactions and the fact
that no sales charge will be imposed in connection
with the transactions.
The Board of Directors of AAFI has concluded that the Cash
Management Agreement and the Cash Management Reorganization are fair to, and in
the best interests of, Cash Management shareholders. The Board of Directors,
including all of the directors who are not interested persons of AIM,
unanimously approved the Cash Management Agreement and the Cash Management
Reorganization, and recommends to the shareholders of Cash Management that they
vote FOR the Cash Management Agreement and the Cash Management Reorganization.
The Board of Directors of AAFI has concluded that the Income
Fund Agreement and the Income Fund Reorganization are fair to, and in the best
interests of, Income Fund shareholders. The Board of Directors, including all
of the directors who are not interested persons of AIM, unanimously approved
the Income Fund Agreement and the Income Fund Reorganization, and recommends to
the shareholders of Income Fund that they vote FOR the Income Fund Agreement
and the Income Fund Reorganization.
The Board of Directors also considered whether each of the
Cash Management Reorganization and the Income Fund Reorganization is in the
best interests of the shareholders of each of Cash Management, Money Market,
Income Fund and Intermediate Government, consistent with the requirements of
Rule 17a-8 under the 1940 Act. Rule 17a-8 under the 1940 Act requires that when
two funds sharing a common investment adviser, common directors and/or common
officers merge or consolidate, the board of directors of each affiliated
investment company participating in the transaction, including a majority of
the directors of each registered investment company who are not interested
persons of any registered investment company participating in the transaction,
determine: (1) that participation in the transaction in the best interests of
that registered investment company; and (2) that the interests of existing
shareholders of that registered investment company will not be diluted as a
result of its effecting the transaction.
Based on its review of the terms of the Reorganizations,
including the provisions of the Cash Management Agreement and the Income Fund
Agreement, the Board of Directors made these required determinations with
respect to each of the funds.
3
<PAGE> 12
SYNOPSIS
CASH MANAGEMENT REORGANIZATION
The Cash Management Agreement and the Cash Management
Reorganization will result in the combination of Cash Management and Money
Market. Cash Management is a portfolio of AAFI, a Maryland corporation. Money
Market is a portfolio of AFG, a Delaware business trust. If shareholders of
Cash Management approve the Cash Management Agreement and other closing
conditions are satisfied, Cash Management will transfer all of its portfolio
securities and substantially all of its other assets to Money Market. In
exchange, AFG will issue directly to the Class A and Class C shareholders of
Cash Management, Cash Reserve shares of Money Market with an aggregate value
equal to the Cash Management assets transferred in connection with the
transaction, as determined by using Money Market's valuation methodology.
Shareholders will not pay any sales charge in connection with the Cash
Management Reorganization. Promptly after the acquisition by Money Market of
such securities and other assets, AAFI will take steps to pay any outstanding
liabilities of Cash Management and Cash Management's status as a designated
series of AAFI will be terminated. Any assets held by Cash Management after the
Cash Management Reorganization that are not used by AAFI to discharge the debts
of that fund will be distributed to its shareholders as a dividend, although
none is expected. It is expected that the value of each shareholder's account
with Money Market immediately after the Cash Management Reorganization will be
the same as the value of such shareholder's account with Cash Management
immediately prior to the Cash Management Reorganizations. A copy of the Cash
Management Agreement is attached as Appendix I to this Proxy
Statement/Prospectus. See "Additional Information About the Agreements -
Transfer of Assets and Liabilities" below.
Cash Management is to receive an opinion of Ballard Spahr
Andrews & Ingersoll to the effect that the Cash Management Reorganization will
constitute a tax-free reorganization for federal income tax purposes. Thus, it
is expected that shareholders will not have to pay federal income taxes as a
result of the Cash Management Reorganization. See "Additional Information
About the Agreements - Federal Tax Consequences" below.
Money Market is a diversified investment portfolio of AFG,
an open-end series management investment company registered under the 1940 Act.
The principal offices of AFG are located at 11 Greenway Plaza, Suite 100,
Houston, Texas 77046 (telephone: (800) 347-4246).
INCOME FUND REORGANIZATION
The Income Fund Agreement and the Income Fund Reorganization
will result in the combination of Income Fund and Intermediate Government.
Income Fund is a portfolio of AAFI, a Maryland corporation. Intermediate
Government is a portfolio of AFG, a Delaware business trust. If shareholders of
Income Fund approve the Income Fund Agreement and other closing conditions are
satisfied, Income Fund will transfer all of its portfolio securities and
substantially all of its other assets to Intermediate Government. In exchange,
AFG will issue directly to the Class A shareholders of Income Fund Class A
shares of Intermediate Government, and to the Class C shareholders of Income
Fund Class C shares of Intermediate Government, each with an aggregate value
equal to the Income Fund assets attributable to such class transferred in
connection with the reorganization, as determined by using Intermediate
Government's valuation methodology. Shareholders will not pay any sales charge
in connection with the Income Fund Reorganization. Promptly after the
acquisition by Intermediate Government of such securities and other assets,
AAFI will take steps to pay any outstanding liabilities of Income Fund, and
Income Fund's status as a designated series of AAFI will be terminated. Any
assets held by Income Fund after the Income Fund Reorganization that are not
4
<PAGE> 13
used by AAFI to discharge the debts of that fund will be distributed to its
shareholders as a dividend, although none is expected. It is expected that the
value of each shareholder's account with Intermediate Government immediately
after the Income Fund Reorganization will be the same as the value of such
shareholders' account with Income Fund immediately prior to the Income Fund
Reorganization. A copy of the Income Fund Agreements attached as Appendix II to
this Proxy Statement/Prospectus. See "Additional Information About the
Agreements - Transfer of Assets and Liabilities" below.
Income Fund is to receive an opinion of Ballard Spahr
Andrews & Ingersoll to the effect that the Income Fund Reorganization will
constitute a tax-free reorganization for Federal Income tax purposes.
Intermediate Government is a diversified investment
portfolios of AFG, an open-end series management investment company registered
under the 1940 Act. The principal offices of AFG are located at 11 Greenway
Plaza, Suite 100, Houston, Texas 77046 (telephone: (800) 347-4246).
COMPARISON OF MONEY MARKET AND CASH MANAGEMENT
Investment Objective and Policies
The investment objectives of Money Market and Cash
Management are very similar, and the types of securities the two funds purchase
to achieve their objectives are very similar also. The investment objective of
Money Market is to provide as high a level of current income as is consistent
with the preservation of capital and liquidity. The investment objective of
Cash Management is to achieve as high a level of current income, without regard
to federal income tax considerations, as is consistent with the preservation of
capital and the maintenance of liquidity. Both Money Market and Cash Management
comply with the requirements of Rule 2a-7 under the 1940 Act, which generally
restrict each fund's investments to high quality short-term liquid securities
that are determined to present minimal credit risk, and set specific limits on
the fund's dollar-weighted average portfolio maturity. Both are designed as
cash management alternatives for retail shareholders and maintain a stable
$1.00 net asset value. See "Comparison of Investment Objectives and Policies"
below.
Distribution
Shares of Money Market and Cash Management are both distributed
through AIM Distributors' nationwide distribution network which consists of
more than 2,500 broker-dealers and institutions located throughout the United
States. AIM Distributors, a registered broker-dealer and a wholly owned
subsidiary of AIM, acts as the distributor of the Cash Reserve shares of Money
Market and of the Class A and Class C shares of Cash Management. AFG has
adopted a plan pursuant to Rule 12b-1 under the 1940 Act under which AFG may
compensate AIM Distributors an aggregate amount of 0.25% of the average daily
net assets
5
<PAGE> 14
of Money Market on an annualized basis for the purpose of financing any
activity that is primarily intended to result in the sale of Cash Reserve
shares of Money Market. Cash Management is not subject to a distribution plan
pursuant to Rule 12b-1 under the 1940 Act. Because Money Market pays a Rule
12b-1 fee, its distribution arrangements allow for greater opportunity for
Money Market to increase in size and to benefit from corresponding lower
expense ratios and potential for diversification as compared to Cash
Management.
Set forth below is a comparison of annual operating expenses as a
percentage of net assets ("Expense Ratio") for the Cash Reserve shares of Money
Market and for the Class A and Class C shares of Cash Management for the fiscal
year ended December 31, 1996. Expense Ratios are shown after any voluntary fee
waivers and expense reimbursements.
<TABLE>
<CAPTION>
Cash Management
Money Market Class A and
Cash Reserve Shares Class C Shares(1)
------------------- --------------
<S> <C> <C>
ANNUAL OPERATING EXPENSES (AS A % OF NET ASSETS)
(AFTER FEE WAIVERS OR EXPENSE
REIMBURSEMENTS, IF ANY)
Management fees . . . . . . . . . . . . . . . . . 0.55% 0.50%
Rule 12b-1 distribution plan
payments . . . . . . . . . . . . . . . . . . . . 0.25 0.00
All other expenses . . . . . . . . . . . . . . . 0.28 0.45
---- ----
Total fund operating expenses . . . . . . . . . . 1.08% 0.95%
===== =====
</TABLE>
(1) Class A shares did not exist for this fiscal year although it is
estimated that the expense ratio would be the same as Class C shares.
Sales Charges
No sales charges are applicable to the Cash Management Reorganization.
Money Market
Cash Reserve shares of Money Market, which will be issued to Cash
Management shareholders pursuant to the Cash Management Agreement, are sold at
net asset value without an initial sales charge or a CDSC. The Cash Reserve
shares pay AIM Distributors a 0.25% Rule 12b-1 fee for distribution services.
Cash Reserve shares of Money Market may be exchanged for a Class A shares of
other AIM Funds (except for Class A shares of Money Market). Prior to
consummation of the Cash Management Reorganization Money Market expects to
offer a new exchange option enabling shareholders of Cash Reserve shares to
exchange their shares for Class C shares of AIM Funds. Shareholders of Class C
shares of the AIM Funds are subject to a CDSC of up to 1.00% and a Rule 12b-1
fee of 1.00%. For more information, see the Investor's Guide to The AIM Family
of Funds--Registered Trademark-- in the attached AFG Prospectus.
In addition to the Cash Reserve shares, Money Market offers for sale
to the public other classes of its shares. The availability of other classes
of shares gives potential new investor additional options in selecting a
suitable investment and allows for wider distribution of Money Market as
compared to Cash Management.
6
<PAGE> 15
Cash Management
The Class A and Class C shares of Cash Management (the only existing
classes of shares) are sold at net asset value, without imposition of an
initial sales charge or a CDSC. Under limited circumstances, a CDSC may be
assessed against redemptions of Class C shares of Cash Management if such
shares were purchased by exchange of shares from another of the AIM Funds and
held less than one year. Cash Management is not subject to a distribution plan
under Rule 12b-1.
COMPARISON OF INTERMEDIATE GOVERNMENT AND INCOME FUND
Investment Objective and Policies
The investment objectives of Intermediate Government and Income Fund
are similar, although the types of securities the two funds purchase to achieve
their objectives differ in minor respects. The investment objective of
Intermediate Government is to achieve a high level of current income consistent
with reasonable concern for safety of principal. Intermediate Government seeks
to achieve that objective by investing, under normal circumstances, at least
65% of its total assets in debt securities issued, guaranteed, or otherwise
backed by the United States Government. Intermediate Government purchases
primarily fixed-rate securities, including, but not limited to, high coupon U.
S. Government Agency mortgage-backed securities which provide a higher coupon
at the time of purchase than the then prevailing market rate yield.
Intermediate Government maintains a dollar-weighted average portfolio maturity
of between three and ten years. The investment objective of Income Fund is to
achieve a high total return on investment through capital appreciation and
current income, without regard to federal income tax considerations. During
normal market conditions, at least 65% of Income Fund's investments will
consist of income producing securities. Income Fund invests primarily in U. S.
Government obligations and carefully selected fixed income corporate
obligations considered to be of investment grade quality. Income Fund may
invest up to 35% of its assets in mortgage-backed securities, including
mortgage pass-through securities and collateralized mortgage obligations, which
carry a guarantee from an agency of the U. S. Government or a private issuer of
the timely payment of principal and interest or, in the case of unrated
securities, are considered to be investment grade quality. See "Comparison of
Investment Objectives and Policies" below.
Both Intermediate Government and Income Fund invest in U.S.
Government obligations, U.S. Government Agency mortgage-backed securities and
repurchase agreements. Income Fund is permitted to invest in debt securities
rated Baa/BBB, or unrated corporate obligations of a quality at least equal to
such rating. These obligations may have speculative characteristics and are
subject to increased credit and market risks. In addition, each fund may engage
in futures contracts and options on futures contracts for hedging purposes.
Income Fund's investment policies and restrictions permit Income Fund to invest
in a wider variety of securities than is permitted under Intermediate
Government's investment policies and restrictions. AIM believes that although
this ability provides Income Fund with greater flexibility to take advantage of
valuable market opportunities, it also introduces a potentially volatile aspect
to Income Fund. For a more detailed discussion of the investment practices of
Money Market and Income Fund, see "Comparison of Investment Objectives and
Policies" below.
7
<PAGE> 16
Performance
Set forth below are average annual total returns for the periods
indicated for each of Intermediate Government and Income Fund. Average annual
total return figures do not take into account sale charges paid by an investor.
<TABLE>
<CAPTION>
Intermediate Government Income Fund
Class A Shares* Class C Shares**
----------------- ----------------
<S> <C> <C>
1 Year Ended December 31, 1996 2.35% (1.23%)
3 Years Ended December 31, 1996 4.74% 5.52%
</TABLE>
* Class C shares did not exist for these fiscal years.
** Class A shares did not exist for these fiscal years.
Distribution
Both Intermediate Government's and Income Fund's shares are
distributed through AIM Distributors' nationwide distribution network which
consists of more than 2,500 broker-dealers and institutions located throughout
the United States. AIM Distributors, a registered broker-dealer and a wholly
owned subsidiary of AIM, acts as the distributor of the Class A and Class C
shares of Intermediate Government and the Class A and Class C shares of Income
Fund. AFG has adopted a plan pursuant to Rule 12b-1 under the 1940 Act under
which AFG may compensate AIM Distributors an aggregate amount of 0.25% of the
average daily net assets of the Class A shares and 1.00% of the average daily
net assets of the Class C shares, of Intermediate Government on an annualized
basis for the purpose of financing any activity that is intended to result in
the sale of Class A or Class C shares of Intermediate Government. AAFI has also
adopted a plan pursuant to Rule 12b-1 under the 1940 Act. Income Fund currently
compensates AIM Distributors an aggregate amount of 0.25% of the average daily
net assets of the Class A shares and 0.60% of the average daily net assets of
the Class C shares of Income Fund on an annualized basis for the purpose of
financing any activity that is intended to result in the sale of Class A or
Class C shares of Income Fund. The additional 0.40% payable under Intermediate
Government's Rule 12b- 1 plan for its Class C shares enables AIM Distributors
to distribute the Class C shares of Intermediate Government more widely, which
allows for greater opportunity for Intermediate Government to increase in size
and to benefit from corresponding lower expense ratios as compared to Income
Fund.
Set forth below is a comparison of Expense Ratio for the Class A
shares and Class C shares of each of Intermediate Government and Income Fund
for the fiscal year ended December 31, 1996. Expense Ratios are shown after any
voluntary fee waivers and expense reimbursements.
8
<PAGE> 17
<TABLE>
<CAPTION>
Intermediate Government Income Fund
----------------------- -----------
Class A Class C Class A Class C
Shares Shares(1) Shares(2) Shares
------ ------- ------ ------
<S> <C> <C> <C> <C>
ANNUAL OPERATING EXPENSES
(AS A % OF NET ASSETS)
(AFTER FEE WAIVERS OR EXPENSE
REIMBURSEMENTS, IF ANY)
Management Fees . . . . . . . . . . 0.48% 0.48% 0.40% 0.40%
Rule 12b-1 distribution plan
payments . . . . . . . . . . . . . 0.25% 1.00% 0.25% 0.60%
All other expenses. . . . . . . . . 0.27% 0.28% 0.45% 0.45%
----- ----- ----- -----
Total fund operating
expenses . . . . . . . . . . . . . 1.00% 1.76% 1.10% 1.45%(3)
===== ===== ===== =====
</TABLE>
(1) Class C shares did not exist for this fiscal year, however the Expense
Ratio for Class B shares of Intermediate Government indicates what the
applicable expense ratio for Class C shares would have been for Class C
shares, assuming no redemption of shares.
(2) Class A shares did not exist for this fiscal year. Expense ratios shown for
Class A shares are estimates for the year ended December 31, 1996.
(3) Certain expenses aggregating $72,341 were voluntarily absorbed by Income
Fund's sub-advisor. If such expenses had not been absorbed, the ratio of
expenses to average net assets would have been 1.76%.
9
<PAGE> 18
The information in the following chart indicates applicable fees
for Income Fund without fee waivers or expense reimbursements:
<TABLE>
<CAPTION>
Income Fund
-----------
Class A Class C
ANNUAL OPERATING EXPENSES (AS A % OF NET ASSETS) Shares Shares
(WITHOUT FEE WAIVERS OR EXPENSE REIMBURSEMENTS) ------ -------
<S> <C> <C>
Management fees 0.65% 0.65%
Rule 12b-1 distribution plan payments 0.25% 0.60%
All other expenses 0.51% 0.51%
----- -----
Total fund operating expenses 1.41% 1.76%
===== =====
</TABLE>
As a result of 12b-1 distribution plan payments, a long-term
shareholder of either Intermediate Government or Income Fund may pay more than
the economic equivalent of the maximum front-end sales charges permitted by
rules of the National Association of Securities Dealers, Inc., although it is
estimated that it would require a substantial number of years to exceed such
maximum charges.
Despite the higher Rule 12b-1 fee, the total fund operating expenses
for Intermediate Government's Class C shares are the same as Income Fund's Class
C shares total fund operating expenses would have been without the advisory fee
waiver and expense reimbursement. The advisory fee waiver is in effect
through September 30, 1998.
Sale Charges
No sales charges are applicable to the Income Fund Reorganization.
Intermediate Government
Class A shares of Intermediate Government may be purchased at their net
asset value plus an initial sales charge. The sales charge represents a
percentage of the offering price, and decreases from 4.75% of the offering price
to 2.00% of the offering price on purchases of under $1 million. A Rule 12b-1
fee of 0.25% applies to Class A shares. Certain categories of Intermediate
Government shareholders may purchase shares of the fund at net asset value
without the imposition of a sales charge. In addition, purchases of Class A
share of Intermediate Government of $1 million or more may be made at net asset
value, subject to a CDSC of 1.00% of the lesser of the value of the shares
redeemed (excluding reinvested dividends and capital gain distributions) or the
total cost such shares if the shares are redeemed prior to 18 months from the
date of purchase. Intermediate Government's Class C shares are subject to a CDSC
of 1.00% and a Rule 12b-1 fee of 1.00%. For more information, see the Investor's
Guide to The AIM Family of Funds--Registered Trademark-- in the attached AFG
Prospectus.
In addition to Class A and Class C shares, Intermediate Government
offers Class B shares for sale to the public. The availability of another
additional class of shares gives investors an additional option in selecting a
suitable investment and allows for wider distribution of Intermediate
Government as compared to Income Fund.
Income Fund
Class A shares of Income Fund may be purchased in their net asset value
plus an initial sales charge. The sales charge represents a percentage of the
offering price, and decreases from 4.75% of the offering price to 2.00% of the
offering price on purchases of under $1 million. A 0.25% Rule 12b-1 fee also
applies. Certain categories of Intermediate Government shareholders may purchase
shares of the fund at net asset value without the imposition of a sales charge.
In addition, purchases of Class A share of Income Fund of $1 million or more may
be made at net asset value, subject to a CDSC of 1.00% of the lesser of the
value of the shares redeemed (excluding reinvested dividends and capital gain
distributions) or the total cost of such shares if the shares are redeemed prior
to 18 months from the date of purchase. Income Fund's Class C shares are
subject to a CDSC of 0.60% and a Rule 12b-1 fee of 0.60%. For more information,
see the Investor's Guide to The AIM Family of Funds--Registered Trademark-- in
the attached AFG Prospectus.
10
<PAGE> 19
RISK FACTORS
Intermediate Government
Securities Issued on a When Issued or Delayed Delivery Basis.
Intermediate Government may purchase securities on a "when-issued" basis, that
is, delivery of and payment for the securities is not fixed at the date of
purchase, but is set after the securities are issued (normally within
forty-five days after the date of the transaction). Intermediate Government
also may purchase or sell securities on a delayed delivery basis. The payment
obligation and the interest rate that will be received on the delayed delivery
securities are fixed at the time the buyer enters into the commitment.
Intermediate Government will only make commitments to purchase when-issued or
delayed delivery securities with the intention of actually acquiring such
securities, but the fund may sell these securities before the settlement date
if it is deemed advisable.
Investment in securities on a when-issued or delayed delivery basis
may increase Intermediate Government's exposure to market fluctuation and may
increase the possibility that the fund will incur short-term gains subject to
federal taxation or short-term losses if Intermediate Government must engage in
portfolio transactions in order to honor a when-issued or delayed delivery
commitment. In a delayed delivery transaction, the fund relies on the other
party to complete the transaction. If the transaction is not completed, the
fund may miss a price or yield considered to be advantageous. Intermediate
Government will employ techniques designed to reduce such risks. If a fund
purchases a when- issued security, the fund's custodian bank will segregate
cash or other high grade securities in an amount equal to the when-issued
commitment. If the market value of such securities declines, additional cash or
securities will be segregated on a daily basis so that the market value of the
segregated assets will equal the amount of the fund's when- issued commitments.
To the extent cash and securities are segregated, they will not be available
for new investments or to meet redemptions. Securities purchased on a delayed
delivery basis may require a similar segregation of cash or other high grade
securities. For a more complete description of when-issued securities and
delayed delivery transactions see the Statement of Additional Information
attached as Appendix I to the Statement of Additional Information.
Illiquid Securities. Intermediate Government may invest up to 15% of
its net assets in securities that are illiquid. Illiquid securities include
securities that have no readily available market quotations and cannot be
disposed of promptly (within seven days) in the normal course of business at a
price at which they are valued. Illiquid securities may include securities that
are subject to restrictions on resale because they have not been registered
under the Securities Act of 1933. Restricted securities may, in certain
circumstances, be resold pursuant to Rule 144A, and thus may or may not
constitute illiquid securities. Limitations on the resale of restricted
securities may have an adverse effect on their marketability, which may prevent
the fund from disposing of them promptly at reasonable prices. Intermediate
Government may have to bear the expense of registering such securities for
resale, and the risk of substantial delays in effecting such registrations.
AFG's Board of Trustees is responsible for developing and establishing
guidelines and procedures for determining the liquidity of Rule 144A restricted
securities on behalf of the fund's monitoring AIM's implementation of the
guidelines and procedures.
11
<PAGE> 20
Income Fund
Mortgage-Related Securities. Income Fund may invest in mortgage
pass-through securities and collateralized mortgage obligations ("CMO").
Mortgage pass-through securities are securities representing interests
in "pools" of mortgage loans in which payment of both interest and principal on
the securities are generally made monthly, in effect "passing through" monthly
payments made by the individual borrowers on the mortgage loans which underlie
the securities (net of fees paid to the issuer or guarantor of the securities).
Payment of principal and interest on some mortgage pass-through
securities may be guaranteed as to principal and interest (but not as to market
value) by the full faith and credit of the U. S. Government (in the case of
securities guaranteed by the Government National Mortgage Association ("GNMA");
or guaranteed by agencies or instrumentalities of the U.S. Government (in the
case of securities guaranteed by the Federal National Mortgage Association
("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC"), which, while
not supported by the full faith and credit of the U.S. Government, are
supported by the discretionary authority of the U.S. Government to purchase the
agency's obligation).
CMOs - are securities which are typically collateralized by portfolios
of mortgage pass-through securities guaranteed by GNMA, FNMA, or FHLMC. Similar
to a bond, interest and pre-paid principal on a CMO are paid, in most cases,
semiannually. CMOs are structured into multiple classes, with each class
bearing a different stated maturity. Monthly payments of principal, including
prepayments, are first returned to investors holding the shortest maturity
class; investors holding the longer maturity classes will receive principal
only after the first class has been retired. CMOs that are issued or guaranteed
by the U.S. Government or by any of its agencies or instrumentalities will be
considered U.S. Government securities by Income Fund, while other CMOs, even if
collateralized by U.S. Government securities, will have the same status as
other privately issued securities for purposes of applying Income Fund's
diversification tests.
Intermediate Government and Income Fund
Interest Rate Futures Contracts and Related Options. Each of
Intermediate Government and Income Fund may purchase and sell interest rate
futures contracts or purchase and sell options thereon in order to hedge the
value of their respective portfolios against changes in market conditions. A
stock index futures contract is an agreement pursuant to which two parties
agree to take or make delivery of an amount of cash equal to a specified dollar
or other currency amount times the difference between the stock index value at
the close of the last trading day of the contract and the price at which the
futures contract is originally struck. No physical delivery of the underlying
stocks in the index is made. An interest rate futures contract is an agreement
between two parties to buy and sell a debt security for a set price on a future
date. Generally, a fund may elect to close a position in a futures contract by
taking an opposite position which will terminate the fund's position in the
futures contract.
There are risks associated with investments in stock index futures
contracts, interest rate futures contracts, and options on such contracts.
During certain market conditions, purchases and sales of futures contracts may
not completely offset a decline or rise in the value of a fund's portfolio. In
the futures markets, it may not always be possible to execute a buy or sell
order at the desired price, or to close out an open position due to market
conditions, limits on open positions and/or daily price fluctuations. Changes
in the market value of a fund's portfolio may differ substantially from the
changes anticipated by the fund when hedged positions were established and
unanticipated price movements in a futures contract may result in a loss
substantially greater than a fund's initial investment in such contract.
Successful use of futures contracts
12
<PAGE> 21
and related options is depended upon the advisor's ability to predict correctly
movements in the direction of the applicable markets. No assurance can be given
that the advisor's judgment in this respect will be correct.
No fund may purchase or sell futures contracts or purchase or sell
related options if, immediately thereafter, the sum of the amount of margin
deposits and premiums on open positions with respect to futures contracts and
related options would exceed 5% of the market value of the fund's total assets.
Intermediate Government may sell call options. Income Fund may
purchase and write put and call options on securities. The purpose of engaging
in put and call transactions is to hedge against changes in the market value of
the fund's portfolio securities caused by fluctuating interest rates,
fluctuating currency exchange rates and changing market conditions and to close
out or offset existing positions in such options or futures contracts as
described below. Neither fund will engage in such transactions for speculative
purposes.
Intermediate Government may write a call option and Income Fund may
write a call or put option only if the option is "covered" by the fund holding
a position in the underlying securities or by other means which would permit
immediate satisfaction of the fund's obligation as writer of the option. The
purchase and writing of options involve certain risks. During the option
period, the covered call writer has, in return for the premium on the option,
given up the opportunity to profit from a price increase in the underlying
securities above the exercise price, but, as long as its obligation as a writer
continues, has retained the risk of loss should the price of the underlying
security decline. The writer of an option has no control over the time when it
may be required to fulfill its obligation as a writer of the option. Once an
option writer has received an exercise notice, it cannot effect a closing
purchase transaction in order to terminate its obligation under the option and
must deliver the underlying securities at the exercise price. If a put or call
option purchased by a fund is not sold when it has remaining value, and if the
market price of the underlying security, in the case of a put, remains equal to
or greater than the exercise price or, in the case of a call, remains less than
or equal to the exercise price, the fund will lose its entire investment in the
option. Also, where a put or call option may move more or less than the price
of the related security. There can be no assurance that a liquid market will
exist when a fund seeks to close out an option position. Furthermore, if
trading restrictions or suspensions are imposed on the options markets, a fund
may be unable to close out a position.
Repurchase Agreements. Each of Intermediate Government and Income Fund
may engage in repurchase agreements. A repurchase agreement, which may be
considered a "loan" under the 1940 Act is a transaction in which a fund
purchases a security and simultaneously commits to sell the security to the
seller at an agreed-upon price and date (usually not more than seven days)
after the date of purchase. The resale price reflects the purchase price plus
an agreed-upon market rate of interest which is unrelated to the coupon rate or
maturity of the purchased security. A fund's risk is limited to the ability of
the seller to pay the agreed-upon amount on the delivery date. In the opinion
of management this risk is not material; if the seller default, the underlying
security constitutes collateral for the seller's obligations to pay. This
collateral, equal or in excess of 100% of the repurchase agreement, will be
held by the custodian for the particular fund's assets. Repurchase agreement
carry certain risks not associated with direct investments in securities,
including a possible decline in the market value of the underlying securities
and delays and costs to the fund if the other party to the repurchase agreement
becomes insolvent. To the extent that the proceeds from a sale upon a default
in the obligation to repurchase are less than the repurchase price, the
particular fund would suffer a loss. It is intended for these funds to enter
into repurchase agreements with commercial banks and securities dealers. The
Board of Directors/Trustees will monitor the creditworthiness of such entities.
13
<PAGE> 22
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES
Money Market
The investment objective of Money Market is to provide as high a level
of current income as is consistent with the preservation of capital and
liquidity.
Cash Management
Cash Management's investment objective is to achieve as high a level
of current income, without regard to Federal income tax considerations, as is
consistent with the preservation of capital and the maintenance of liquidity.
Intermediate Government
The investment objective of Intermediate Government is to achieve a
high level of current income consistent with reasonable concern for safety of
principal by investing, under normal circumstances, at least 65% of its total
assets in debt securities issued, guaranteed or otherwise backed by the United
States Government.
Income Fund
Income Fund's investment objective is to achieve a high total return
on investment through capital appreciation and current income, without regard
to Federal income tax considerations. During normal market conditions at least
65% of Income Fund's investments will consist of income-producing securities.
INVESTMENT POLICIES
Money Market
Money Market intends to invest in money market instruments such as
banker's acceptances, certificates of deposit, repurchase agreements, master
notes, time deposits, taxable municipal securities and commercial paper, all of
which will be denominated in U. S. dollars (referred to collectively as "Money
Market Instruments") and U. S. Government direct obligations and U. S.
Government agencies' securities. Bankers' acceptances, certificates of deposit
and time deposits may be purchased from U. S. or foreign banks. Certain types
of Money Market Instruments are briefly described in Appendix A to the AFG
Prospectus attached hereto.
Money Market may invest in other types of Money Market Instruments not
prohibited by its investment restrictions, if approved by the trustees. Money
Market will not invest in instruments maturing more than 397 days from the date
of investment, and will maintain a dollar-weighted average portfolio maturity
of 90 days or less.
Money Market will limit investments in Money Market Instruments to
those which at the date of purchase are "First Tier" securities as defined in
Rule 2a-7 under the 1940 Act, as such Rule may be amended from time to time.
Generally, "First Tier" securities are securities that are rated in the highest
rating
14
<PAGE> 23
category by two nationally recognized statistical rating organizations
("NRSROs"), or, if only rated by one NRSRO, are rated in the highest rating
category by that NRSRO, or, if unrated, are determined by AIM (under the
supervision of and pursuant to guidelines established by the Board of Trustees)
to be of comparable quality to a rated security that meets the foregoing
quality standards.
Money Market must also comply with the requirements of Rule 2a-7 under
the 1940 Act, which govern the operations of money market funds and may be more
restrictive than Money Market's restrictions. If any of the fund's policies and
restrictions are more restrictive than Rule 2a-7, such policies and
restrictions will be followed.
Money Market will normally hold portfolio securities to maturity but
may dispose of such securities prior to maturity if AIM believes such
disposition advisable. Investing in Money Market Instruments of short maturity
and/or actively managing its portfolio will result in a large number of
transactions, but since the costs of these transactions are small, they are not
expected to have a significant effect on net asset value or yield.
Cash Management
Cash Management seeks to achieve its objective through investment in a
diversified portfolio of high-quality, short-term Money Market Instruments,
obligations issued or guaranteed by the U. S. Government or any of its agencies
or instrumentalities and corporate obligations. Cash Management may also place
a portion of its assets in interest-bearing accounts with qualifying banks
provided Cash Management is free to withdraw its assets at any time without
suffering any interest reduction or other penalty. Because Cash Management
invests in high-quality, short-term debt obligations, its ability to achieve a
high level of current income is limited in comparison to mutual funds that
invest in securities which present a greater credit risk.
Cash Management also complies with the requirements of Rule 2a-7 under
the 1940 Act.
Intermediate Government
The Government securities which may be purchased by Intermediate
Government include but are not limited to (1) U. S. Treasury obligations such
as Treasury Bills (maturities of one year or less), Treasury Notes (maturities
of one to ten years) and Treasury Bonds (generally maturities of greater than
ten years) and (2) obligations issued or guaranteed by U.S. Government agencies
and instrumentalities ("Agency Securities") which are supported by any of the
following: (a) the full faith and credit of the U.S. Treasury, such as
obligations of GNMA, (b) the right of the issuer to borrow an amount limited to
a specific line of credit from the U.S. Treasury, such as obligations of the
FNMA, the Federal Home Loan Bank and the U. S. Postal Service, or (c) the
credit of the agency or instrumentality, such as obligations of the FHLMC and
Federal Farm Credit System. Although their close relationship with the U. S.
Government is believed to make them high-quality securities with minimal credit
risks, the U.S. Government is not obligated by law to support either FNMA or
FHLMC. Accordingly, such securities may involve risk of loss of principal and
interest; however, historically there have not been any defaults of such
issues. For a listing of some of the types of Agency Securities in which
Intermediate Government may invest, see Appendix B to the AFG Prospectus,
attached hereto. Intermediate Government may also invest in U. S. Government
agency mortgage-backed securities. Mortgage-backed securities consist of
interests in underlying mortgages with maturities of up to thirty years.
Intermediate Government purchases primarily fixed-rate securities,
including but not limited to high coupon U. S. Government agency
mortgage-backed securities, which provide a higher coupon at the time of
purchase than the then prevailing market rate yield. The price of high coupon
U. S. Government agency mortgage-backed securities do not tend to rise as
rapidly as those of traditional fixed-rate securities at times when interest
rates are decreasing, and tend to decline more slowly at times when interest
rates are
15
<PAGE> 24
increasing. Intermediate Government may purchase such securities at a premium,
which means that a faster principal prepayment rate than expected will reduce
the market value of and income from such securities, while a slower prepayment
rate will tend to increase the market value of and income from securities.
The composition and weighted average maturity of Intermediate
Government's portfolio will vary from time to time, based upon AIM's
determination of how best to achieve Intermediate Government's investment
objective. Intermediate Government may invest in U.S. Government securities of
all maturities, short-term, intermediate-term and long-term. Intermediate
Government will maintain a dollar-weighted average portfolio maturity of
between three and ten years. This policy regarding portfolio maturity is a
non-fundamental policy of Intermediate Government.
Income Fund
The Income Fund hopes to achieve its goal of capital appreciation by
selecting fixed income obligations which INVESCO Capital Management Inc.
("ICM"), Income Fund's sub-advisor, believes are of a higher quality than has
been generally recognized by the market place. If ICM's analysis is correct in
these cases, the value of these obligations should increase as the marketplace
recognizes the higher quality of the obligations. ICM intends to identify
investments which it believes to be under-rated (and therefore higher yielding)
in light of, among other things, historic and current financial condition of
the issuer, current and anticipated cash flow and borrowing requirement,
strength of management, responsiveness to business conditions, credit standing
and historic and current results of operations. Investors should note that
investments in fixed income obligations will generally be subject to both
credit risk and market risk. Credit risk relates to the ability of the issuer
to meet interest or principal payments, or both, as they come due. Market risk
relates to the fact that the market values of fixed income obligations in which
the fund invests generally will be affected by changes in the level of interest
rates. An increase in interest rates will generally reduce the value of
portfolio investments, and a decline in interest rates will generally increase
the value of portfolio investments.
Securities in which Income Fund invests consist primarily of U. S.
Government obligations and carefully selected fixed income corporate
obligations which ICM considers to be of investment grade quality. Income Fund
invests only in those corporate obligations which in ICM's opinion have the
investment characteristics described by Moody's Investors Service, Inc.
("Moody's") in rating corporate obligations within its four highest ratings of
Aaa, Aa, A and Baa and by Standard & Poor's Ratings Services ("S&P") in rating
corporate obligations within its four highest ratings of AAA, AA, A and BBB. It
is possible that the ability of the fund to achieve its objective of high total
return could be diminished by its restriction on the use of non-investment
grade corporate obligations. Investments in government obligations will include
direct obligations of the U. S. Government, such as U. S. Treasury Bills, Notes
and Bonds, obligations guaranteed by the U. S. Government, such as GNMA
obligations, and obligations of U. S. Government authorities, agencies and
instrumentalities, such as FNMA, Federal Home Loan Bank, Federal Financing Bank
and Federal Farm Credit Bank obligations.
Income Fund may invest up to 35% of its assets in mortgage-backed
securities, including mortgage pass-through securities and CMOs, which carry a
guarantee from an agency of the U. S. Government or a private issuer of the
timely payment of principal and interest or, in the case of unrated securities,
are considered by the sub-advisor to be investment grade quality.
Income Fund does not require that its investments in corporate
obligations actually be rated by Moody's or S&P, and it may acquire such
unrated obligations which in the opinion of ICM are of a quality at least equal
to a rating of Baa by Moody's or BBB by S&P. With respect to investments in
unrated obligations, the fund will rely more on ICM's judgment and experience
than would be the case if Income Fund invested
16
<PAGE> 25
solely in rated obligations. Obligations rated Baa by Moody's or BBB by S&P may
have speculative characteristics. A rating of Baa by Moody's indicates that the
obligation is of "medium grade," neither highly protected or poorly secured.
Interest payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. A rating of BBB by S&P indicates that
the obligation is in the lowest "investment grade" security rating. Obligations
rated BBB are regarded as having an adequate capacity to pay principal and
interest. Although such obligations normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest than
obligations in the top three "investment grade" categories. Both credit and
market risks as described above are increased by investing in fixed income
obligations rated Baa by Moody's and BBB by S&P.
ICM will attempt to limit fluctuations in the market value of Income
Fund by adopting a more defensive posture during periods of economic
difficulty. During such periods Income Fund may acquire Treasury Bills and/or
high quality short-term Money Market Instruments rated Prime-1 by Moody's or A
or better by S&P or, if unrated, of comparable quality as determined by ICM, at
such times, and in such amounts, as in the opinion of ICM seems appropriate.
INVESTMENT RESTRICTIONS
Money Market and Cash Management
There are some differences in the investment limitations applicable
to Money Market and Cash Management. However, Money Market and Cash Management
both are money market funds whose investment practices are circumscribed by the
more restrictive requirements of Rule 2a-7 of the 1940 Act. Thus the
differences in the investment restrictions of Money Market and Cash Management
are not reflected in actual operations of the two funds.
Intermediate Government and Income Fund
Set forth below are certain investment restrictions of Intermediate
Government and Income Fund. The investment limitations of Intermediate
Government and Income Fund are similar in many respects. Unless otherwise
noted, the following investment restrictions are fundamental policies.
Fundamental policies may not be changed without the approval of a majority of
such fund's outstanding shares, as defined in the 1940 Act.
The following chart summarizes the differences between the
investment limitations of Intermediate Government and Income Fund:
17
<PAGE> 26
<TABLE>
<CAPTION>
Investment Restriction Intermediate Government Income Fund
---------------------- ----------------------- -----------
<S> <C> <C>
Futures Intermediate Government may purchase Income Fund may not write, purchase
and sell interest rate futures or sell puts, calls, straddles,
contracts or purchase and sell spreads or combinations thereof,
options on futures contracts. except for transactions in options,
futures, and options on futures and
transactions arising under swap
agreements. Options on interest rate
futures contracts and investments in
initial margins will not exceed 5% of
Income Fund's total assets. Covered
call options and cash secured puts
will not exceed 25% of Income Fund's
total assets. This is not a
fundamental policy.
Short sales and Intermediate Government may not make Income Fund may not make short sales
purchases of securities short sales of securities or of securities, but it may purchase or
on margin purchase securities on margin, but sell options on futures and write,
it may obtain such short-term purchase and sell puts and calls.
credits as are necessary for the Income Fund may not purchase
clearance of purchases and sales of securities on margin except that it
securities and may make margin may obtain such short-term credit as
payments in connection with may be necessary for the clearance of
transactions in financial futures purchases and sales of portfolio
contracts and options thereon. securities.
Illiquid securities Intermediate Government may not Income Fund may not invest in
invest more that 15% of its average securities for which there are legal
net assets at the time of purchase or contractual restrictions on
in investments which are not readily resale, if more than 2% of the value
marketable. This is not a of its total assets would be invested
fundamental policy. in such securities, or invest in
securities for which there is no
readily available market, if more
than 5% of the value of its total
assets would be invested in such
securities. In determining securities
subject to this 5% restriction,
Income Fund will include repurchase
agreements maturing in more than
seven days.
</TABLE>
18
<PAGE> 27
<TABLE>
<CAPTION>
Investment Restriction Intermediate Government Income Fund
---------------------- ----------------------- -----------
<S> <C> <C>
Securities of one Intermediate Government may not With respect to 100% of Income Fund's
issuer purchase the securities of any assets, the fund may not invest in
issuer if such purchase would cause the securities of any one issuer,
more than 5% of the value of its other than obligations of, or
assets to be invested in the guaranteed by, the U.S. Government,
securities of such issuer (except its agencies, authorities or
U.S. Government Securities, instrumentalities, if immediately
including securities issued by its after such investment more than 5% of
agencies and instrumentalities and the value of Income Fund's total
except that Intermediate Government assets, taken at market value, would
may purchase securities of other be invested in such issuer or more
investment companies to the extent than 10% of such issuer's outstanding
permitted by applicable law or voting securities would be owned by
exemptive order). Intermediate such fund.
Government may not purchase the
securities of any issuer if such
purchase would cause more than 5% of
the voting securities, or more than
10% of the securities of any class
of such issuer, to be held by
Intermediate Government (except U.
S. Securities, including securities
issued by its agencies and
instrumentalities) and except that
Intermediate Government may purchase
securities of other investment
companies to the extent permitted by
applicable law or exemptive order.
Issue senior securities No corresponding restriction. (1940 Income Fund may not issue any class
Act restriction prohibiting funds of senior securities.
from issuing senior securities
without appropriate disclosure
applies, barring Intermediate
Government from such issuance)
</TABLE>
19
<PAGE> 28
<TABLE>
<CAPTION>
Investment Restriction Intermediate Government Income Fund
---------------------- ----------------------- -----------
<S> <C> <C>
Loans Intermediate Government may not make Income Fund may not make loans to
loans, except (a) through the other persons, provided that it may
purchase of a portion of an issue of purchase debt obligations consistent
bonds or other obligations of types with its investment objectives and
commonly offered publicly and policies and may lend limited amounts
purchased by financial institutions, (not to exceed 15% of total assets)
(b) through the purchase of short- of its portfolio securities to
term obligations (maturing within a broker-dealers or other institutional
year), including repurchase investors.
agreements, and (c) Intermediate
Government may lend its portfolio
securities, provided that the value
of the securities loaned does not
exceed 33-1/3% of a Intermediate
Government's total assets.
Industry concentration Intermediate Government may not Income Fund may not invest in the
concentrate 25% or more of its securities of issuers conducting
investments in a particular their principal business activity in
industry. the same industry, if immediately
after such investment the value of
its investments in such industry
would exceed 25% of the value of
Income Fund's total assets; provided,
however, that this limitation does
not apply to Income Fund's
investments in obligations issued or
guaranteed by the U.S. Government,
its agencies, authorities or
instrumentalities.
Underwriting Intermediate Government may not act Income Fund may not underwrite
as a securities underwriter. securities of other issuers except
insofar as it may technically be
deemed an "underwriter" under the
Securities Act of 1933, in connection
with the disposition of portfolio
securities.
Oil, gas or other Intermediate Government shall not Income Fund may not purchase or sell
mineral exploration or invest in oil, gas or mineral interests in oil, gas or other
development leases. This is not a fundamental mineral leases or exploration or
policy. development programs. Income Fund,
however, may purchase or sell
securities issued by entities which
invest in such interests. This is not
a fundamental policy.
</TABLE>
20
<PAGE> 29
<TABLE>
<CAPTION>
Investment Restriction Intermediate Government Income Fund
---------------------- ----------------------- -----------
<S> <C> <C>
Real Estate Intermediate Government may not Income Fund may not purchase or sell
invest in real estate, although real estate or interests in real
Intermediate Government may purchase estate. Income Fund may invest in
securities secured by real estate or securities secured by real estate or
interests therein or issued by interests therein or issued by
issuers which invest in real estate. companies, including real estate
investment trusts, which invest in
real estate or interests therein.
Borrowing Intermediate Government may not Income Fund may not borrow money
borrow money or mortgage, pledge, or except borrowings from banks for
hypothecate its assets, except that temporary or emergency purposes not
Intermediate Government may enter in excess of 5% of the value of its
into financial futures contracts, total assets at the time the
and except that Intermediate borrowing is made. Income Fund may
Government may borrow from banks to not mortgage, pledge, hypothecate or
pay for redemptions and for in any manner transfer as security
temporary purposes in an amount not for indebtedness any securities owned
exceeding one-third of the value of or held except to an extent not
its total assets (including the greater than 5% of the value of
amount of such borrowings) less its Income Fund's total assets.
liabilities (excluding the amount of
such borrowings) and may secure such
borrowings by pledging up to
one-third of the value of its total
assets. For the purpose of this
restriction, collateral arrangements
with respect to margin for a
financial futures contract are not
deemed to be a pledge of assets.
Intermediate Government will not
purchase securities while borrowings
in an amount in excess of 5% of its
total assets are outstanding.
Commodities Intermediate Government may not buy Income Fund will not purchase or sell
or sell commodities or commodity commodities or commodities contracts
contracts, although Intermediate except for purchases and sales of
Government may purchase and sell options and futures and options on
financial futures contracts and futures on underlying financial
options thereon. instruments.
</TABLE>
21
<PAGE> 30
<TABLE>
<CAPTION>
Investment Restriction Intermediate Government Income Fund
---------------------- ----------------------- -----------
<S> <C> <C>
Puts and calls Intermediate Government may not Income Fund is permitted to write or
invest in puts, calls, straddles, invest in put or call options.
spreads or any combination thereof,
except, however, that Intermediate
Government may purchase and sell
options on financial futures
contracts and may sell covered call
options. Intermediate Government may
not, as a non-fundamental
restriction, write a covered call
option if, immediately thereafter,
the aggregate value of the
securities underlying all such
options, determined as of the date
the options were written, would
exceed 5% of the net assets of
Intermediate Government.
Investment in non- No corresponding restriction. Income Fund may not invest in non-
income producing income producing securities if
securities immediately after such investment
more than 35% of the value of its
total assets would be invested in
such securities. However, as an
operating policy, Income Fund does
not intend to invest in non-income
producing securities.
</TABLE>
22
<PAGE> 31
<TABLE>
<CAPTION>
Investment Restriction Intermediate Government Income Fund
---------------------- ----------------------- -----------
<S> <C> <C>
Warrants No corresponding restriction. To the extent Income Fund invests in
warrants, its investment in warrants,
valued at the lower of cost or
market, may not exceed 5% of the
value of Income Fund's net assets.
Included within that amount, but not
to exceed 2% of the value of Income
Fund's net assets, may be warrants
which are not listed on the New York
or American Stock Exchanges. Warrants
acquired by Income Fund as part of a
unit or attached to securities may be
deemed to be without value.
</TABLE>
23
<PAGE> 32
<TABLE>
<CAPTION>
Investment Restriction Intermediate Government Income Fund
---------------------- ----------------------- -----------
<S> <C> <C>
Investment companies Intermediate Government may purchase Income Fund may not purchase
securities of other investment securities of other investment
companies to the extent permitted by companies except (a) in connection
applicable law or exemptive order. with a merger, consolidation,
acquisition or reorganization; or
(b) by purchase in the open market of
securities of other investment
companies involving only customary
brokers' commissions and only if
immediately thereafter (i) no more
than 3% of the voting securities of
any one investment company are owned
by Income Fund, (ii) no more than 5%
of the value of the total assets of
Income Fund would be invested in any
one investment company, and (iii) no
more than 10% of the value of the
total assets of Income Fund would be
invested in the securities of such
investment companies. A portion of
Income Fund's cash may be invested
from time to time in investment
companies which AIM or the
sub-advisor serves as investment
advisor; provided that no management
or distribution fee will be charged
by AIM or the sub-advisor with
respect to any such assets so
invested and provided further that at
no time will more than 3% of Income
Fund's assets be so invested. Should
Income Fund purchase securities of
other investment companies,
shareholders may incur additional
management, advisory and distribution
fees.
</TABLE>
24
<PAGE> 33
<TABLE>
<CAPTION>
Investment Restriction Intermediate Government Income Fund
---------------------- ----------------------- -----------
<S> <C> <C>
Investing for control Intermediate Government may not Income Fund may not invest in
invest for the purpose of companies for the purpose of
influencing management or exercising exercising control or management.
control, except that Intermediate
Government may purchase securities
of other investment companies to the
extent permitted by applicable law
or exemptive order. This is not a
fundamental policy.
Unseasoned issuers Intermediate Government may not Income Fund may not invest more than
purchase securities of any company 5% of its total assets in securities
with a record of less than three of companies having a record,
years of continuous operation together with predecessors, of less
(including that of predecessors) if than three years continuous
such purchase would cause operation. This is not a fundamental
Intermediate Government's aggregate policy.
investments in all such companies
taken at cost to exceed 5% of its
total assets taken at market value.
This is not a fundamental policy.
Purchase of securities Intermediate Government may not Income Fund may not purchase or
of issuers owned by purchase or retain the securities of retain the securities of any issuer
officers or directors any issuer, if the officers and if any individual officer or director
of advisors or trustees of AFG, or officers and of Income Fund, AIM or sub-advisor,
distributors directors of AIM who own or any subsidiary thereof owns
beneficially more than 1/2 of 1% of individually more than 0.5% of the
the securities of such issuer, securities of that issuer and all
together own more than 5% of the such officers and directors together
securities of such issuer. This is own more than 5% of the securities of
not a fundamental policy. that issuer. This is not a
fundamental policy.
Securities of foreign No corresponding restrictions. Income Fund may not invest more than
issuers 10% of the value of its total assets
in securities of foreign issuers.
This is not a fundamental policy.
</TABLE>
PORTFOLIO MANAGERS
AIM uses a team approach and a disciplined investment process in
providing investment advisory services to all of its accounts, including Money
Market and Intermediate Government. AIM's investment staff consists of
approximately 125 individuals. While individual members of AIM's investment
staff are assigned
25
<PAGE> 34
primary responsibility for the day-to-day management of each of AIM's accounts,
all accounts are reviewed on a regular basis by AIM's Investment Policy
Committee to ensure that they are being invested in accordance with the
account's and AIM's investment policies. The individuals who are primarily
responsible for the day-to-day management of Intermediate Government and their
titles, if any, with AIM or its subsidiaries and AFG, the length of time they
have been responsible for the management, and their years of investment
experience and prior experience (if they have been with AIM for less than five
years) are shown below.
Karen Dunn Kelley is Senior Vice President of A I M Capital
Management, Inc. ("AIM Capital"), Vice President of AIM and of AFG and has been
responsible for Intermediate Government since 1992. Ms. Kelley has been
associated with AIM and/or its subsidiaries since 1989 and has a total of 15
years of experience as an investment professional. Meggan Walsh is Vice
President of AIM Capital and has been responsible for Intermediate Government
since 1992. Ms. Walsh has been associated with AIM and/or its subsidiaries
since 1991 and has 10 years of experience as an investment professional. Paula
A. Permenter has been responsible for Intermediate Government since 1996. Ms.
Permenter has been associated with AIM and/or its subsidiaries since 1996 and
has 11 years of experience as an investment professional. Prior to joining
AIM, she was an Associate Trader and Investment Assistant with Van Kampen
American Capital Asset Management, Inc.
See the discussion relating to portfolio managers under "Management
- - Portfolio Managers - Income Fund" set forth in the AFG Prospectus.
26
<PAGE> 35
FINANCIAL INFORMATION
Money Market
Shown below are the financial highlights for a Cash Reserve share
outstanding during the six months ended June 30, 1997, each of the years in the
three-year period ended December 31, 1996 and the period October 16, 1993 (date
operations commenced) through December 31, 1993.
<TABLE>
<CAPTION>
OCT. 16 -
DECEMBER 31 DEC. 31
JUNE 30, ---------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income from operations:
Net investment income ........................ 0.0220 0.0433 0.0493 0.0337 0.0048
-------- -------- -------- -------- --------
Less distributions:
Dividends(from net investment income)......... (0.0220) (0.0433) (0.0493) (0.0337) (0.0048)
-------- -------- -------- -------- --------
Net asset value, end of period.................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return ................................... 4.49% 4.41% 5.04% 3.42% 2.27%(a)
======== ======== ======== ======== ========
Ratios/Supplemental Data:
Net assets, end of year (000's omitted)....... $466,235 $315,470 $293,450 $359,952 $241,778
======== ======== ======== ======== ========
Ratio of expenses to average net
assets........................................ 1.08%(b)(c) 1.08% 1.04% 0.99%(d) 1.00%(a) (d)
======== ======== ======== ======== ========
Ratio of net investment income to
average net assets............................ 4.45%(b) 4.32% 4.92% 3.49%(d) 2.27%(a) (d)
======== ======== ======== ======== ========
</TABLE>
- ----------------
(a) Annualized.
(b) Ratios are annualized and based on average daily net assets of $402,433,762.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly
the ratio of expenses to average daily net assets would have been the same.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses and net
investment income to average daily net assets prior to fee waivers and/or
expense reimbursements are 1.08% and 3.40% for 1994 and 1.20% (annualized)
and 2.07% (annualized) for 1993.
27
<PAGE> 36
Cash Management
Shown below are financial highlights for a Class A share and Class C
share outstanding during the six months ended June 30, 1997, and for a Class C
share outstanding during each of the years in the ten-year period ended
December 31, 1996.
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ---------------------------------------------------------
1997 1996 1995 1994 1993
---------------------- ------- ------- ------- -------
CLASS A CLASS C
------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Investment operations:
Net investment income .... 0.02 0.02 0.04 0.05 0.03 0.02
------- ------- ------- ------- ------- -------
Distributions:
Dividends (from net ...... (0.02) (0.02) (0.04) (0.05) (0.03) (0.02)
------- ------- ------- ------- ------- -------
investment income)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total return (a) ........... 2.23%(b) 2.23%(b) 4.48% 5.04% 3.30% 2.20%
======= ======= ======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of year
(000's omitted) ......... $ 136 $ 8,481 $15,946 $20,439 $15,212 $13,827
======= ======= ======= ======= ======= =======
Ratio of expenses to
average net assets (c) ... 0.48%(b) 0.48%(b) 1.04% 1.00% 1.00% 0.95%
======= ======= ======= ======= ======= =======
Ratio of net investment
income to average net
asset(c) ................. 2.23%(b) 2.23%(b) 4.36% 4.91% 3.23% 2.17%
======= ======= ======= ======= ======= =======
<CAPTION>
1992 1991 1990 1989 1988 1987
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Investment operations:
Net investment income .... 0.03 0.05 0.07 0.08 0.07 0.06
------- ------- ------- ------- ------- -------
Distributions:
Dividends (from net ...... (0.03) (0.05) (0.07) (0.08) (0.07) (0.06)
------- ------- ------- ------- ------- -------
investment income)
Net asset value, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total return (a) ........... 3.04% 5.08% 7.35% 8.63% 6.90% 5.67%
======= ======= ======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of year
(000's omitted) ......... $20,431 $17,730 $20,701 $19,902 $32,309 $27,683
======= ======= ======= ======= ======= =======
Ratio of expenses to
average net assets (c) ... 0.73% 1.00% 1.09% 1.00% 0.88% 1.25%
======= ======= ======= ======= ======= =======
Ratio of net investment
income to average net
asset(c) ................. 2.94% 5.04% 7.11% 8.31% 6.90% 5.67%
======= ======= ======= ======= ======= =======
</TABLE>
- ----------------------
(a) Total return assumes dividend reinvestment and does not reflect the effect
of sales charges.
(b) Not annualized.
(c) The advisor prior to August 4, 1997, voluntarily absorbed certain expenses
of the Fund aggregating $15,099, $38,925, $5,536, and $27,402 for 1993,
1992, 1990 and 1989, respectively. If such expenses had not been absorbed,
the ratio of expenses to average net assets would have been 1.03%, 0.92%,
1.12% and 1.11% for the above periods, respectively, and the ratio of net
investment income to average net assets would have been 2.09%, 2.75%,
7.08%, and 8.20%, respectively.
28
<PAGE> 37
Intermediate Government
Shown below are financial highlights for a Class A share
outstanding during the six months ended June 30, 1997, and each of the years in
the nine-year period ended December 1996, and the period April 28, 1987 (date
operations commenced) through December 31, 1987.
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, -----------------------------------------------------------------
1997 1996 1995 1994 1993 1992(a)
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period . $ 9.28 $ 9.70 $ 8.99 $ 10.05 $ 10.19 $ 10.34
--------- --------- --------- --------- --------- ---------
Income from investing operations:
Net investment income .............. 0.32 0.63 0.69 0.68 0.74 0.77
--------- --------- --------- --------- --------- ---------
Net gains (losses) on securities both
realized and unrealized ............ (0.04) (0.42) 0.73 (1.02) (0.04) (0.15)
--------- --------- --------- --------- --------- ---------
Total from investment operations ..... 0.28 0.21 1.42 (0.34) 0.70 0.62
--------- --------- --------- --------- --------- ---------
Less distributions:
Dividends from net investment income (0.32) (0.59) (0.67) (0.58) (0.70) (0.74)
--------- --------- --------- --------- --------- ---------
Distributions from net realized .... -- -- -- (0.04) (0.14) (0.03)
capital gain
--------- --------- --------- --------- --------- ---------
Return of capital .................. -- (0.04) (0.04) (0.10) -- --
--------- --------- --------- --------- --------- ---------
Total distribution ................. (0.32) (0.63) (0.71) (0.72) (0.84) (0.77)
--------- --------- --------- --------- --------- ---------
Net asset value, end of period ....... $ 9.24 $ 9.28 $ 9.70 $ 8.99 $ 10.05 $ 10.19
========= ========= ========= ========= ========= =========
Total return (b) ..................... 3.03% 2.35% 16.28% (3.44)% 7.07% 6.26%
========= ========= ========= ========= ========= =========
Ratios/Supplemental Data:
Net assets, end of year ........... $ 157,530 $ 174,344 $ 176,318 $ 158,341 $ 139,586 $ 123,484
========= ========= ========= ========= ========= =========
(000's omitted)
Ratio of expenses to average net
(exclusive of interest expense)(c). 0 .99(d)(e) 1.00% 1.08% 1.04% 1.00% 0.98%
========= ========= ========= ========= ========= =========
Ratio of net investment income to
average net assets (f) ............. 6.98%(d) 6.76% 7.36% 7.34% 7.08% 7.53%
========= ========= ========= ========= ========= =========
Portfolio turnover rate ............ 33% 134% 140% 109% 110% 42%
========= ========= ========= ========= ========= =========
<CAPTION>
APRIL 28 -
DECEMBER 31,
1991 1990 1989 1988 1987
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period . $ 9.95 $ 9.91 $ 9.70 $ 9.92 $ 10.00
----------- ----------- ----------- ----------- -----------
Income from investing operations:
Net investment income .............. 0.82 0.87 0.90 0.89 0.55
----------- ----------- ----------- ----------- -----------
Net gains (losses) on securities both
realized and unrealized ............ 0.41 (0.01) (0.15) (0.27) (0.14)
----------- ----------- ----------- ----------- -----------
Total from investment operations ..... 1.23 0.88 1.05 0.62 0.41
----------- ----------- ----------- ----------- -----------
Less distributions:
Dividends from net investment income (0.84) (0.84) (0.84) (0.84) (0.49)
----------- ----------- ----------- ----------- -----------
Distributions from net realized .... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
capital gain
Return of capital .................. -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total distribution ................. (0.84) (0.84) (0.84) (0.84) (0.49)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ....... $ 10.34 $ 9.95 $ 9.91 $ 9.70 $ 9.92
=========== =========== =========== =========== ===========
Total return (b) ..................... 12.98% 9.39% 11.28% 6.43% 4.18%
=========== =========== =========== =========== ===========
Ratios/Supplemental Data:
Net assets, end of year ........... $ 101,409 $ 61,463 $ 57,077 $ 48,372 $ 28,052
=========== =========== =========== =========== ===========
(000's omitted)
Ratio of expenses to average net
(exclusive of interest expense(c)) . 1.00% 1.00% 1.00% 1.00% 1.20%(g)
=========== =========== =========== =========== ===========
Ratio of net investment income to
average net assets (f) ............. 8.15% 8.85% 9.10% 9.11% 8.64%(g)
=========== =========== =========== =========== ===========
Portfolio turnover rate ............ 26% 16% 15% 15% 35%
=========== =========== =========== =========== ===========
</TABLE>
- -----------------------
(a) Intermediate Government changed investment advisors on June 30, 1992.
(b) Does not deduct sales charges and is not annualized for periods less than
one year.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net asset prior to fee waiver and/or expense reimbursement were
1.05%, 1.04%, 1.04%, 1.10%, 1.13%, 1.08% and 1.08% for 1994-88,
respectively.
(d) Ratios are annualized and based on average net assets of $164,653,827.
(e) Includes expenses paid indirectly. Excluding expenses paid indirectly, the
ratio of expenses to average net assets would have remained the same.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursement were 7.32%, 7.04%, 7.48%, 8.05%, 8.72%, 9.03% and 9.03, for
1994-88, respectively.
(g) Annualized.
29
<PAGE> 38
Income Fund
Shown below are financial highlights for a Class A share and Class C
share outstanding during the six months ended June 30, 1997, and for a Class C
share outstanding during each of the years in the ten-year period ended
December 31, 1996.
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ------------------------------------
1997 1996 1995 1994
------- ------- -------
CLASS A CLASS C
------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year .................... $ 48.87 $ 48.87 $ 52.22 $ 45.33 $ 48.60
------- ------- ------- ------- -------
Investment operations:
Net investment income ..... 1.45 1.33 2.61 2.44 2.40
------- ------- ------- ------- -------
Net gains or losses on
securities both realized
and unrealized) ........... (0.36) (0.31) (3.31) 6.91 (3.27)
------- ------- ------- ------- -------
Total from investment
operations ................ 1.09 1.02 (0.70) 9.35 (0.87)
------- ------- ------- ------- -------
Distributions:
Dividends (from net
investment income) ........ (1.53) (1.35) (2.65) (2.46) (2.40)
------- ------- ------- ------- -------
Distributions (from
capital gains) ............ 0.00 0.00 0.00 0.00 0.00
------- ------- ------- ------- -------
Total Distributions .......... (1.53) (1.35) (2.65) (2.46) (2.40)
------- ------- ------- ------- -------
Net asset value, end
of period ................... $ 48.43 $ 48.54 $ 48.87 $ 52.22 $ 45.33
======= ======= ======= ======= =======
Total return (a) ............. 2.26%(b) 2.13%(b) (1.23)% 21.12% (1.80)%
======= ======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period .. $ 29 $24,575 $26,162 $31,986 $25,467
======= ======= ======= ======= =======
(000's omitted)
Ratio of expenses to
average net assets (c) ..... 0.55%(b) 0.72%(b) 1.51% 2.19% 2.25%
======= ======= ======= ======= =======
Ratio of net investment
income to average
net assets (c) ............. 2.91%(b) 2.74%(b) 5.30% 4.94% 5.09%
======= ======= ======= ======= =======
Portfolio turnover rate .... 0%(b) 0%(b) 34% 24% 59%
======= ======= ======= ======= =======
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year .................... $ 47.41 $ 47.77 $ 45.42 $ 45.48 $ 44.45 $ 45.45 $ 50.42
------- ------- ------- ------- ------- ------- -------
Investment operations:
Net investment income ..... 2.28 2.57 3.03 3.43 3.32 3.32 2.71
------- ------- ------- ------- ------- ------- -------
Net gains or losses on
securities both realized
and unrealized) ........... 1.20 (0.37) 2.43 (0.03) 0.88 (0.92) ( 3.18)
------- ------- ------- ------- ------- ------- -------
Total from investment
operations ................ 3.48 2.20 5.46 (3.40) 4.20 2.40 (0.47)
------- ------- ------- ------- ------- ------- -------
Distributions:
Dividends (from net
investment income) ........ (2.29) (2.56) (3.11) (3.46) (3.27) (3.30) (3.35)
------- ------- ------- ------- ------- ------- -------
Distributions (from
capital gains) ............ 0.00 0.00 0.00 0.00 0.00 0.00 (1.15)
------- ------- ------- ------- ------- ------- -------
Total Distributions .......... (2.29) (2.56) (3.11) (3.46) (3.27) (3.30) (4.50)
------- ------- ------- ------- ------- ------- -------
Net asset value, end
of period ................... $ 48.60 $ 47.41 $ 47.77 $ 45.42 $ 45.48 $ 44.55 $ 45.45
======= ======= ======= ======= ======= ======= =======
Total return (a) ............. 7.39% 4.74% 12.46% 7.81% 9.12% 5.59% (0.90)%
======= ======= ======= ======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period .. $42,872 $47,096 $39,104 $41,004 $58,774 $74,309 $81,882
======= ======= ======= ======= ======= ======= =======
(000's omitted)
Ratio of expenses to
average net assets (c) ..... 2.25% 2.25% 2.29% 2.30% 2.35% 2.16% 1.99%
======= ======= ======= ======= ======= ======= =======
Ratio of net investment
income to average
net assets (c) ............. 4.56% 5.48% 6.48% 7.08% 6.98% 6.89% 6.29%
======= ======= ======= ======= ======= ======= =======
Portfolio turnover rate .... 92% 16% 37% 25% 33% 49% 64%
======= ======= ======= ======= ======= ======= =======
</TABLE>
- --------------------------
(a) Total return assumes dividend reinvestment and does not reflect the effect
of sales charges.
(b) Not annualized.
(c) The advisor prior to August 4, 1997, voluntarily absorbed certain expenses
of the Fund aggregating $31,132, $72,341, $17,720, $17,632, and $11,540
for the six months ended June 30, 1997 and the years 1996, 1995, 1993, and
1990, respectively. If such expenses had not been absorbed, the ratio of
expenses to average net assets would have been 0.68% and 0.85%, (each of
Class A and Class C) 1.76%, 2.25%, 2.29% and 2.32%, respectively. The
ratio of net investment income to average net assets would have been
2.79%, 2.62%, 5.05%, 4.88%, 4.52% and 7.66% for each of Class A and Class C
for the six months ended June 30, 1997 and the years ended 1996, 1995, 1993
and 1990, respectively.
30
<PAGE> 39
MANAGEMENT DISCUSSION AND ANALYSIS OF PERFORMANCE
A discussion of the performance of Intermediate Government for the
six-month period ended June 30, 1997 is set forth in Appendix IV to this Proxy
Statement/Prospectus. A discussion of the performance of Income Fund for the
six- months period ended June 30, 1997 is set forth in Appendix V to this Proxy
Statement/Prospectus.
ADDITIONAL INFORMATION ABOUT THE AGREEMENTS
TERMS OF THE REORGANIZATIONS
The terms and conditions under which the Reorganizations may be
consummated are set forth in the Agreements. Significant provisions of the
Agreements are summarized below; however, this summary is qualified in its
entirety by reference to each Agreement, copies of which are attached as
Appendix I and II to this Proxy Statement/Prospectus.
TRANSFER OF ASSETS
Money Market will acquire substantially all of the assets of Cash
Management in exchange for shares of Money Market. The actual transfer of such
assets (the "Cash Closing") is expected to occur on March 2, 1998 (the "Cash
Closing Date"), at 7:00 a.m. Central Time (the "Cash Effective Time") on the
basis of values calculated as of the close of business on the preceding business
day in accordance with the policies of Money Market.
At the Cash Closing, AFG will issue directly to the shareholders of
Cash Management that number of shares of Money Market equal in aggregate net
asset value to the aggregate value of Cash Management's assets then transferred.
It is expected that the value of each shareholder's account with Money Market
immediately after the Cash Management Reorganization will be the same as the
value of such shareholder's account with Cash Management immediately prior to
the Cash Management Reorganization. The value calculations will be made pursuant
to procedures customarily used by Money Market. Securities for which there is no
readily ascertainable market value will be valued by mutual agreement of AAFI
and AFG, provided such value is consistent with AFG's pricing procedures.
Promptly after the Cash Closing, AAFI will take steps to pay any outstanding
liabilities of Cash Management and Cash Management's status as a designated
series of shares of AAFI will be terminated. Any assets held by Cash Management
after the Cash Management Reorganization that are not used by AAFI to discharge
the debts of Cash Management will be distributed to its shareholders as a
dividend, although none is expected.
Intermediate Government will acquire substantially all of the assets of
Income Fund in exchange for shares of Intermediate Government. The actual
transfer of such assets (the "Income Closing") is expected to occur on March 2,
1998(the "Income Closing Date"), at 7:00 a.m. Central Time (the "Income
Effective Time") on the basis of values calculated as of the close of business
on the preceding business day in accordance with the policies of Intermediate
Government.
At the Income Closing, AFG will issue directly to the shareholders of
Income Fund that number of shares of Intermediate Government equal in aggregate
net asset value to the aggregate value of Income Fund's assets then transferred.
It is expected that the value of each shareholder's account with Intermediate
Government immediately after the Income Fund Reorganization will be the same as
the value of such shareholder's account with Income Fund immediately prior to
the Income Fund Reorganization. The value calculations will be made pursuant to
procedures customarily used by Intermediate Government. Securities for which
there
31
<PAGE> 40
is no readily ascertainable market value will be valued by mutual agreement of
AAFI and AFG, provided such value is consistent with AFG's pricing procedures.
Promptly after the Income Closing, AAFI will take steps to pay any outstanding
liabilities of Income Fund and Income Fund's status as a designated series of
shares of AAFI will be terminated. Any assets held by Income Fund after the
Income Fund Reorganization that are not used by AAFI to discharge the debts of
Income Fund will be distributed to its shareholders as a dividend, although none
is expected.
OTHER TERMS
The Cash Management Agreement may be amended without shareholder
approval by mutual agreement of AAFI and AFG. If any amendment is made to the
Cash Management Agreement which effects a material change to the Cash
Management Agreement and the Cash Management Reorganization, such change will
be submitted to the shareholders for their approval.
Each of AAFI and AFG have made representations and warranties in the
Cash Management Agreement that are customary in matters such as the Cash
Management Reorganization. The obligations of AAFI and AFG pursuant to the Cash
Management Agreement are subject to various conditions, including the
following: (a) the assets of Cash Management to be acquired by Money Market
shall constitute at least 90% of the fair market value of the net assets and at
least 70% of the fair market value of the gross assets held by Cash Management
immediately prior to the Cash Management Reorganization; (b) AFG's Registration
Statement on Form N-14 under the 1933 Act and the 1940 Act shall have been
filed with the SEC and such Registration Statement shall have become effective,
and no stop-order suspending the effectiveness of the Registration Statement
shall have been issued, and no proceeding for that purpose shall have been
initiated or threatened by the SEC (and not withdrawn or terminated); (c) the
shareholders of Cash Management shall have approved the Cash Management
Agreement; and (d) the receipt of an opinion from Ballard Spahr Andrews &
Ingersoll, that the Cash Management Reorganization will not result in the
recognition of gain or loss for Federal income tax purposes for Cash
Management, Money Market or their shareholders.
Money Market and Cash Management have each agreed to bear their
respective expenses in connection with the Cash Management Reorganization.
The Board of Directors of AAFI may waive without shareholder approval
any default by AFG or any failure by AFG to satisfy any of the conditions to
AAFI's obligations as long as such a waiver will not have a material adverse
effect on the benefits intended under the Cash Management Agreement for the
shareholders of Cash Management. The Cash Management Agreement may be terminated
and the Cash Management Reorganization may be abandoned by either AAFI or AFG at
any time by mutual agreement of AAFI and AFG, or by either party in the event
that Cash Management shareholders do not approve the Cash Management Agreement
or if the Cash Closing does not occur on or before June 30, 1998.
If the Cash Management Agreement is approved, an account will be
established for each shareholder of Cash Management containing the appropriate
number of shares of Money Market. Such accounts will contain certain
information about the shareholder that is identical to the account currently
maintained for each shareholder of Cash Management.
The Income Fund Agreement may be amended without shareholder approval
by mutual agreement of AAFI and AFG. If any amendment is made to the Income
Fund Agreement which effects a material change to the Income Fund Agreement and
the Income Fund Reorganization, such change will be submitted to the
shareholders for their approval.
32
<PAGE> 41
Each of AAFI and AFG have made representations and warranties in the
Income Fund Agreement that are customary in matters such as the Income Fund
Reorganization. The obligations of AAFI and AFG pursuant to the Income Fund
Agreement are subject to various conditions, including the following: (a) the
assets of Income Fund to be acquired by Intermediate Government shall
constitute at least 90% of the fair market value of the net assets and at least
70% of the fair market value of the gross assets held by Income Fund
immediately prior to the Income Fund Reorganization; (b) AFG's Registration
Statement on Form N-14 under the 1933 Act and the 1940 Act shall have been
filed with the SEC and such Registration Statement shall have become effective,
and no stop-order suspending the effectiveness of the Registration Statement
shall have been issued, and no proceeding for that purpose shall have been
initiated or threatened by the SEC (and not withdrawn or terminated); (c) the
shareholders of Income Management shall have approved the Income Fund
Agreement; and (d) the receipt of an opinion from Ballard Spahr Andrews &
Ingersoll, that the Income Fund Reorganization will not result in the
recognition of gain or loss for Federal income tax purposes for Income Fund,
Intermediate Government or their shareholders.
Intermediate Government and Income Fund have each agreed to bear their
respective expenses in connection with the Income Fund Reorganization.
The Board of Directors of AAFI may waive without shareholder approval
any default by AFG or any failure by AFG to satisfy any of the conditions to
AAFI's obligations as long as such a waiver will not have a material adverse
effect on the benefits intended under the Income Fund Agreement for the
shareholders of Income Fund. The Income Fund Agreement may be terminated and
the Income Fund Reorganization may be abandoned by either AAFI or AFG at any
time by mutual agreement of AAFI and AFG, or by either party in the event that
Income Fund shareholders do not approve the Income Fund Agreement or if the
Income Closing does not occur on or before June 30, 1998.
If the Income Fund Agreement is approved, an account will be
established for each shareholder of Income Fund containing the appropriate
number of shares of Intermediate Government. Such accounts will contain certain
information about the shareholder that is identical to the account currently
maintained for each shareholder of Income Fund.
FEDERAL TAX CONSEQUENCES
The following is a general summary of the material Federal income tax
consequences of the Cash Management Reorganization and is based upon the
current provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), the existing Treasury regulations thereunder, current administrative
rulings of the Internal Revenue Service ("IRS") and judicial decisions, all of
which are subject to change. The principal Federal income tax consequences that
are expected to result from the Cash Management Reorganization, under currently
applicable law, are as follows: (i) the Cash Management Reorganization will
qualify as a "reorganization" within the meaning of Section 368(a) of the Code;
(ii) in accordance with Sections 361(a) and 361(c)(1) of the Code, no gain or
loss will be recognized by Cash Management upon the transfer of its assets to
Money Market; (iii) in accordance with Section 354(a)(1) of the Code, no gain
or loss will be recognized by any shareholder of Cash Management upon the
exchange of shares of Cash Management solely for shares of Money Market; (iv)
in accordance with Section 358(a) of the Code, the tax basis of the shares of
Money Market to be received by a shareholder of Cash Management will be the
same as the tax basis of the shares of Cash Management surrendered in exchange
therefor; (v) in accordance with Section 1223(1) of the Code, the holding
period of the shares of Money Market to be received by a shareholder of Cash
Management will include the holding period for which such shareholder held the
shares of Cash Management exchanged therefor, provided that such shares of Cash
Management are capital assets in the hands of such shareholder as of the
Cash Closing; (vi) in accordance with Section 1032 of the Code, no gain or loss
will be recognized by Money Market on the receipt of assets of Cash Management
in exchange for
33
<PAGE> 42
shares of Money Market; (vii) in accordance with Section 362(b) of the Code,
the tax basis of the assets of Cash Management in the hands of Money Market
will be the same as the tax basis of such assets in the hands of Cash
Management immediately prior to the Cash Management Reorganization; (viii) in
accordance with Section 1223(2) of the Code, the holding period of the assets
of Cash Management to be received by Money Market will include the holding
period of such assets in the hands of Cash Management immediately prior to the
Cash Management Reorganization; and (ix) Money Market will succeed to and take
into account the items of Cash Management described in Section 381(c) of the
Code, subject to the conditions and limitations specified in Sections 381
through 384 of the Code and the Treasury regulations thereunder.
As a condition to Cash Closing, Ballard Spahr Andrews & Ingersoll will
render a favorable opinion as to the foregoing Federal income tax consequences
of the Cash Management Reorganization, which opinion will be conditioned upon
the accuracy, as of the Cash Closing Date, of certain representations upon which
Ballard Spahr Andrews & Ingersoll will rely in rendering its opinion, which
representations include, but are not limited to, the following (taking into
account for purposes thereof any events that are part of the plan of
reorganization): (A) there is no plan or intention by the shareholders of Cash
Management to sell, exchange or otherwise dispose of a number of shares of Money
Market received in the Cash Management Reorganization that would reduce the Cash
Management shareholders' ownership of Money Market shares to a number of shares
having a value, as of the Cash Closing Date, of less than 50% of the value of
all of the formerly outstanding shares of Cash Management as of the Cash Closing
Date; (B) following the Cash Management Reorganization, Money Market will
continue the historic business of Cash Management (for this purpose "historic
business" shall mean the business most recently conducted by Cash Management
which was not entered into in connection with the Cash Management
Reorganization) or use a significant portion of Cash Management's historic
business assets in its business; (C) at the direction of Cash Management, Money
Market will issue directly to Cash Management's shareholders pro rata the shares
of Money Market that Cash Management constructively receives in the Cash
Management Reorganization and Cash Management will distribute its other
properties (if any) to its shareholders on, or as promptly as practicable after,
the Cash Closing; (D) Money Market has no plan or intention to reacquire any of
its shares issued in the Cash Management Reorganization, except to the extent
that Money Market is required by the 1940 Act to redeem any of its shares
presented for redemption; (E) Money Market does not plan or intend to sell or
otherwise dispose of any of the assets of Cash Management acquired in the Cash
Management Reorganization, except for dispositions made in the ordinary course
of its business or dispositions necessary to maintain its status as a "regulated
investment company" under the Code; (F) Money Market, Cash Management and the
shareholders of Cash Management will pay their respective expenses, if any,
incurred in connection with the Cash Management Reorganization; (G) Money Market
will acquire at least 90 percent of the fair market value of the net assets and
at least 70 percent of the fair market value of the gross assets held by Cash
Management immediately before the Cash Management Reorganization, including for
this purpose amounts used by Cash Management to pay its reorganization expenses
and all redemptions and distributions made by Cash Management immediately before
the Cash Management Reorganization (other than redemptions pursuant to a demand
of a shareholder in the ordinary course of Cash Management's business as an
open-end diversified management investment company under the 1940 Act and
regular, normal dividends not in excess of the requirements of Section 852 of
the Code); and (H) Money Market and Cash Management have each elected to be
taxed as a "regulated investment company" ("RIC") under Section 851 of the Code
and will each have qualified for the special Federal tax treatment afforded RICs
under the Code for all taxable periods (including the last short taxable period
of Cash Management ending on the Cash Closing and the taxable year of Money
Market that includes the Cash Closing).
THE FOREGOING DESCRIPTION OF THE FEDERAL INCOME TAX CONSEQUENCES OF
THE CASH MANAGEMENT REORGANIZATION IS MADE WITHOUT REGARD TO THE PARTICULAR
FACTS AND CIRCUMSTANCES OF ANY SHAREHOLDER OF CASH MANAGEMENT. CASH MANAGEMENT
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
34
<PAGE> 43
AS TO THE SPECIFIC CONSEQUENCES TO THEM OF THE CASH MANAGEMENT REORGANIZATION,
INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX
LAWS.
The following is a general summary of the material Federal income tax
consequences of the Income Fund Reorganization and is based upon the current
provisions of the Code, the existing Treasury regulations thereunder, current
administrative rulings of the IRS and judicial decisions, all of which are
subject to change. The principal Federal income tax consequences that are
expected to result from the Income Fund Reorganization, under currently
applicable law, are as follows: (i) the Income Fund Reorganization will qualify
as a "reorganization" within the meaning of Section 368(a) of the Code; (ii) in
accordance with Sections 361(a) and 361(c)(1) of the Code, no gain or loss will
be recognized by Income Fund upon the transfer of its assets to Intermediate
Government; (iii) in accordance with Section 354(a)(1) of the Code, no gain or
loss will be recognized by any shareholder of Income Fund upon the exchange of
shares of Income Fund solely for shares of Intermediate Government; (iv) in
accordance with Section 358(a) of the Code, the tax basis of the shares of
Intermediate Government to be received by a shareholder of Income Fund will be
the same as the tax basis of the shares of Income Fund surrendered in exchange
therefor; (v) in accordance with Section 1223(1) of the Code, the holding period
of the shares of Intermediate Government to be received by a shareholder of
Income Fund will include the holding period for which such shareholder held the
shares of Income Fund exchanged therefor provided that such shares of Income
Fund are capital assets in the hands of such shareholder as of the Income
Closing; (vi) in accordance with Section 1032 of the Code, no gain or loss will
be recognized by Intermediate Government on the receipt of assets of Income Fund
in exchange for shares of Intermediate Government; (vii) in accordance with
Section 362(b) of the Code, the tax basis of the assets of Income Fund in the
hands of Intermediate Government will be the same as the tax basis of such
assets in the hands of Income Fund immediately prior to the Income Fund
Reorganization; (viii) in accordance with Section 1223(2) of the Code, the
holding period of the assets of Income Fund to be received by Intermediate
Government will include the holding period of such assets in the hands of Income
Fund immediately prior to the Income Fund Reorganization; and (ix) Intermediate
Government will succeed to and take into account the items of Income Fund
described in Section 381(c) of the Code, subject to the conditions and
limitations specified in Sections 381 through 384 of the Code and the Treasury
regulations thereunder.
As a condition to Income Closing, Ballard Spahr Andrews & Ingersoll
will render a favorable opinion as to the foregoing Federal income tax
consequences of the Income Fund Reorganization, which opinion will be
conditioned upon the accuracy, as of the Income Closing Date, of certain
representations upon which Ballard Spahr Andrews & Ingersoll will rely in
rendering its opinion, which representations include, but are not limited to,
the following (taking into account for purposes thereof any events that are part
of the plan of reorganization): (A) there is no plan or intention by the
shareholders of Income Fund to sell, exchange or otherwise dispose of a number
of shares of Intermediate Government received in the Income Fund Reorganization
that would reduce the Income Fund shareholders' ownership of Intermediate
Government shares to a number of shares having a value, as of the Income Closing
Date, of less than 50% of the value of all of the formerly outstanding shares of
Income Fund as of the Income Closing Date; (B) following the Income Fund
Reorganization, Intermediate Government will continue the historic business of
Income Fund (for this purpose "historic business" shall mean the business most
recently conducted by Income Fund which was not entered into in connection with
the Income Fund Reorganization) or use a significant portion of Income Fund's
historic business assets in its business; (C) at the direction of Income Fund,
Intermediate Government will issue directly to Income Fund's shareholders pro
rata the shares of Intermediate Government that Income Fund constructively
receives in the Income Fund Reorganization and Income Fund will distribute its
other properties (if any) to its shareholders on, or as promptly as practicable
after, the Income Closing; (D) Intermediate Government has no plan or intention
to reacquire any of its shares issued in the Income Fund Reorganization, except
to the extent that Intermediate Government is required by the 1940 Act to redeem
any of its shares presented for redemption; (E) Intermediate Government does not
plan or intend to sell or otherwise dispose of any of the assets of Income Fund
acquired in the Income Fund Reorganization, except for dispositions made in the
35
<PAGE> 44
ordinary course of its business or dispositions necessary to maintain its
status as a "regulated investment company" under the Code; (F) Intermediate
Government, Income Fund and the shareholders of Income Fund will pay their
respective expenses, if any, incurred in connection with the Income Fund
Reorganization; (G) Intermediate Government will acquire at least 90 percent of
the fair market value of the net assets and at least 70 percent of the fair
market value of the gross assets held by Income Fund immediately before the
Income Fund Reorganization, including for this purpose amounts used by Income
Fund to pay its reorganization expenses and all redemptions and distributions
made by Income Fund immediately before the Income Fund Reorganization (other
than redemptions pursuant to demands of shareholders in the ordinary course of
Income Fund's business as an open-end diversified management investment company
under the 1940 Act and regular, normal dividends not in excess of the
requirements of Section 852 of the Code; and (H) Intermediate Government and
Income Fund have each elected to be taxed as a RIC under Section 851 of the
Code and will each have qualified for the special Federal tax treatment
afforded RICs under the Code for all taxable periods (including the last short
taxable period of Income Fund ending on the Closing and the taxable year of
Intermediate Government that includes the Closing).
THE FOREGOING DESCRIPTION OF THE FEDERAL INCOME TAX CONSEQUENCES OF
THE INCOME FUND REORGANIZATION IS MADE WITHOUT REGARD TO THE PARTICULAR FACTS
AND CIRCUMSTANCES OF ANY SHAREHOLDER OF INCOME FUND. INCOME FUND SHAREHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC CONSEQUENCES TO
THEM OF THE INCOME FUND REORGANIZATION, INCLUDING THE APPLICABILITY AND EFFECT
OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
CAPITAL LOSS CARRYFORWARD
As of December 31, 1996, Cash Management had a capital loss
carryforward available to offset future capital gains of approximately $1,113.
Under Section 381 of the Code, Money Market will succeed to the capital loss
carryforwards of Cash Management if, as described in "Additional Information
about the Agreements -- Federal Tax Consequences" above, the Cash Management
Reorganization qualifies as a "reorganization" under Section 368 (a) of the
Code. The carryforward period for capital losses is limited to eight years and
absent realized capital gains, these capital loss carryforwards will expire
through the year 2004.
As a result of the Cash Management Reorganization, Cash Management
will undergo an ownership change, as defined under Section 382 of the Code. The
amount of Cash Management's capital loss carryforwards which can be taken into
account each year by Money Market to offset any realized capital gains will
not exceed an amount equal to the fair market value of Cash Management on
the date the Cash Management Reorganization is consummated multiplied by the
long-term tax-exempt rate in effect at that time.
The amount of such capital loss carryforwards may be different at the
Cash Effective Time. The Cash Management Agreement does not provide for any
adjustment to the number of shares that Cash Management shareholders will
receive to reflect any potential income tax effect on the shareholders of Cash
Management which might result from any differences in the proportionate amounts
of the capital loss carryforward because of the difficulty of predicting the
potential use by Money Market of such capital loss carryforward. It is
anticipated that there will be no distributions to shareholders of current or
future net realized gains on investments until the capital loss carryforwards
are offset or expire, although any such gains would be reflected in the
calculation of net asset value.
As of December 31, 1996, Income Fund had a capital loss carryforward
available to offset future capital gains of approximately $930,172. Under
Section 381 of the Code, Intermediate Government will succeed to the capital
loss carryforwards of Income Fund if, as described in "Additional Information
about
36
<PAGE> 45
the Agreements -- Federal Tax Consequences" above, the Income Fund
Reorganization qualifies as a "reorganization" under Section 368 (a) of the
Code. The carryforward period for capital losses is limited to eight years and
absent realized capital gains, these capital loss carryforwards will expire
through the year 2002.
As a result of the Income Fund Reorganization, Income Fund will
undergo an ownership change, as defined under Section 382 of the Code. The
amount of Income Fund's capital loss carryforwards which can be taken into
account each year by Intermediate Government to offset any realized capital
gains will not exceed an amount equal to the fair market value of Income
Fund on the date the Income Fund Reorganization is consummated multiplied
by the long-term tax-exempt rate in effect at that time.
The amount of such capital loss carryforwards may be different at the
Income Effective Time. The Income Fund Agreement does not provide for any
adjustment to the number of shares that Income Fund shareholders will receive to
reflect any potential income tax effect on the shareholders of Income Fund which
might result from any differences in the proportionate amounts of the capital
loss carryforward because of the difficulty of predicting the potential use by
Intermediate Government of such capital loss carryforward. It is anticipated
that there will be no distributions to shareholders of current or future net
realized gains on investments until the capital loss carryforwards are offset or
expire, although any such gains would be reflected in the calculation of net
asset value.
ACCOUNTING TREATMENT
The Reorganizations will be accounted for on a continuing entity
(pooling of interests without restatement) basis. Accordingly, the book cost
basis to Money Market of the assets of Cash Management will be the same as the
book cost basis of such assets to Cash Management, and the book cost basis to
Intermediate Government of the assets of Income Fund will be the same as the
book cost basis of such assets to Income Fund.
RIGHTS OF SHAREHOLDERS
AAFI is organized as a Maryland corporation and AFG is a Delaware
business trust. There is much that is similar between the two forms of
organization. For example, the responsibilities, powers and fiduciary duties of
the trustees of AFG are substantially the same as those of the directors of
AAFI.
There are, however, certain differences between the two forms of
organization. The operations of AAFI, as a Maryland corporation, are governed
by its Articles of Incorporation and applicable Maryland law. The operations of
AFG, as a Delaware business trust, are governed by its Agreement and
Declaration of Trust (the "Declaration of Trust") and Delaware law.
LIABILITY OF SHAREHOLDERS
The Delaware Business Trust Act provides that shareholders of a
Delaware business trust shall be entitled to the same limitations of liability
extended to shareholders of private for-profit corporations. There is, however,
a remote possibility that, under certain circumstances, shareholders of a
Delaware business trust may be held personally liable for that trust's
obligations to the extent the courts of another state which does not recognize
such limited liability were to apply the laws of such state to a controversy
involving such obligations. The Declaration of Trust provides that shareholders
of AFG shall not be subject to any personal liability for acts or obligations
of AFG and that every written agreement, obligation or other undertaking made
or issued by AFG shall contain a provision to the effect that shareholders are
not personally liable thereunder.
37
<PAGE> 46
In addition, the Declaration of Trust provides for indemnification out of AFG
property for any shareholder held personally liable solely by reason of his or
her being or having been a shareholder. Therefore, the risk of any shareholder
incurring financial loss beyond his investment due to shareholder liability is
limited to circumstances in which AFG itself is unable to meet its obligations
and the express disclaimer of shareholder liabilities is determined not to be
effective. Given the nature of AFG's assets and operations, the possibility of
AFG's being unable to meet its obligations is considered remote, and given the
nature of AFG's operations, even if a claim were brought against AFG and a
court determined that shareholders were personally liable, it would likely not
impose a material obligation on a shareholder.
Shareholders of a Maryland corporation generally do not have personal
liability for a corporation's obligations, except a shareholder may be liable
to the extent that he receives any distribution which exceeds the amount which
he could properly receive under Maryland law.
ELECTION OF DIRECTORS/TRUSTEES; ANNUAL SHAREHOLDER MEETINGS
The shareholders of AFG initially elected the trustees of AFG and are,
thereafter, entitled to vote for the election of trustees only to the extent
such vote may be required by the 1940 Act, by the Declaration of Trust or by
AFG's By-Laws. AFG is not otherwise required to hold annual shareholder
meetings. The shareholders of AAFI initially elected the directors of AAFI and
are, thereafter, entitled to vote for the election of directors only to the
extent such vote may be required by the 1940 Act, by the Articles of
Incorporation or by AAFI's By-Laws. AAFI is not otherwise required to hold
annual shareholder meetings.
TERMS OF DIRECTORS/TRUSTEES
The Declaration of Trust provides that the trustees of AFG shall hold
office during the lifetime of AFG except as follows: (a) any trustees may
resign or retire; (b) any trustee may be removed by the other trustees or the
shareholders of the trust (as discussed below); or (c) any trustee who has died
or become incapacitated and is unable to serve may be retired by a written
instrument signed by a majority of the trustees. AAFI's By-Laws provide that a
director shall hold office until the next election of directors is held or
until his successor is duly elected and qualified.
REMOVAL OF DIRECTORS/TRUSTEES
A trustee of AFG may be removed by a vote of two-thirds of the
outstanding shares at any meeting of the shareholders of AFG or at any time by
written instrument signed by at least two-thirds of the trustees and specifying
when such removal becomes effective. The Declaration of Trust provides that in
the case of refusal to serve, death, resignation, retirement or removal of a
trustee, the remaining trustees may either fill the vacancy or leave the
vacancy unfilled or reduce the number of trustees. Any appointment of a trustee
shall be evidenced by a written instrument signed by a majority of the trustees
in office. AAFI's Articles of Incorporation do not specifically address removal
of a director. Under Maryland law, removal of a director requires the
affirmative vote of a majority of the votes entitled to be cast for the
election of directors.
38
<PAGE> 47
SPECIAL MEETINGS OF SHAREHOLDERS
AFG's Declaration of Trust provides that trustees may call special
meetings of shareholders. In addition, AFG's By-Laws provide that holders of
10% of the outstanding shares of AFG may require that the trustees call a
special meeting for the removal of a trustee. AAFI's By-Laws provide that a
special meeting of shareholders may be called by the chairman, president or the
Board of Directors and shall be called by the secretary upon the written
request of the holders of at least 25% of all the votes entitled to be cast at
such meeting.
LIABILITY OF DIRECTORS/TRUSTEES AND OFFICERS
Under AFG's Declaration of Trust, the trustees of AFG shall not be
liable for any act or omission or any conduct whatsoever in their capacity as
trustees, except for liability to the trust or shareholders due to willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of trustee. While AFG's Declaration of
Trust does not contain any provision limiting the liability of officers, under
Delaware business trust law, the officers of AFG are not personally liable to
any person other than AFG or shareholders for any act, omission or obligation
of AFG or its trustees. AFG's Declaration of Trust and Bylaws allow for the
indemnification of trustees and officers to the fullest extent permitted by
Delaware law and AFG's Bylaws. Delaware law allows a business trust to
indemnify and hold harmless any trustee or other person from and against any
and all claims and demands whatsoever.
Under AAFI's Articles of Incorporation, to the fullest extent that
limitations on liability of directors and officers are permitted by Maryland
General Corporation law, no director or officer of AAFI shall have any
liability to AAFI or its shareholders for damages.
TERMINATION
AFG's Declaration of Trust provides that AFG may be terminated at any
time (i) by the vote of shareholders holding a majority of shares outstanding
provided that the Trustees have submitted the termination of AFG to the
shareholders for their approval or (ii) by the trustees by written notice to
shareholders, provided that as of the date on which they have determined to so
terminate there are fewer than 100 holders of record of AFG. Any portfolio of
AFG may be terminated at any time (i) by a vote of the shareholders entitled to
vote and holding at least a majority of the shares of such portfolio provided
that the trustees have submitted the termination of such portfolio to the
shareholders for their approval or (ii) by the trustees by written notice to
such shareholders provided that, as of the date on which the trustees have
determined to terminate the portfolio, there are fewer than 100 holders of
record of such portfolio.
Under Maryland law, AAFI may be dissolved by vote of a majority of the
directors, followed by the affirmative vote of two-thirds of AAFI's outstanding
stock.
VOTING RIGHTS OF SHAREHOLDERS
Currently, AFG's Declaration of Trust grants shareholders power to do
the following: (i) elect trustees, provided that a meeting of shareholders has
been called for that purpose; (ii) remove trustees, provided that a meeting of
shareholders has been called for that purpose; (iii) approve the termination of
AFG or any portfolio or class of shares of AFG, provided that a meeting of
shareholders has been called for that purpose, unless, as of the date on which
the trustees have determined to so terminate AFG or such portfolio or class,
there are fewer than 100 holders of record of AFG or such terminating portfolio
or class of shares of AFG; (iv) approve the sale of all or substantially all of
the assets of AFG or of any portfolio or class of
39
<PAGE> 48
shares of AFG, unless the primary purpose of such sale is to change AFG's
domicile or form of organization or form of business trust; (v) approve the
merger or consolidation of AFG or any portfolio or class of shares of AFG with
and into another company unless (A) the primary purpose of such merger or
consolidation is to change AFG's domicile or form of organization or form of
business trust, or (B) after giving effect to such merger or consolidation,
based on the number of shares outstanding as of a date selected by the
trustees, the shareholders of AFG or such portfolio or class will have a
majority of the outstanding shares of the surviving company or portfolio or
class, as the case may be; (vi) approve any amendment to their voting rights;
and (vii) approve such additional matters as may be required by law or as the
trustees, in their sole discretion, shall determine.
Shareholders of a Maryland corporation such as AAFI are entitled to
vote on numerous matters affecting the corporation (such as mergers or sales of
substantially all of the assets of the corporation) as provided by Maryland
corporation law.
DISSENTERS' RIGHTS
Under Maryland law, an AAFI shareholder may not demand the fair value
of his shares from the successor company in a transaction involving the
transfer of AAFI's assets, and is bound by the terms of the transaction,
because AAFI's stock is that of an open-end investment company registered with
the SEC under the 1940 Act and the value placed on the stock in the transaction
is its net asset value. Neither Delaware law nor AFG's Declaration of Trust or
Bylaws provides AFG's shareholders with dissenters' rights.
AMENDMENTS TO ORGANIZATION DOCUMENTS
The trustees of AFG may, without shareholder approval, amend the
Declaration of Trust at any time, except that no amendment may be made to
change the voting power of the shareholders of AFG as set forth in the
Declaration of Trust. Consistent with Maryland law, AAFI's Articles of
Incorporation provide that AAFI reserves the right to amend any provision
contained in the Articles of Incorporation in the manner now or hereafter
prescribed by statute, including any amendment that alters the contract rights,
as expressly set forth in the Articles of Incorporation, of any outstanding
capital stock. The Board of Directors of AAFI may approve amendments to the
Articles of Incorporation to classify or reclassify unissued shares of a class
of stock without shareholder approval.
OWNERSHIP OF MONEY MARKET, INTERMEDIATE
GOVERNMENT, CASH MANAGEMENT AND INCOME FUND SHARES
CONTROL PERSONS
Ownership of Intermediate Government
As of December 10, 1997, Merrill Lynch Pierce Fenner & Smith, FBO the
sole benefit of its Customers, owned of record 83,970.000 Class C shares of
Intermediate Government, or 36.157% of the outstanding shares of such class.
Ownership of Cash Management
As of December 10, 1997, INVESCO Services, Inc. owned of record
103,903.790 Class A shares of Cash Management, or 76.064% of the outstanding
shares of such class.
40
<PAGE> 49
Ownership of Income Fund
As of December 10, 1997, Florence A. Correll owned of record 520.280
Class A shares of Income Fund, or 58.354% of the outstanding shares of such
class.
Listed below is the name, address and percent ownership of each person
who as of December 10, 1997, to the knowledge of AFG, owned beneficially 5% or
more of the outstanding shares of Money Market:
<TABLE>
<CAPTION>
Percent
Number of Beneficial
Name and Address Shares Owned Ownership
- ---------------- ------------ ---------
<S> <C> <C>
Cash Reserve Shares
- -------------------
Charles T. Bauer & 24,470,268.630 6.712%
Ruth J. Bauer
11 Greenway Plaza
Suite 100
Houston, Texas 77046
A I M Advisors, Inc. .............................. 17,934,917.420 5.153%
11 Greenway Plaza, Suite 100
Attn: David Hessel
Houston, Texas 77046
</TABLE>
Listed below is the name, address and percent ownership of each person who as
of December 10, 1997, to the knowledge of AFG, owned beneficially 5% or more of
the outstanding shares of Intermediate Government:
<TABLE>
<CAPTION>
Percent
Number of Beneficial
Name and Address Shares Owned Ownership
- ---------------- ------------ ---------
<S> <C> <C>
Class A Shares
- --------------
Merrill Lynch Pierce Fenner & Smith.............. 417,023.000 8.126%
FBO the Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East
Jacksonville, FL 32246
Class C Shares
- --------------
Merrill Lynch Pierce Fenner & Smith............... 83,970.000 36.157%
FBO the Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 3rd Fl.
Jacksonville, FL 32246
ITC Cust. 403B Plan............................... 37,408.713 16.108%
First-Plymouth Congre. Church FBO
John M. Levick, Jr.
2454 Ryons St.
Lincoln, NE 68502-4024
Arden W. Richards and ............................ 31,982.942 13.772%
Velma T. Richards
2401 E. Seventh St.
Tucson, AZ 85719
ITC Cust. IRA FBO................................. 22,632.607 9.745%
John R. Baker
Plan 09/16/92
301 Elizabeth St.
Summerville, SC 29483-4259
Victor P. Biasella TTEE........................... 15,940.489 6.834%
Victor P. Biasella Rev. Liv. Tr.
DTD 11-07-96
1509 Bailey Road
Cuyahoga Falls, OH 44221
</TABLE>
41
<PAGE> 50
Listed below is the name, address and percent ownership of each person
who as of December 10, 1997, to the knowledge of AAFI, owned beneficially 5% or
more of the outstanding shares of Cash Management:
<TABLE>
<CAPTION>
Percent
Number of Beneficial
Name and Address Shares Owned Ownership
- ---------------- ------------ ---------
<S> <C> <C>
Class A Shares
- --------------
INVESCO Services, Inc. 103,903.790 76.064%
Attn: Tony Green
1355 Peachtree St. NE
Atlanta, GA 30306-3269
Middleton Savant and 24,260.130 17.760%
Sheila Johnson
26 Dunsford Dr.
Sullivan, MO 63080
Class C Shares
- --------------
ITC Cust. Rollover IRA FBO 248,183.030 5.427%
Bruno H. Zwerenz
501 NE Lacosta St.
Lees Summit, MO 64064
</TABLE>
42
<PAGE> 51
Listed below is the name, address and percent ownership of each person
who as of December 10, 1997, to the knowledge of AAFI, owned beneficially 5% or
more of the outstanding shares of Income Fund:
<TABLE>
<CAPTION>
Percent
Number of Beneficial
Name and Address Shares Owned Ownership
- ---------------- ------------ ---------
<S> <C> <C>
Class A Shares
- --------------
Florence A. Correll 520.280 58.354%
1329 Nevada St.
Allentown, PA 18103-3006
NFSC FBO C7W-608904 193.836 21.740%
Lois M. Bove
FMT Co TTEE NFRP PS
UA 01 01 84
501 Atwood Ct.
Newtown, PA 18940-1755
INVESCO Services, Inc. 105.805 11.867%
Attn: Tony Green
1355 Peachtree St. NE
Atlanta, GA 30309-3269
PaineWebber For the Benefit of 71.676 8.039%
PaineWebber Cdn FBO
Molly Elizabeth Scarmoutsos
P.O. Box 3321
Weehawken, NJ 07087-8154
Class C Shares
- --------------
Merrill Lynch Pierce Fenner & Smith 51,225.00 10.767%
FBO the Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lane Dr. East
Jacksonville, FL 32246
</TABLE>
OWNERSHIP OF OFFICERS AND TRUSTEES/DIRECTORS
To the best of the knowledge of AFG, the beneficial ownership of
shares of Money Market and of Intermediate Government by officers and trustees
of AFG as a group constituted less than 1% of the outstanding shares of such
fund; except that the officers and trustees as a group owned 10.19% of the
outstanding Cash Reserve shares of Money Market as of December 10, 1997. To
the best of the knowledge of AAFI, the beneficial ownership of shares of Cash
Management and of Income Fund by officers or directors of AAFI as a group
constituted less than 1% of the outstanding shares of such fund as of
December 10, 1997.
43
<PAGE> 52
CAPITALIZATION
The following table sets forth as of September 30, 1997, (i) the
capitalization of Money Market Cash Reserve shares, (ii) the capitalization of
Cash Management Class A and Class C shares, and (iii) the pro-forma
capitalization of Money Market Cash Reserve shares as adjusted to give effect
to the transactions contemplated by the Cash Management Agreement.
<TABLE>
<CAPTION>
PRO FORMA
CASH MONEY MARKET
MONEY MARKET MANAGEMENT CASH RESERVE
CASH RESERVE CLASS A AND SHARES
SHARES CLASS C SHARES AS ADJUSTED
------ -------------- -----------
<S> <C> <C> <C>
Net Assets $273,947,980 $7,031,920 $280,979,900
Shares Outstanding 273,927,309 7,032,374 280,959,683
Net Asset Value Per Share $ 1.00 $ 1.00 $ 1.00
</TABLE>
The following table sets forth as of September 30, 1997, (i) the
capitalization of Intermediate Government Class A shares, (ii) the
capitalization of Income Fund Class A shares, and (iii) the pro-forma
capitalization of Intermediate Government Class A shares as adjusted to give
effect to the transactions contemplated by the Income Fund Agreement:
<TABLE>
<CAPTION>
PRO FORMA
INTERMEDIATE
INTERMEDIATE GOVERNMENT
GOVERNMENT INCOME FUND CLASS A SHARES
CLASS A SHARES CLASS A SHARES AS ADJUSTED
--------------- -------------- --------------
<S> <C> <C> <C>
Net Assets $157,095,768 $ 50,912 $157,146,680
Shares Outstanding 16,789,490 1,037,453 16,794,929
Net Asset Value Per Share $ 9.36 $ 49.07 $ 9.36
</TABLE>
The following table sets forth as of September 30, 1997, (i) the
capitalization of Intermediate Government Class C shares (ii) the
capitalization of Income Fund Class C shares, and (iii) the pro forma
capitalization of Intermediate Government Class C shares as adjusted to give
the effect to the transactions contemplated by the Income Fund Agreement:
44
<PAGE> 53
<TABLE>
<CAPTION>
PRO FORMA
INTERMEDIATE
INTERMEDIATE GOVERNMENT
GOVERNMENT INCOME FUND CLASS C SHARES
CLASS C SHARES CLASS C SHARES AS ADJUSTED
-------------- -------------- -----------
<S> <C> <C> <C>
Net Assets $1,368,595 $ 24,552,143 $ 25,920,738
Shares Outstanding 146,350 498,328 2,772,299
Net Asset Value Per Share $ 9.35 $ 49.27 $ 9.35
</TABLE>
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of Money
Market and Intermediate Government will be passed upon by Ballard Spahr Andrews
& Ingersoll, 1735 Market Street, 51st Floor, Philadelphia, PA 19103-7599.
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
This Proxy Statement/Prospectus and the related Statement of
Additional Information do not contain all the information set forth in the
registration statements and the exhibits relating thereto and annual reports
which AAFI and AFG have filed with the SEC pursuant to the requirements of the
Securities Act and the 1940 Act, to which reference is hereby made. The SEC
file number for AAFI's registration statement containing the Prospectus and
Statement of Additional Information relating to Cash Management and Income Fund
is Registration No. 2-87377. Such Prospectus and Statement of Additional
Information are incorporated herein by reference. The SEC file number for AFG's
registration statement containing the Prospectus and Statement of Additional
Information relating to Money Market and Intermediate Government is
Registration No. 2-27334. Such Prospectus and Statement of Additional
Information are incorporated herein by reference.
AFG and AAFI are subject to the informational requirements of the 1940
Act and in accordance therewith file reports and other information with the
SEC. Reports, proxy statements, registration statements and other information
filed by AAFI and AFG (including the Registration Statement of AFG relating to
Money Market and Intermediate Government on Form N-14 of which this Proxy
Statement/Prospectus is a part and which is hereby incorporated by reference)
may be inspected without charge and copied at the public reference facilities
maintained by the SEC at Room 1014, Judiciary Plaza, 450 Fifth Street, NW,
Washington, DC 20549, and at the following regional offices of the SEC: 7 World
Trade Center, New York, New York 10048; and 500 West Madison Street, 14th
Floor, Chicago, Illinois 60661. Copies of such material may also be obtained
from the Public Reference Section of the SEC at 450 Fifth Street, NW,
Washington, DC 20549 at the prescribed rates.
45
<PAGE> 54
ADDITIONAL INFORMATION ABOUT MONEY MARKET,
INTERMEDIATE GOVERNMENT, CASH MANAGEMENT AND INCOME FUND
For more information with respect to AFG and Money Market and
Intermediate Government concerning the following topics, please refer to the
AFG Prospectus as indicated: (i) see the discussion "Investment Objectives,"
"Summary," "About the Funds," "Investment Programs," "Management" and "General
Information" for further information regarding AFG and Money Market and
Intermediate Government; (ii) see the discussion "Summary," "Investment
Objectives and Policies," "Investment Restrictions," "Repurchase Agreement and
Reverse Repurchase Agreements" and "Ratings of Securities" for further
information regarding investment objectives and polices of Money Market and
Intermediate Government; (iii) see the discussion "Summary," "Management,"
"Organization of the Trust," "Dividends, Distributions and Tax Matters" and
"General Information" for further information regarding the capital stock of
Money Market and Intermediate Government; (iv) see the discussion "Management,"
"How to Purchase Shares," "Terms and Conditions of Purchase of the AIM Funds,"
"Special Plans," "Exchange Privilege," "Determination of Net Asset Value" and
"How to Redeem Shares" for further information regarding the purchase,
redemption and repurchase of Money Market and Intermediate Government shares.
For more information with respect to AAFI and Cash Management and
Income Fund concerning the following topics, please refer to the AAFI
Prospectus as indicated: (i) see the discussion "Summary," "About the Funds,"
"Investment Programs," "Management" and "General Information" for further
information regarding AAFI and Cash Management and Income Fund; (ii) see the
discussion "Summary," "Investment Programs," "Management" and "General
Information" for further information regarding management of Cash Management
and Income Fund; (iii) see the discussion "Summary," "Management,"
"Miscellaneous," "Dividends, Distributions and Tax Matters" and "General
Information" for further information regarding the capital stock of Cash
Management and Income Fund; (iv) see the discussion "Management," "How to
Purchase Shares," "Terms and Conditions of Purchase of the AIM Funds," "Special
Plans," "Exchange Privilege," "Determination of Net Asset Value" and "How to
Redeem Shares" for further information regarding the purchase, redemption and
repurchase of Cash Management and Income Fund shares.
46
<PAGE> 55
APPENDIX I
AGREEMENT
and
PLAN OF REORGANIZATION
for
AIM ADVISOR CASH MANAGEMENT FUND
a Portfolio of
AIM ADVISOR FUNDS, INC.
<PAGE> 56
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
TRANSFER OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1. Reorganization of Cash Management Fund . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.2. Computation of Net.Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.3. Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.4. Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.5. Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.6. Dissolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.7. Issuance of AFG Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.8. Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.9 Liabilities and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AAFI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.1. Incorporation: Qualification and Corporate Authority . . . . . . . . . . . . . . . . . . . 5
Section 3.2. Registration and Regulation of AAFI . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.3. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.4. No Material Adverse Changes; Contingent Liabilities . . . . . . . . . . . . . . . . . . . . 5
Section 3.5. CMF Shares; Liabilities; Business Operations . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.6. Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.7. Binding Obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.8. No Breaches or Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.9. Authorizations or Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.10. Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.11. No Actions, Suits or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.12. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.13. Properties and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.14. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.15. Benefit and Employment Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.16. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.17. Voting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.18. State Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.19. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.20. Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AFG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.1. Organization; Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.2. Binding Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
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<TABLE>
<S> <C>
Section 4.3. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.4. No Material Adverse Changes; Contingent Liabilities . . . . . . . . . . . . . . . . . . . 9
Section 4.5. No Breaches or Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.6. Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.7. Authorizations or Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.8. Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.9. No Actions, Suits or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.11. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.12. Registration and Regulation of Company . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.13. Registration of Money Market Portfolio Cash Reserve Shares . . . . . . . . . . . . . . . 11
Section 4.14. Representations Concerning the Reorganization . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.15. Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE V
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.1. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.2. Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.4. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.5. Notice of Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.6. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.7. Consents, Approvals and Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.8. Submission of Agreement to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VI
CONDITIONS PRECEDENT TO THE REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.1. Conditions Precedent of AFG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.2. Mutual Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.3. Conditions Precedent of AAFI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VII
TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7.2. Survival After Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.1. Nonsurvival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.2. Law Governing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.3. Binding Effect, Persons Benefiting, No Assignment . . . . . . . . . . . . . . . . . . . . 16
Section 8.4. Obligations of AFG and AAFI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.5. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.6. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.7. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.8. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.9. Entire Agreement; Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
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<TABLE>
<S> <C> <C>
Section 8.10. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Schedule 6.1(d) - Opinion of Counsel to AIM Advisor Cash Management Fund
Schedule 6.2(f) - Tax Opinions
Schedule 6.3(d) - Opinion of Counsel to AFG
</TABLE>
<PAGE> 59
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of September
25, 1997 (this "Agreement"), by and between AIM Advisor Funds, Inc., a
Maryland corporation ("AAFI"), acting on behalf of AIM Advisor Cash Management
Fund ("Cash Management Fund"), and AIM Funds Group, a Delaware business trust
("AFG"), acting on behalf of AIM Money Market Fund (the "Money Market
Portfolio").
WITNESSETH
WHEREAS, AAFI is an investment company registered with the
Securities and Exchange Commission (the "SEC") under the Investment Company Act
(as defined below) that offers separate classes of its shares representing
interests in seven investment portfolios, including Cash Management Fund, for
sale to the public; and
WHEREAS, AFG is an investment company registered with the SEC
under the Investment Company Act that offers separate classes of its shares
representing interests in several investment portfolios, including the Money
Market Portfolio, for sale to the public; and
WHEREAS, Cash Management Fund owns securities in which the
Money Market Portfolio is permitted to invest; and
WHEREAS, Cash Management Fund desires to provide for its
reorganization through the transfer of substantially all of its assets to the
Money Market Portfolio in exchange for shares of the Money Market Portfolio
issued in the manner set forth in this Agreement; and
WHEREAS, this Agreement is intended to be and is adopted as a
Plan of Reorganization and Liquidation within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing premises and
the agreements and undertakings contained in this Agreement, AFG and AAFI agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. (a) For all purposes in this
Agreement, the following terms shall have the respective meanings set forth in
this Section 1.1 (such definitions to be equally applicable to both the
singular and plural forms of the terms herein defined):
"AAFI" means AIM Advisor Funds, Inc., a Maryland corporation.
<PAGE> 60
"Advisers Act" means the Investment Advisers Act of 1940, as
amended, and all rules and regulations of the SEC adopted pursuant thereto.
"AFG Registration Statement" means the registration statement
on Form N-1A of AFG, as amended, Registration No. 2-27334, that is applicable
to the Portfolio.
"Affiliated Person" means an affiliated person as defined in
Section 2(a)(3) of the Investment Company Act.
"AFG" means AIM Funds Group, a Delaware business trust.
"Agreement" means this Agreement and Plan of Reorganization,
together with all schedules and exhibits attached hereto and all amendments
hereto and thereof.
"Benefit Plan" means any material "employee benefit plan" (as
defined in Section 3(3) of ERISA) and any material bonus, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, vacation, retirement, profit sharing, welfare plans or
other plan, arrangement or understanding maintained or contributed to by AAFI
on behalf of Cash Management Fund, or otherwise providing benefits to any
current or former employee, officer or director of AAFI.
"Cash Management Fund" means AIM Advisor Cash Management Fund,
a portfolio of AAFI.
"CMF Financial Statements" shall have the meaning set forth in
Section 3.3 of this Agreement.
"CMF Shareholders" means the holders of record as of the
Closing Date of the issued and outstanding shares of the capital stock of Cash
Management Fund.
"CMF Shareholders Meeting" means a meeting of the shareholders
of Cash Management Fund convened in accordance with applicable law and the
articles of incorporation of AAFI to consider and vote upon the approval of
this Agreement and the transactions contemplated by this Agreement.
"CMF Shares" means the issued and outstanding shares of the
capital stock of Cash Management Fund.
"Closing" means the transfer of the assets of Cash Management
Fund against the delivery of Money Market Portfolio Cash Reserve Shares
directly to the shareholders of Cash Management Fund as described in Section
2.1 of this Agreement.
"Closing Date" means March 2, 1998, or such other date as the
parties may mutually determine.
"Code" means the Internal Revenue Code of 1986, as amended.
2
<PAGE> 61
"Custodian" means State Street Bank and Trust Company acting
in its capacity as custodian for the assets of the Money Market Portfolio.
"Effective Time" shall mean 7:00 a.m. Central Time on the
Closing Date.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and all rules and regulations adopted by the SEC pursuant thereto.
"Excluded Assets" shall have the meaning set forth in Section
2.3 of this Agreement.
"Governmental Authority" means any foreign, United States or
state government, government agency, department, board, commission (including
the SEC) or instrumentality, and any court, tribunal or arbitrator of competent
jurisdiction, and any governmental or non-governmental self-regulatory
organization, agency or authority (including the National Association of
Securities Dealers, Inc., the Commodities and Futures Trading Commission, the
National Futures Association, the Investment Management Regulatory Organization
Limited and the Office of Fair Trading).
"Investment Company Act" means the Investment Company Act of
1940, as amended, and all rules and regulations adopted by the SEC pursuant
thereto.
"Lien" means any pledge, lien, security interest, charge,
claim or encumbrance of any kind.
"Material Adverse Effect" means an effect that would cause a
change in the condition (financial or otherwise), properties, assets or
prospects of an entity having an adverse monetary effect in an amount equal to
or greater than $50,000.
"Money Market Portfolio" means AIM Money Market Fund, an
investment portfolio of AFG.
"Money Market Portfolio Cash Reserve Shares" means Cash
Reserve Shares of the Money Market Portfolio issued by AFG, each representing
an interest in the Money Market Portfolio.
"Money Market Portfolio Financial Statements" shall have the
meaning set forth in Section 4.3 of this Agreement.
"Person" means an individual or a corporation, partnership,
joint venture, association, trust, unincorporated organization or other entity.
"Reorganization" means the acquisition of certain of the
assets of Cash Management Fund by the Money Market Portfolio in consideration
of the issuance of Money
3
<PAGE> 62
Market Portfolio Cash Reserve Shares directly to CMF Shareholders as described
in this Agreement.
"Required CMF Shareholder Vote" shall have the meaning set
forth in Section 3.19 of this Agreement.
"Return" means any return, report or form or any attachment
thereto required to be filed with any taxing authority.
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and all rules and regulations adopted by the SEC pursuant thereto.
"Tax" means any tax or similar governmental charge, impost or
levy (including, without limitation, income taxes (including, without
limitation, alternative minimum tax and estimated tax), franchise taxes,
transfer taxes or fees, sales taxes, use taxes, gross receipts taxes, value
added taxes, employment taxes, excise taxes, ad valorem taxes, property taxes,
withholding taxes, payroll taxes, minimum taxes, or windfall profit taxes),
together with any related penalties, fines, additions to tax or interest,
imposed by the United States or any state, county, local or foreign government
or subdivision or agency thereof.
"Valuation Date" shall have the meaning set forth in Section
2.4 of this Agreement.
ARTICLE II
TRANSFER OF ASSETS
Section 2.1. Reorganization of Cash Management Fund. At
the Effective Time, all of the assets of Cash Management Fund, except the
Excluded Assets, shall be delivered to the Custodian for the account of the
Money Market Portfolio, in exchange for, and against delivery by AFG directly to
the CMF Shareholders at the opening of business on the Closing Date of a number
of Money Market Portfolio Cash Reserve Shares (including, if applicable,
fractional shares rounded to the nearest thousandth) having an aggregate net
asset value equal to the net value of the assets of the Cash Management Fund so
transferred, assigned and delivered, all determined and adjusted as provided in
Section 2.2 below. Upon delivery of such assets, the Money Market Portfolio
will receive good and marketable title to such assets free and clear of all
Liens.
Section 2.2. Computation of Net Asset Value.
(a) The net asset value of the Money Market Portfolio
Cash Reserve Shares and the net value of the assets of Cash Management Fund
subject to this Agreement shall, in each case, be determined as of the close of
business on the NYSE on the Valuation Date.
4
<PAGE> 63
(b) The net asset value of the Money Market Portfolio
Cash Reserve Shares shall be computed in accordance with the policies and
procedures of the Money Market Portfolio as described in the AFG Registration
Statement.
(c) The net value of the assets of Cash Management Fund
subject to this Agreement shall be computed by AFG and shall be subject to
adjustment by the amount, if any, agreed to by AAFI and AFG. In determining
the value of the securities transferred by Cash Management Fund to the Money
Market Portfolio, each security shall be priced in accordance with the policies
and procedures of the Money Market Portfolio as described in the AFG
Registration Statement. For such purposes, market quotes and the security
characteristics relating to establishing such quotes shall be determined by
AFG, with the approval of AAFI. Securities for which market quotes are not
available shall be valued as mutually agreed by AFG and AAFI, provided that
such value is consistent with the pricing procedures adopted by AFG. All
computations shall be made by AFG in cooperation with the auditors of AFG and
the auditors of AAFI, who will apply certain procedures agreed to by AFG and
AAFI to test such computations.
Section 2.3. Excluded Assets. There shall be deducted
from the assets of Cash Management Fund described in Section 2.1 all
organizational expenses, any prepaid expenses that would not have value to the
Money Market Portfolio and cash in an amount estimated by AAFI to be sufficient
to pay all the liabilities of Cash Management Fund, including, without
limitation, (i) amounts owed or to be owed to any CMF Shareholder, including
declared but unpaid dividends, (ii) accounts payable, taxes and other accrued
and unpaid expenses, if any, incurred in the normal operation of its business
up to and including the Closing Date and (iii) the costs and expenses incurred
by Cash Management Fund in making and carrying out the transactions
contemplated by this Agreement.
Section 2.4. Valuation Date. The assets of Cash
Management Fund and the net asset value per share of the Money Market Portfolio
Cash Reserve Shares shall be valued as of the close of business on the NYSE on
the business day next preceding the Closing Date (the "Valuation Date"). The
stock transfer books of Cash Management Fund will be permanently closed as of
the close of business on the Valuation Date and only requests for the
redemption of shares of Cash Management Fund received in proper form prior to
the close of trading on the NYSE on the Valuation Date shall be accepted by
Cash Management Fund. Redemption requests thereafter received by Cash
Management Fund shall be deemed to be redemption requests for Money Market
Portfolio Cash Reserve Shares (assuming that the transactions contemplated by
this Agreement have been consummated) to be distributed to CMF Shareholders
under this Agreement.
Section 2.5. Delivery.
(a) Assets held by Cash Management Fund shall be
delivered by AAFI to the Custodian on the Closing Date. No later than three
(3) business days preceding the Closing Date, AAFI shall instruct Cash
Management Fund's custodian to make such delivery to the Custodian. AAFI shall
further instruct Cash Management Fund's custodian that any trade made by Cash
Management Fund during the three day period before the Closing Date shall
settle at the Custodian. The assets so delivered shall be duly endorsed in
proper form for transfer in
5
<PAGE> 64
such condition as to constitute a good delivery thereof, in accordance with the
custom of brokers, and shall be accompanied by all necessary state stock
transfer stamps, if any, or a check for the appropriate purchase price thereof.
Cash held by Cash Management Fund (other than cash held as part of the Excluded
Assets) shall be delivered on the Closing Date and shall be in the form of
currency or wire transfer in Federal funds, payable to the order of the account
of the Money Market Portfolio at the Custodian.
(b) If, on the Closing Date, AAFI is unable to make
delivery in the manner contemplated by Section 2.5(a) of securities held by
Cash Management Fund for the reason that any of such securities purchased prior
to the Closing Date have not yet been delivered to Cash Management Fund, its
broker or brokers, then, AFG shall waive the delivery requirements of Section
2.5(a) with respect to said undelivered securities, if Cash Management Fund has
delivered to the Custodian by or on the Closing Date and with respect to said
undelivered securities, executed copies of an agreement of assignment and
escrow agreement and due bills executed on behalf of said broker or brokers,
together with such other documents as may be required by AFG or the Custodian,
including brokers' confirmation slips.
Section 2.6. Dissolution. As soon as reasonably
practicable after the Closing Date, Cash Management Fund shall pay or make
provisions for all of its debts, liabilities and taxes and distribute all
remaining assets to the CMF Shareholders, and Cash Management Fund's status as
a designated series of shares of AAFI shall be terminated, provided that, in
the event that the transactions contemplated herein are not approved by the CMF
Shareholders, AAFI shall not be obligated to so terminate Cash Management
Fund's designation as a series of shares.
Section 2.7. Issuance of AFG Shares. At the Closing
Date, AAFI shall instruct AFG that the pro rata interest of each of CMF
Shareholders of record as of the close of business on the Valuation Date, as
certified by Cash Management Fund's transfer agent, in Money Market Portfolio
Cash Reserve Shares to holders of Class A Shares and Class C Shares of Cash
Management Fund, be registered on the books of AFG in full and fractional
shares in the name of each CMF Shareholder, and AFG agrees promptly to comply
with said instruction. All issued and outstanding shares of Cash Management
Fund's capital stock shall thereupon be canceled on the books of AAFI. AFG
shall have no obligation to inquire as to the validity, propriety or
correctness of any such instruction, but shall, in each case, assume that such
instruction is valid, proper and correct. AFG shall record on its books the
ownership of the Money Market Portfolio Cash Reserve Shares by CMF Shareholders
and shall forward a confirmation of such ownership to the CMF Shareholders. No
redemption or repurchase of such shares credited to former CMF Shareholders in
respect of Cash Management Fund shares represented by unsurrendered stock
certificates shall be permitted until such certificates have been surrendered
to AFG for cancellation, or if such certificates are lost or misplaced, until
lost certificate affidavits have been executed and delivered to AFG.
Section 2.8. Investment Securities. On or prior to the
Valuation Date, AAFI shall deliver a list setting forth the securities Cash
Management Fund then owns together with the respective Federal income tax bases
thereof. AAFI shall provide to AFG on or before the Valuation Date, detailed
tax basis accounting records for each security to be transferred to it pursuant
to this Agreement. Such records shall be prepared in accordance with the
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requirements for specific identification tax lot accounting and clearly reflect
the bases used for determination of gain and loss realized on the partial sale
of any security transferred to the Money Market Portfolio hereunder. Such
records shall be made available by AAFI prior to the Valuation Date for
inspection by the Treasurer (or his designee) or the auditors of AFG upon
reasonable request.
Section 2.9 Liabilities and Expenses. The Money Market
Portfolio shall not assume any liability of Cash Management Fund and Cash
Management Fund shall use its reasonable best efforts to discharge all known
liabilities, so far as may be possible, prior to the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AAFI
AAFI, on behalf of Cash Management Fund, represents and
warrants to AFG that:
Section 3.1. Incorporation: Qualification and Corporate
Authority. AAFI has been duly incorporated and is validly existing and in
active status under the laws of the State of Maryland with all requisite
corporate power and authority to conduct its business as presently conducted.
Section 3.2. Registration and Regulation of AAFI. AAFI
is duly registered with the SEC as an investment company under the Investment
Company Act and all CMF Shares which have been or are being offered for sale
have been duly registered under the Securities Act and have been duly
registered, qualified or are exempt from registration or qualification under
the securities laws of each state or other jurisdiction in which such shares
have been or are being offered for sale, and no action has been taken by AAFI
to revoke or rescind any such registration or qualification. Cash Management
Fund is in compliance in all material respects with all applicable laws, rules
and regulations, including, without limitation, the Investment Company Act, the
Securities Act, the Exchange Act and all applicable state securities laws.
Cash Management Fund is in compliance in all material respects with the
applicable investment policies and restrictions set forth in its registration
statement currently in effect. The value of the net assets of Cash Management
Fund is determined using portfolio valuation methods that comply in all
material respects with the requirements of the Investment Company Act and the
policies of Cash Management Fund and all purchases and redemptions of CMF
Shares have been effected at the net asset value per share calculated in such
manner.
Section 3.3. Financial Statements. The books of account
and related records of Cash Management Fund fairly reflect in reasonable detail
its assets, liabilities and transactions in accordance with generally accepted
accounting principles applied on a consistent basis. The audited financial
statements dated December 31, 1996 of Cash Management Fund, and the unaudited
financial statements dated June 30, 1997 of Cash Management Fund, previously
delivered to AFG (the "CMF Financial Statements") present fairly in all
material respects the financial position of Cash Management Fund as at the
dates indicated and the results of operations and changes in net assets for the
periods then ended in
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accordance with generally accepted accounting principles applied on a
consistent basis for the periods then ended.
Section 3.4. No Material Adverse Changes; Contingent
Liabilities. Since June 30, 1997, no material adverse change has occurred in
the financial condition, results of operations, business, assets or liabilities
of Cash Management Fund or the status of Cash Management Fund as a regulated
investment company under the Code, other than changes resulting from any change
in general conditions in the financial or securities markets or the performance
of any investments made by Cash Management Fund or occurring in the ordinary
course of business of Cash Management Fund or AAFI. There are no contingent
liabilities of Cash Management Fund not disclosed in the CMF Financial
Statements which are required to be disclosed in accordance with generally
accepted accounting principles.
Section 3.5. CMF Shares; Liabilities; Business Operations.
(a) The CMF Shares have been duly authorized and
validly issued and are fully paid and non- assessable.
(b) There is no plan or intention by the shareholders
of Cash Management Fund who own five percent (5%) or more of the CMF Shares,
and to the knowledge of AAFI's management, the remaining CMF Shareholders have
no present plan or intention of selling, exchanging, redeeming or otherwise
disposing of a number of the Money Market Portfolio Cash Reserve Shares
received by them in connection with the Reorganization that would reduce the
CMF Shareholders' ownership of Money Market Portfolio Cash Reserve Shares to a
number of shares having a value, as of the Closing Date, of less than fifty
percent (50%) of the value of all of the formerly outstanding CMF Shares as of
the same date. For purposes of this representation, CMF Shares exchanged for
cash or other property or exchanged for cash in lieu of fractional shares of
the Money Market Portfolio will be treated as outstanding CMF Shares on the
date of the Reorganization. Moreover, CMF Shares and Money Market Portfolio
Cash Reserve Shares held by CMF Shareholders and otherwise sold, redeemed or
disposed of prior or subsequent to the Reorganization will be considered in
making this representation, except for CMF Shares or Money Market Portfolio
Cash Reserve Shares which have been, or will be, redeemed by Cash Management
Fund or the Money Market Portfolio in the ordinary course of its business as an
open-end, diversified management investment company (or a series thereof) under
the Investment Company Act.
(c) At the time of the Reorganization, Cash Management
Fund shall not have outstanding any warrants, options, convertible securities
or any other type of right pursuant to which any Person could acquire CMF
Shares, except for the right of investors to acquire CMF Shares at net asset
value in the normal course of its business as an open-end diversified
management investment company operating under the Investment Company Act.
(d) From the date it commenced operations on October
19, 1983 (as INVESCO Advisor Cash Management Fund) and ending on the Closing
Date, Cash Management Fund will have conducted its historic business within the
meaning of Section 1.368-1(d) of the Income Tax Regulations under the Code in a
substantially unchanged manner. In anticipation of the Reorganization, Cash
Management Fund will not dispose of assets that, in
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the aggregate, will result in less than fifty percent (50%) of its historic
business assets being transferred to the Money Market Portfolio.
(e) AAFI does not have, and has not had during the six
(6) months prior to the date of this Agreement any employees, and shall not
hire any employees from and after the date of this Agreement through the
Closing Date.
Section 3.6. Accountants. Price Waterhouse, LLP, which
has reported upon CMF Financial Statements for the period ended December 31,
1996, are independent public accountants as required by the Securities Act and
the Exchange Act.
Section 3.7. Binding Obligation. This Agreement has
been duly authorized, executed and delivered by AAFI on behalf of Cash
Management Fund and, assuming this Agreement has been duly executed and
delivered by AFG and approved by the CMF Shareholders, constitutes the legal,
valid and binding obligation of AAFI, enforceable against AAFI in accordance
with its terms from and with respect to the revenues and assets of Cash
Management Fund, except as the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization or similar laws relating to or affecting
creditors' rights generally, or by general equity principles (whether applied
in a court of law or a court of equity and including limitations on the
availability of specific performance or other equitable remedies).
Section 3.8. No Breaches or Defaults. The execution
and delivery of this Agreement by AAFI on behalf of Cash Management Fund and
performance of its obligations hereunder has been duly authorized by all
necessary corporate action on the part of AAFI, other than CMF Shareholder
approval, and (i) does not and, on the Closing Date, will not result in any
violation of the articles of incorporation or by-laws of AAFI and (ii) does not
and, will not on the Closing Date, result in a breach of any of the terms or
provisions of, or constitute (with or without the giving of notice or the lapse
of time or both) a default under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of a material
benefit under, or result in the creation or imposition of any Lien upon any
property or assets of Cash Management Fund (except for such breaches or
defaults or Liens that would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect) under (A) any indenture, mortgage
or loan agreement or any other material agreement or instrument to which AAFI
is a party or by which it may be bound and which relates to the assets of Cash
Management Fund or to which any of Cash Management Fund's properties may be
subject; (B) any Permit; or (C) any existing applicable law, rule, regulation,
judgment, order or decree of any Governmental Authority having jurisdiction
over AAFI or any of Cash Management Fund's properties. AAFI is not under the
jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
Section 3.9. Authorizations or Consents. Other than
those which shall have been obtained or made on or prior to the Closing Date
and those that must be made after the Closing Date to comply with Section 2.6
of this Agreement, no authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority will be required to be
obtained or made by AAFI in connection with the due execution and delivery by
AAFI of this Agreement and the consummation by AAFI of the transactions
contemplated hereby.
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Section 3.10. Permits. AAFI has in full force and effect
all Federal, state, local and foreign governmental approvals, consents,
authorizations, certificates, filings, franchises, licenses, notices, permits
and rights (collectively, "Permits") necessary for it to conduct its business
as presently conducted as it relates to Cash Management Fund, and there has
occurred no default under any Permit, except for the absence of Permits and for
defaults under Permits the absence or default of which would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
To the knowledge of AAFI there are no proceedings relating to the suspension,
revocation or modification of any Permit, except for such that would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
Section 3.11. No Actions, Suits or Proceedings.
(a) There is no pending action, litigation or
proceeding, nor, to the knowledge of AAFI, has any litigation been overtly
threatened in writing or orally, against AAFI before any Governmental Authority
which questions the validity or legality of this Agreement or of the actions
contemplated hereby or which seeks to prevent the consummation of the
transactions contemplated hereby, including the Reorganization.
(b) There are no legal, administrative or arbitration
actions, suits, or proceedings instituted or pending or, to the knowledge of
AAFI, threatened in writing or, if probable of assertion, orally against AAFI
affecting any property, asset, interest, or right of Cash Management Fund, that
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect with respect to Cash Management Fund. There are not in
existence on the date hereof any plea agreements, judgments, injunctions,
consents, decrees, exceptions or orders that were entered by, filed with or
issued by Governmental Authority relating to AAFI's conduct of the business of
Cash Management Fund affecting in any significant respect the conduct of such
business. AAFI is not, and has not been, to the knowledge of AAFI, the target
of any investigation by the SEC or any state securities administrator with
respect to its conduct of the business of Cash Management Fund.
Section 3.12. Contracts. AAFI is not in default under
any contract, agreement, commitment, arrangement, lease, insurance policy or
other instrument to which it is a party and which involves or affects the
assets of Cash Management Fund, by which the assets, business, or operations of
Cash Management Fund may be bound or affected, or under which it or the assets,
business or operations of Cash Management Fund receives benefits, and which
default could reasonably be expected, individually or in the aggregate, to have
a Material Adverse Effect, and, to the knowledge of AAFI, there has not
occurred any event that, with the lapse of time or the giving of notice or
both, would constitute such a default.
Section 3.13. Properties and Assets. Cash Management
Fund has good and marketable title to all properties and assets reflected in
the CMF Financial Statements as owned by it, free and clear of all Liens,
except as described in the CMF Financial Statements.
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Section 3.14. Taxes.
(a) Cash Management Fund has elected to be treated as a
regulated investment company under Subchapter M of the Code. Cash Management
Fund has qualified as such for each taxable year since inception and that has
ended prior to the Closing Date and will have satisfied the requirements of
Section 851(b) of the Code for the period beginning on the first day of its
current taxable year and ending on the Closing Date. In order to (i) insure
continued qualification of Cash Management Fund as a "regulated investment
company" for tax purposes and (ii) eliminate any tax liability of Cash
Management Fund arising by reason of undistributed investment company taxable
income or net taxable gain, AAFI will declare to the CMF Shareholders of record
on or prior to the Valuation Date, a dividend or dividends that, together with
all previous such dividends shall have the effect of distributing (A) all of
Cash Management Fund's investment company taxable income (determined without
regard to any deductions for dividends paid) for the taxable year ended
December 31, 1997 and for the short taxable year beginning on January 1, 1998
and ending on the Closing Date and (B) all of Cash Management Fund's net
capital gains realized in its taxable year ended December 31, 1997 and in such
short taxable year (after reduction for any capital loss carryover).
(b) Cash Management Fund has timely filed all Returns
required to be filed by it and all Taxes with respect thereto have been paid,
except where the failure so to file or so to pay, would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
Adequate provision has been made in the financial statements of Cash Management
Fund for all Taxes in respect of all periods ending on or before the date of
such financial statements, except where the failure to make such provisions
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect. No deficiencies for any Taxes have been proposed,
assessed or asserted in writing by any taxing authority against Cash Management
Fund, and no deficiency has been proposed, assessed or asserted, in writing,
where such deficiency would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. No waivers of the time to assess
any such Taxes are outstanding nor are any written requests for such waivers
pending and no Return of Cash Management Fund is currently being or has been
audited with respect to income taxes or other Taxes by any Federal, state,
local, or foreign Tax authority.
(c) Cash Management Fund's fiscal year has not been
changed for tax purposes since the date on which it commenced operations.
Section 3.15. Benefit and Employment Obligations. On or
prior to the Closing Date, Cash Management Fund has no obligation to provide
any post-retirement or post-employment benefit to any Person, including but not
limited to under any Benefit Plan, and has no obligation to provide unfunded
deferred compensation or other unfunded or self-funded benefits to any Person.
Section 3.16. Brokers. No broker, finder or similar
intermediary has acted for or on behalf of AAFI or Cash Management Fund in
connection with this Agreement or the transactions contemplated hereby, and no
broker, finder, agent or similar intermediary is entitled to any broker's,
finder's or similar fee or other commission in connection therewith based on
any agreement, arrangement or understanding with AAFI or any action taken by
it.
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Section 3.17. Voting Requirements; Dissenter's Rights.
The affirmative votes of a majority of the holders of the outstanding CMF
Shares (the "Required CMF Shareholder Vote") are the only votes of the holders
of any class or series of Cash Management Fund's capital stock necessary to
approve this Agreement and the transactions contemplated by this Agreement.
The CMF Shareholders may not exercise dissenter's rights granted under the
Maryland Business Corporation Law with respect to the Reorganization.
Section 3.18. State Takeover Statutes. No state takeover
statute or similar statute or regulation applies or purports to apply to the
Reorganization, this Agreement or any of the transactions contemplated by this
Agreement.
Section 3.19. Books and Records. The books and records
of AAFI relating to Cash Management Fund, reflecting, among other things, the
purchase and sale of CMF Shares by CMF Shareholders, the number of issued and
outstanding shares owned by each CMF Shareholder and the state or other
jurisdiction in which such shares were offered and sold, are complete and
accurate in all material respects.
Section 3.20. Prospectus. The current prospectus and
statement of additional information for Cash Management Fund as of the date on
which they were issued did not contain, and as supplemented by any supplement
thereto dated prior to or on the Closing Date, do not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
provided however, that no representation or warranty is made with respect to
written information provided by AFG for inclusion in the prospectus or
statement of additional information of Cash Management Fund, or any supplement
thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AFG
AFG, on behalf of the Money Market Portfolio, represents and
warrants to AAFI as follows:
Section 4.1. Organization; Authority. AFG is duly
organized, validly existing and in good standing under the Business Trust Act
of the State of Delaware, with all requisite trust power and authority to enter
into this Agreement and perform its obligations hereunder.
Section 4.2. Binding Obligation. This Agreement has
been duly authorized, executed and delivered by AFG and, assuming this
Agreement has been duly executed and delivered by AAFI, constitutes the legal,
valid and binding obligation of AFG, enforceable against AFG in accordance with
its terms from and with respect to the revenues and assets of the Money Market
Portfolio, except as the enforceability hereof may be limited by bankruptcy,
insolvency, reorganization or similar laws relating to or affecting creditors'
rights generally, or by general equity principles (whether applied in a court
or law or a court of equity and including limitations on the availability of
specific performance or other equitable remedies).
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Section 4.3. Financial Statements. The books of account
and related records of the Money Market Portfolio fairly reflect in reasonable
detail its assets, liabilities and transactions in accordance with generally
accepted accounting principles applied on a consistent basis. The audited
financial statements dated December 31, 1996 of the Money Market Portfolio, and
unaudited financial statements dated June 30, 1997 of the Money Market
Portfolio, previously delivered to AAFI (the "Money Market Portfolio Financial
Statements") present fairly in all material respects the financial position of
the Money Market Portfolio as at the dates indicated and the results of
operations and changes in net assets for the periods then ended in accordance
with generally accepted accounting principles applied on a consistent basis for
the periods then ended.
Section 4.4. No Material Adverse Changes; Contingent
Liabilities. Since June 30, 1997, no material adverse change has occurred in
the financial condition, results of operations, business, assets or liabilities
of the Money Market Portfolio or the status of the Money Market Portfolio as a
regulated investment company under the Code, other than changes resulting from
any change in general conditions in the financial or securities markets or the
performance of any investments made by the Money Market Portfolio or occurring
in the ordinary course of business of the Money Market Portfolio or AFG. There
are no contingent liabilities of the Money Market Portfolio not disclosed in
the Money Market Portfolio Financial Statements which are required to be
disclosed in accordance with generally accepted accounting principles.
Section 4.5. No Breaches or Defaults . The execution
and delivery of this Agreement by AFG and performance by AFG of its obligations
hereunder have been duly authorized by all necessary trust action on the part
of AFG and (i) do not, and on the Closing Date will not, result in any
violation of the Agreement and Declaration of Trust, as amended, or by-laws, as
amended, of AFG and (ii) does not, and on the Closing Date will not, result in
a breach of any of the terms or provisions of, or constitute (with or without
the giving of notice or the lapse of time or both) a default under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to the loss of a material benefit under, or result in the creation or
imposition of any Lien upon any property or assets of the Money Market
Portfolio (except for such breaches or defaults or Liens that would not
reasonably be expected, individually or in the aggregate, to adversely affect
the consummation of the Reorganization) under (A) any indenture, mortgage or
loan or any other material agreement or instrument to which AFG is a party or
by which it may be bound which relates to the Money Market Portfolio or to
which any properties of the Money Market Portfolio may be subject; (B) any
Permit; or (C) any existing applicable law, rule, regulation, judgment, order
or decree of any Governmental Authority having jurisdiction over AFG or any of
the Money Market Portfolio's properties.
Section 4.6. Accountants. KPMG Peat Marwick LLP, which
has reported upon the Money Market Portfolio Financial Statements for the
period ended December 31, 1996, are independent public accountants as required
by the Securities Act and the Exchange Act.
Section 4.7. Authorizations or Consents. Other than
those which shall have been obtained or made on or prior to the Closing Date,
no authorization or approval or other action by, and no notice to or filing
with, any Governmental Authority will be required to be
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obtained or made by AFG in connection with the due execution and delivery by
AFG of this Agreement and the consummation by AFG of the transactions
contemplated hereby.
Section 4.8. Permits. AFG has in full force and effect
all Permits necessary for it to conduct its business as presently conducted as
it relates to the Money Market Portfolio, and there has occurred no default
under any Permit, except for the absence of Permits and for defaults under
Permits the absence or default of which would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. To the
knowledge of AFG there are no proceedings relating to the suspension,
revocation or modification of any Permit, except for such that would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
Section 4.9. No Actions, Suits or Proceedings.
(a) There is no pending action, suit or proceeding,
nor, to the knowledge of AFG, has any litigation been overtly threatened in
writing or, if probable of assertion, orally, against AFG before any
Governmental Authority which questions the validity or legality of this
Agreement or of the transactions contemplated hereby, or which seeks to prevent
the consummation of the transactions contemplated hereby, including the
Reorganization.
(b) There are no legal, administrative or arbitration
actions, suits, or proceedings instituted or pending or, to the knowledge of
AFG, threatened in writing or, if probable of assertion, orally against AFG
affecting any property, asset, interest, or right of the Money Market
Portfolio, that could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect with respect to the Money Market
Portfolio. There are not in existence on the date hereof any plea agreements,
judgments, injunctions, consents, decrees, exceptions or orders that were
entered by, filed with or issued by Governmental Authority relating to AFG's
conduct of the business of the Money Market Portfolio affecting in any
significant respect the conduct of such business. AFG is not, and has not
been, to the knowledge of AFG, the target of any investigation by the SEC or
any state securities administrator with respect to its conduct of the business
of the Money Market Portfolio.
Section 4.10. Taxes.
(a) The Money Market Portfolio has elected to be
treated as a regulated investment company under Subchapter M of the Code. The
Money Market Portfolio has qualified as such for each taxable year since
inception that has ended prior to the Closing Date.
(b) The Money Market Portfolio has timely filed all
Returns required to be filed by it and all Taxes with respect thereto have been
paid, except where the failure so to file or so to pay, would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
Adequate provision has been made in the financial statements of the Money
Market Portfolio for all Taxes in respect of all periods ending on or before
the date of such financial statements, except where the failure to make such
provisions would not reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect. No deficiencies for any Taxes have been
proposed, assessed or asserted in writing by any taxing authority against the
Money Market Portfolio, and no deficiency has been proposed, assessed or
asserted, in
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writing, where such deficiency would reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect. No waivers of the time to
assess any such Taxes are outstanding nor are any written requests for such
waivers pending and no Return of the Money Market Portfolio is currently being
or has been audited with respect to income taxes or other Taxes by any Federal,
state, local, or foreign Tax authority.
(c) The Money Market Portfolio's fiscal year has not
been changed for tax purposes since the date on which it commenced operations.
Section 4.11. Brokers. No broker, finder or similar
intermediary has acted for or on behalf of AFG or the Money Market Portfolio in
connection with this Agreement or the transactions contemplated hereby, and no
broker, finder, agent or similar intermediary is entitled to any broker's,
finder's or similar fee or other commission in connection therewith based on
any agreement, arrangement or understanding with AFG or any action taken by
AFG.
Section 4.12. Registration and Regulation of Company.
AFG is registered with the SEC under the Investment Company Act as an open-end,
management, series, investment company and the Portfolio has elected to qualify
as a regulated investment company under Section 851 of the Code. The Money
Market Portfolio is in compliance in all material respects with all applicable
laws, rules and regulations, including without limitation the Investment
Company Act, the Securities Act, the Exchange Act and all applicable state
securities laws. The Money Market Portfolio is in compliance in all material
respects with the applicable investment policies and restrictions set forth in
its registration statement currently in effect. The value of the net assets of
the Money Market Portfolio is determined using portfolio valuation methods
that comply in all material respects with the requirements of the Investment
Company Act.
Section 4.13. Registration of Money Market Portfolio
Cash Reserve Shares.
(a) The shares of beneficial interest of AFG are divided into
nine portfolios, including the Money Market Portfolio. The Money Market
Portfolio has four classes of shares, Class A Shares, Class B Shares, Class C
Shares and Cash Reserve Shares. Under the Delaware Business Trust Act and its
Agreement and Declaration of Trust, as amended, AFG is authorized to issue an
unlimited number of shares of any class representing an investment in each of
its portfolios, including the Money Market Portfolio.
(b) The Money Market Portfolio Cash Reserve Shares of
AFG to be issued pursuant to Section 2.7 shall on the Closing Date be duly
registered under the Securities Act by a Registration Statement on Form N-14 of
AFG then in effect.
(c) The Money Market Portfolio Cash Reserve Shares to
be issued pursuant to Section 2.7 are duly authorized and on the Closing Date
will be validly issued and fully paid and non-assessable and will conform to
the description thereof contained in the Registration Statement on Form N-14
then in effect. At the time of the Reorganization, the Money Market Portfolio
shall not have outstanding any warrants, options, convertible securities or any
other type of right pursuant to which any Person could acquire Money Market
Portfolio Cash Reserve Shares, except for the right of investors to acquire
Money Market Portfolio Cash
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Reserve Shares at net asset value in the normal course of its business as an
open-ended diversified management investment company operating under the
Investment Company Act.
(d) The combined proxy statement/prospectus (the
"Combined Proxy Statement/Prospectus") which forms a part of AFG's Registration
Statement on Form N-14 shall be furnished to AAFI and CMF Shareholders entitled
to vote at the CMF Shareholders Meeting. The Combined Proxy
Statement/Prospectus and related Statement of Additional Information of the
Money Market Portfolio, when they become effective, shall conform to the
applicable requirements of the Securities Act and the Investment Company Act
and shall not include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not materially misleading, provided, however, that no representation or
warranty is made with respect to written information provided by AAFI for
inclusion in the Combined Prospectus/Proxy Statement.
(e) The shares of the Money Market Portfolio which have
been or are being offered for sale (other than Money Market Portfolio Cash
Reserve Shares to be issued in connection with the Reorganization) have been
duly registered under the Securities Act by the AFG Registration Statement then
in effect and have been duly registered, qualified or are exempt from
registration or qualification under the securities laws of each state or other
jurisdiction in which such shares have been or are being offered for sale, and
no action has been taken by AFG to revoke or rescind any such registration or
qualification.
Section 4.14. Representations Concerning the Reorganization.
(a) AFG has no plan or intention to reacquire any of
the Money Market Portfolio Cash Reserve Shares issued in the Reorganization,
except to the extent that the Money Market Portfolio is required by the
Investment Company Act to redeem any of its shares presented for redemption.
(b) The Money Market Portfolio has no plan or intention
to sell or otherwise dispose of any of the assets of Cash Management Fund
acquired in the Reorganization, other than in the ordinary course of its
business and to the extent necessary to maintain its status as a "regulated
investment company" under the Code.
(c) Following the Reorganization, the Money Market
Portfolio will continue the "historic business" of Cash Management Fund (within
the meaning of Section 1.368-1(d) of the Income Tax Regulations under the Code)
or use a significant portion of Cash Management Fund's historic business assets
in a business.
Section 4.15. Prospectus. The current prospectus and
statement of additional information for the Money Market Portfolio as of the
date on which they were issued did not contain, and as supplemented by any
supplement thereto dated prior to or on the Closing Date do not contain, any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading.
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ARTICLE V
COVENANTS
Section 5.1. Conduct of Business.
(a) From the date of this Agreement up to and including the
Closing Date (or, if earlier, the date upon which this Agreement is terminated
pursuant to Article VII), AAFI shall conduct the business of Cash Management
Fund only in the ordinary course and substantially in accordance with past
practices, and shall use its reasonable best efforts to preserve intact its
business organization and material assets and maintain the rights, franchises
and business and customer relations necessary to conduct the business of Cash
Management Fund in the ordinary course in all material respects. Without
limiting the generality of the foregoing, AAFI shall not do any of the
following with respect to Cash Management Fund without the prior written
consent of AFG, which consent shall not be unreasonably withheld:
(i) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital
stock;
(ii) amend its articles of incorporation or by-laws;
(iii) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization
or division thereof or any assets that are material, individually or
in the aggregate, to Cash Management Fund taken as a whole, except
purchases of assets in the ordinary course of business consistent with
past practice;
(iv) sell, lease or otherwise dispose of any of its
material properties or assets, or mortgage or otherwise encumber or
subject to any Lien any of its material properties or assets, other
than in the ordinary course of business;
(v) incur any indebtedness for borrowed money or
guarantee any indebtedness of another Person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities
of Cash Management Fund, guarantee any debt securities of another
Person, enter into any "keep well" or other agreement to maintain any
financial statement condition of another Person, or enter into any
arrangement having the economic effect of any of the foregoing;
(vi) settle or compromise any income tax liability
or make any material tax election;
(vii) pay, discharge or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than in the ordinary
course of business;
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(viii) change its methods of accounting, except as
required by changes in generally accepted accounting principles as
concurred in by its independent auditors, or change its fiscal year;
(ix) make or agree to make any material severance,
termination, indemnification or similar payments except pursuant to
existing agreements; or
(x) adopt any Benefit Plan.
(b) From the date of this Agreement up to and including
the Closing Date (or, if earlier, the date upon which this Agreement is
terminated pursuant to Article VII), AFG shall conduct the business of the
Money Market Portfolio only in the ordinary course and substantially in
accordance with past practices, and shall use its reasonable best efforts to
preserve intact its business organization and material assets and maintain the
rights, franchises and business relations necessary to conduct the business
operations of the Money Market Portfolio in the ordinary course in all material
respects.
Section 5.2. Announcements. Promptly following
execution and delivery of this Agreement, AAFI and AFG shall agree upon and
release a mutually acceptable press release and AAFI shall give any and all
notices required to be given by law.
Section 5.3. Expenses. Cash Management Fund and the
Money Market Portfolio shall each bear the expenses it incurs in connection
with this Agreement and the Reorganization and other transactions contemplated
hereby.
Section 5.4. Further Assurances. Each of the parties
hereto shall execute such documents and other papers and perform such further
acts as may be reasonably required to carry out the provisions hereof and the
transactions contemplated hereby. Each such party shall, on or prior to the
Closing Date, use its reasonable best efforts to fulfill or obtain the
fulfillment of the conditions precedent to the consummation of the
Reorganization, including the execution and delivery of any documents,
certificates, instruments or other papers that are reasonably required for the
consummation of the Reorganization.
Section 5.5. Notice of Events. AFG shall give prompt
notice to AAFI, and AAFI shall give prompt notice to AFG, of (i) the occurrence
or nonoccurrence of any event of which to the knowledge of AFG or to the
knowledge of AAFI, the occurrence or non-occurrence of which would be likely to
result in any of the conditions specified in (x) in the case of AFG, Sections
6.1 and 6.2 or (y) in the case of AAFI, Sections 6.2 and 6.3, not being
satisfied so as to permit the consummation of the Reorganization and (ii) any
material failure on its part, or on the part of the other party hereto of which
it has knowledge, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 5.5 shall not limit or
otherwise affect the remedies available hereunder to any party.
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Section 5.6. Access to Information.
(a) AAFI will, during regular business hours and on reasonable
prior notice, allow AFG and its authorized representatives reasonable access to
the books and records of AAFI pertaining to the assets of Cash Management Fund
and to employees of AAFI knowledgeable thereof; provided, however, that any
such access shall not significantly interfere with the business or operations
of AAFI.
(b) AFG will, during regular business hours and on reasonable
notice, allow AAFI and its authorized representatives reasonable access to the
books and records of AFG pertaining to the assets of the Money Market Portfolio
and to employees of AFG knowledge thereof; provided, however, that any such
access shall not significantly interfere with the business or operations of
AFG.
Section 5.7. Consents, Approvals and Filings. Each of
AAFI and AFG shall make all necessary filings, as soon as reasonably
practicable, including, without limitation, those required under the Securities
Act, the Exchange Act, the Investment Company Act and the Advisers Act, in
order to facilitate prompt consummation of the Reorganization and the other
transactions contemplated by this Agreement. In addition, each of AAFI and AFG
shall use its reasonable best efforts, and shall cooperate fully with each
other (i) to comply as promptly as reasonably practicable with all requirements
of Governmental Authorities applicable to the Reorganization and the other
transactions contemplated herein and (ii) to obtain as promptly as reasonably
practicable all necessary permits, orders or other consents of Governmental
Authorities and consents of all third parties necessary for the consummation of
the Reorganization and the other transactions contemplated herein. Each of
AAFI and AFG shall use reasonable efforts to provide such information and
communications to Governmental Authorities as such Governmental Authorities may
request.
Section 5.8. Submission of Agreement to Shareholders.
AAFI shall take all action necessary in accordance with applicable law and its
articles of incorporation and by-laws to convene the CMF Shareholders Meeting.
AAFI shall, through its Board of Directors, recommend to the CMF Shareholders
approval of this Agreement and the other transactions contemplated by this
Agreement. AAFI shall use its reasonable best efforts to hold the CMF
Shareholders Meeting as soon as practicable after the date hereof.
ARTICLE VI
CONDITIONS PRECEDENT TO THE REORGANIZATION
Section 6.1. Conditions Precedent of AFG. The
obligation of AFG to consummate the Reorganization is subject to the
satisfaction, at or prior to the Closing Date, of all of the following
conditions, any one or more of which may be waived in writing by AFG.
(a) The representations and warranties of AAFI on
behalf of Cash Management Fund set forth in this Agreement shall be true and
correct in all material respects
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as of the date of this Agreement and as of the Closing Date with the same
effect as though all such representations and warranties had been made as of
the Closing Date.
(b) AAFI shall have complied with and satisfied in all
material respects all agreements and conditions set forth herein on its part to
be performed or satisfied at or prior to the Closing Date.
(c) AFG shall have received at the Closing Date (i) a
certificate, dated as of the Closing Date, from an officer of AAFI on behalf of
AAFI, in such individual's capacity as an officer of AAFI and not as an
individual, to the effect that the conditions specified in Section 6.1(a) and
(b) have been satisfied and (ii) a certificate, dated as of the Closing Date,
from the Secretary or Assistant Secretary of AAFI certifying as to the accuracy
and completeness of the attached articles of incorporation and by-laws, and
resolutions, consents and authorizations with respect to the execution and
delivery of this Agreement and the transactions contemplated hereby.
(d) AFG shall have received the signed opinion of
Ballard Spahr Andrews & Ingersoll, counsel to AAFI, or other counsel reasonably
acceptable to AFG, in form and substance reasonably acceptable to counsel for
AFG, as to the matters set forth in Schedule 6.1(d).
Section 6.2. Mutual Conditions. The obligation of AAFI
and AFG to consummate the Reorganization is subject to the satisfaction, at or
prior to the Closing Date, of all of the following further conditions, any one
or more may be waived in writing by AAFI and AFG, but only if and to the extent
that such waiver is mutual.
(a) All filings required to be made prior to the
Closing Date with, and all consents, approvals, permits and authorizations
required to be obtained on or prior to the Closing Date from Governmental
Authorities, in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein by AAFI and AFG
shall have been made or obtained, as the case may be; provided, however, that
such consents, approvals, permits and authorizations may be subject to
conditions that would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
(b) This Agreement, the Reorganization and related
corporate matters shall have been approved and adopted at the CMF Shareholders
Meeting by the shareholders of Cash Management Fund on the record date by the
Required CMF Shareholder Vote.
(c) The assets of Cash Management Fund to be acquired
by the Money Market Portfolio shall constitute at least 90% of the fair market
value of the net assets and at least 70% of the fair market value of the gross
assets held by Cash Management Fund immediately prior to the Reorganization.
For purposes of this Section 6.2(c), assets used by Cash Management Fund to pay
the expenses it incurs in connection with this Agreement and the Reorganization
and to effect all shareholder redemptions and distributions (other than
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regular, normal dividends and regular, normal redemptions pursuant to the
Investment Company Act, and not in excess of the requirements of Section 852 of
the Code, occurring in the ordinary course of Cash Management Fund's business
as an open-end diversified management investment company) after the date of
this Agreement shall be included as assets of Cash Management Fund immediately
prior to the Reorganization.
(d) No temporary restraining order, preliminary or
permanent injunction or other order issued by any Governmental Authority
preventing the consummation of the Reorganization on the Closing Date shall be
in effect; provided, however, that the party or parties invoking this condition
shall use reasonable efforts to have any such order or injunction vacated.
(e) The Registration Statement on Form N-14 filed by
AFG with respect to the Money Market Portfolio Cash Reserve Shares to be issued
to CMF Shareholders in connection with the Reorganization shall have become
effective under the Securities Act and no stop order suspending the
effectiveness thereof shall have been issued and, to the best knowledge of the
parties hereto, no investigation or proceeding for that purpose shall have been
instituted or be pending, threatened or contemplated under the Securities Act.
(f) AAFI and AFG shall have received on or before the
Closing Date an opinion of Ballard Spahr Andrews & Ingersoll in form, scope and
substance satisfactory to AAFI and AFG, set forth on Schedule 6.2(f).
(g) The dividend or dividends described in the last
sentence of Section 3.14(a) shall have been declared.
Section 6.3. Conditions Precedent of AAFI. The
obligation of AAFI to consummate the Reorganization is subject to the
satisfaction, at or prior to the Closing Date, of all of the following
conditions, any one or more of which may be waived in writing by AAFI.
(a) The representations and warranties of AFG on behalf
of the Money Market Portfolio set forth in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Closing Date with the same effect as though all such representations and
warranties had been made as of the Closing Date.
(b) AFG shall have complied with and satisfied in all
material respects all agreements and conditions set forth herein on its part to
be performed or satisfied at or prior to the Closing Date.
(c) AAFI shall have received on the Closing Date (i) a
certificate, dated as of the Closing Date, from an officer of AFG, in such
individual's capacity as an officer of AFG and not as an individual, to the
effect that the conditions specified in Section 6.3(a) and (b) have been
satisfied and (ii) a certificate, dated as of the Closing Date, of AFG,
certifying as to the accuracy and completeness of the attached Agreement and
Declaration of Trust, as amended, and by-laws, as amended, and resolutions,
consents and authorizations with respect to the execution and delivery of this
Agreement and the transactions contemplated hereby.
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(d) AAFI shall have received the signed opinion of
Ballard Spahr Andrews & Ingersoll, counsel to AFG, or other counsel reasonably
acceptable to AAFI, in form and substance reasonably acceptable to counsel for
AAFI, as to the matters set forth on Schedule 6.3(d).
ARTICLE VII
TERMINATION OF AGREEMENT
Section 7.1. Termination.
(a) This Agreement may be terminated on or prior to the
Closing Date as follows:
(i) by mutual written consent of AAFI and AFG;
and
(ii) at the election of AAFI or AFG:
(A) if the Closing Date shall not be on or
before June 30, 1998, or such later date as the parties hereto
may agree upon, unless the failure to consummate the
Reorganization is the result of a willful and material breach
of this Agreement by the party seeking to terminate this
Agreement;
(B) if, upon a vote at CMF Shareholders Meeting
or any adjournment thereof, the Required CMF Shareholder Vote
shall not have been obtained as contemplated by Section 5.8;
or
(C) if any Governmental Authority shall have
issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting
the Reorganization and such order, decree, ruling or other
action shall have become final and nonappealable.
(b) The termination of this Agreement shall be effectuated by
the delivery by the terminating party to the other party of a written notice of
such termination. If this Agreement so terminates, it shall become null and
void and have no further force or effect, except as provided in Section 7.2.
Section 7.2. Survival After Termination. If this
Agreement is terminated in accordance with Section 7.1 hereof and the
transactions contemplated hereby are not consummated, this Agreement shall
become void and of no further force and effect, except for the provisions of
Section 5.3.
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ARTICLE VIII
MISCELLANEOUS
Section 8.1. Nonsurvival of Representations and
Warranties. Except as set for those contained in Sections 2.6, 3.5, 3.15(a)
and 4.14, none of the representations, warranties or covenants in this
Agreement or in any certificate or instrument delivered pursuant to this
Agreement shall survive the Closing Date and no party shall, therefore, have
any recourse therefor against any other party in connection therewith. This
Section 8.1 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Closing Date.
Section 8.2. Law Governing. This Agreement shall be
construed and interpreted according to the laws of the State of Delaware
applicable to contracts made and to be performed wholly within such state.
Section 8.3. Binding Effect, Persons Benefiting, No
Assignment. This Agreement shall inure to the benefit of and be binding upon
the parties hereto and the respective successors and assigns of the parties and
such Persons. Nothing in this Agreement is intended or shall be construed to
confer upon any entity or Person other than the parties hereto and their
respective successors and permitted assigns any right, remedy or claim under or
by reason of this Agreement or any part hereof. Without the prior written
consent of the parties hereto, this Agreement may not be assigned by any of the
parties hereto.
Section 8.4. Obligations of AFG and AAFI.
(a) AAFI and AFG hereby acknowledge and agree that the
Money Market Portfolio is a separate investment portfolio of AFG, that AFG is
executing this Agreement on behalf of the Money Market Portfolio, and that any
amounts payable by AFG under or in connection with this Agreement shall be
payable solely from the revenues and assets of the Money Market Portfolio.
AAFI further acknowledges and agrees that this Agreement has been executed by
an authorized officer of AFG in his or her capacity as an officer of AFG
intending to bind AFG as provided herein, and that no officer, trustee or
shareholder of AFG shall be personally liable for the liabilities or
obligations of AFG incurred hereunder.
(b) AAFI and AFG hereby acknowledge and agree that Cash
Management Fund is a separate investment portfolio of AAFI, that AAFI is
executing this Agreement on behalf of Cash Management Fund and that any amounts
payable by AAFI under or in connection with this Agreement shall be payable
solely from the revenues and assets of Cash Management Fund.
Section 8.5. Amendments. This Agreement may not be
amended, altered or modified except by a written instrument executed by AAFI
and AFG.
Section 8.6. Enforcement. The parties agree irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that
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the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any court of the United States or any state having
jurisdiction, in addition to any other remedy to which they are entitled at law
or in equity.
Section 8.7. Interpretation. When a reference is made
in this Agreement to a Section or Schedule, such reference shall be to a
Section of, or a Schedule to, this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation". Each representation and warranty contained in Article
III or IV that relates to a general category of a subject matter shall be
deemed superseded by a specific representation and warranty relating to a
subcategory thereof to the extent of such specific representation or warranty.
Section 8.8. Counterparts. This Agreement may be
executed in counterparts, each of which shall be deemed an original and each of
which shall constitute one and the same instrument.
Section 8.9. Entire Agreement; Schedules. This
Agreement, including the Schedules, certificates and lists referred to herein,
and any documents executed by the parties simultaneously herewith or pursuant
thereto, constitute the entire understanding and agreement of the parties
hereto with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, written or oral, between the parties with
respect to such subject matter.
Section 8.10. Notices. All notices, requests, demands
and other communications hereunder shall be in writing and shall be deemed to
have been duly given when delivered by hand or by overnight courier, two days
after being sent by registered mail, return receipt requested, or when sent by
telecopier (with receipt confirmed), provided, in the case of a telecopied
notice, a copy is also sent by registered mail, return receipt requested, or by
courier, addressed as follows (or to such other address as a party may
designate by notice to the other):
(a) If to AFG:
AIM Funds Group
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attn: Carol F. Relihan, Esq.
Fax: (713) 993-9185
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with a copy to:
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103-7599
Attn: William H. Rheiner, Esq.
Fax: (215) 864-8999
(b) If to AAFI:
AIM Funds Group
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attn: Carol F. Relihan, Esq.
Fax: (713) 993-9185
with a copy to:
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103-7599
Attn: William H. Rheiner, Esq.
Fax: (215) 864-8999
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
AIM ADVISOR FUNDS, INC., acting
on behalf of AIM Advisor Cash Management Fund
By: /s/ Robert H. Graham
--------------------------------------
AIM FUNDS GROUP, acting
on behalf of AIM Money Market Fund
By: /s/ Robert H. Graham
--------------------------------------
25
<PAGE> 84
Schedule 6.1(d)
OPINION OF COUNSEL TO AIM Advisor Cash Management Fund
1. AAFI is a corporation duly incorporated and validly existing
under the laws of the State of Maryland.
2. AAFI is an open-end, management investment company registered
under the Investment Company Act of 1940.
3. The execution, delivery and performance of the Agreement by
AAFI have been duly authorized and approved by all requisite
corporate action on the part of AAFI. The Agreement has been
duly executed and delivered by AAFI and constitutes the valid
and binding obligation of Cash Management Fund.
4. The CMF Shares outstanding on the date hereof have been duly
authorized and validly issued, are fully paid and are
non-assessable.
5. AAFI is not required to submit any notice, report or other
filing with or obtain any authorization consent or approval
from any governmental authority or self regulatory
organization prior to the consummation of the transactions
contemplated by the Agreement.
We confirm to you that to our knowledge after inquiry of each lawyer
who is the current primary contact for AAFI or who has devoted substantive
attention on behalf of AAFI during the preceding twelve months and who is still
currently employed by or is currently a member of this firm, no litigation or
governmental proceeding is pending or threatened in writing against Cash
Management Fund (i) with respect to the Agreement or (ii) which involves in
excess of $500,000 in damages.
<PAGE> 85
Schedule 6.2(f)
Tax Opinions.
(i) The transfer of the assets of Cash
Management Fund to the Money Market Portfolio in exchange for the
Portfolio Shares distributed directly to the CMF Shareholders, as
provided in the Agreement, will constitute a "reorganization" within
the meaning of Section 368(a) of the Code and that Cash Management
Fund and AFG will each be a "party to a reorganization" within the
meaning of 368(b) of the Code.
(ii) In accordance with Section 361(a) and
Section 361(c)(1) of the Code, no gain or loss will be recognized by
Cash Management Fund as a result of such transaction.
(iii) In accordance with Section 1032 of the
Code, no gain or loss will be recognized by the Money Market Portfolio
upon the receipt of assets of Cash Management Fund in exchange for
Money Market Portfolio Cash Reserve Shares issued directly to the CMF
Shareholders
(iv) In accordance with Section 354(a)(1) of the
Code, no gain or loss will be recognized by CMF Shareholders on
issuance by AFG of Money Market Portfolio Cash Reserve Shares in
exchange for their CMF Shares.
(v) In accordance with Section 362(b) of the
Code, the basis to the Money Market Portfolio of the assets of Cash
Management Fund transferred to it will be the same as the basis of
such assets in the hands of Cash Management Fund immediately prior to
the exchange.
(vi) In accordance with Section 358(a) of the
Code, a CMF Shareholder's basis for Money Market Portfolio Cash
Reserve Shares issued to such CMF Shareholder pursuant to Section 2.7
of the Agreement ("Issued Shares") will be the same as his basis for
CMF Shares.
(vii) In accordance with Section 1223(1) of the
Code, a CMF Shareholder's holding period for Money Market Portfolio
Cash Reserve Shares will be determined by including said CMF
Shareholder's holding period for CMF Shares exchanged therefor,
provided that CMF Shareholder held such CMF Shares as a capital asset.
(viii) In accordance with Section 1223(2) of the
Code, the holding period with respect to the assets of Cash Management
Fund transferred to the Money Market Portfolio will include the
holding period for such assets in the hands of Cash Management Fund.
(ix) In accordance with Section 381(a)(2) of the
Code, the Money Market Portfolio will succeed to and take into account
the items of Cash Management Fund described in Section 381(c) of the
Code, subject to the conditions and limitations specified in Sections
381 through 384 of the Code and the Internal Revenue Service
regulations thereunder.
<PAGE> 86
<PAGE> 87
Schedule 6.3(d)
OPINION OF COUNSEL TO AFG
1. AFG is duly organized and validly existing as a business trust
under the Business Trust Law of the State of Delaware.
2. AFG is an open-end, management investment company registered
under the Investment Company Act of 1940.
3. The execution, delivery and performance of the Agreement by
AFG have been duly authorized and approved by all requisite
trust action on the part of AFG. The Agreement has been duly
executed and delivered by AFG and constitutes the valid and
binding obligation of the Money Market Portfolio.
4. The Money Market Portfolio Cash Reserve Shares outstanding on
the date hereof have been duly authorized and validly issued,
are fully paid and are non-assessable.
5. AFG is not required to submit any notice, report or other
filing with or obtain any authorization consent or approval
from any governmental authority or self regulatory
organization prior to the consummation of the transactions
contemplated by the Agreement.
We confirm to you that to our knowledge after inquiry of each lawyer
who is the current primary contact for AFG or who has devoted substantive
attention on behalf of AFG during the preceding twelve months and who is still
currently employed by or is currently a member of this firm, no litigation or
governmental proceeding is pending or threatened in writing against the Money
Market Portfolio (i) with respect to the Agreement or (ii) which involves in
excess of $500,000 in damages.
<PAGE> 88
APPENDIX II
AGREEMENT
and
PLAN OF REORGANIZATION
for
AIM ADVISOR INCOME FUND
a Portfolio of
AIM ADVISOR FUNDS, INC.
<PAGE> 89
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
TRANSFER OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1. Reorganization of Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.2. Computation of Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.3. Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.4. Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.5. Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.6. Dissolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.7. Issuance of AFG Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.8. Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.9 Liabilities and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AAFI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.1. Incorporation: Qualification and Corporate Authority . . . . . . . . . . . . . . . . . . . 5
Section 3.2. Registration and Regulation of AAFI . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.3. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.4. No Material Adverse Changes; Contingent Liabilities . . . . . . . . . . . . . . . . . . . . 6
Section 3.5. IF Shares; Liabilities; Business Operations . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.6. Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.7. Binding Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.8. No Breaches or Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.9. Authorizations or Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.10. Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.11. No Actions, Suits or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.12. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.13. Properties and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.14. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.15. Benefit and Employment Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.16. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.17. Voting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.18. State Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.19. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.20. Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AFG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.1. Organization; Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.2. Binding Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
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Section 4.3. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.4. No Material Adverse Changes; Contingent Liabilities . . . . . . . . . . . . . . . . . . . 9
Section 4.5. No Breaches or Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.6. Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.7. Authorizations or Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.8. Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.9. No Actions, Suits or Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.11. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.12. Registration and Regulation of Company . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.13. Registration of Intermediate Government Portfolio Shares . . . . . . . . . . . . . . . . 11
Section 4.14. Representations Concerning the Reorganization . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.15. Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE V
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.1. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.2. Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.3. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.4. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.5. Notice of Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.6. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.7. Consents, Approvals and Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.8. Submission of Agreement to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VI
CONDITIONS PRECEDENT TO THE REORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.1. Conditions Precedent of AFG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6.2. Mutual Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.3. Conditions Precedent of AAFI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VII
TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7.2. Survival After Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.1. Nonsurvival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.2. Law Governing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 8.3. Binding Effect, Persons Benefiting, No Assignment . . . . . . . . . . . . . . . . . . . . 16
Section 8.4. Obligations of AFG and AAFI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.5. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.6. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.7. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.8. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
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Section 8.9. Entire Agreement; Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8.10. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Schedule 6.1(d) - Opinion of Counsel to AIM Advisor Income Fund
Schedule 6.2(f) - Tax Opinions
Schedule 6.3(d) - Opinion of Counsel to AFG
</TABLE>
<PAGE> 92
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of September
25, 1997 (this "Agreement"), by and between AIM Advisor Funds, Inc., a Maryland
corporation ("AAFI"), acting on behalf of AIM Advisor Income Fund ("Income
Fund"), and AIM Funds Group, a Delaware business trust ("AFG"), acting on
behalf of AIM Intermediate Government Fund (the "Intermediate Government
Portfolio").
WITNESSETH
WHEREAS, AAFI is an investment company registered with the
Securities and Exchange Commission (the "SEC") under the Investment Company Act
(as defined below) that offers separate classes of its shares representing
interests in seven investment portfolios, including Income Fund, for sale to
the public; and
WHEREAS, AFG is an investment company registered with the SEC
under the Investment Company Act that offers separate classes of its shares
representing interests in several investment portfolios, including the
Intermediate Government Portfolio, for sale to the public; and
WHEREAS, Income Fund owns securities in which the Intermediate
Government Portfolio is permitted to invest; and
WHEREAS, Income Fund desires to provide for its reorganization
through the transfer of substantially all of its assets to the Intermediate
Government Portfolio in exchange for shares of the Intermediate Government
Portfolio issued in the manner set forth in this Agreement; and
WHEREAS, this Agreement is intended to be and is adopted as a
Plan of Reorganization and Liquidation within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing premises and
the agreements and undertakings contained in this Agreement, AFG and AAFI agree
as follows:
<PAGE> 93
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. (a) For all purposes in this
Agreement, the following terms shall have the respective meanings set forth in
this Section 1.1 (such definitions to be equally applicable to both the
singular and plural forms of the terms herein defined):
"AAFI" means AIM Advisor Funds, Inc., a Maryland corporation.
"Advisers Act" means the Investment Advisers Act of 1940, as
amended, and all rules and regulations of the SEC adopted pursuant thereto.
"AFG Registration Statement" means the registration statement
on Form N-1A of AFG, as amended, Registration No. 2-27334, that is applicable
to the Portfolio.
"Affiliated Person" means an affiliated person as defined in
Section 2(a)(3) of the Investment Company Act.
"AFG" means AIM Funds Group, a Delaware business trust.
"Agreement" means this Agreement and Plan of Reorganization,
together with all schedules and exhibits attached hereto and all amendments
hereto and thereof.
"Benefit Plan" means any material "employee benefit plan" (as
defined in Section 3(3) of ERISA) and any material bonus, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, vacation, retirement, profit sharing, welfare plans or
other plan, arrangement or understanding maintained or contributed to by AAFI
on behalf of Income Fund, or otherwise providing benefits to any current or
former employee, officer or director of AAFI.
"Closing" means the transfer of the assets of Income Fund
against the delivery of Intermediate Government Portfolio Class A Shares and
Intermediate Government Portfolio Class C Shares directly to the shareholders
of Income Fund as described in Section 2.1 of this Agreement.
"Closing Date" means March 2, 1998, or such other date as the
parties may mutually determine.
"Code" means the Internal Revenue Code of 1986, as amended.
"Custodian" means State Street Bank and Trust Company acting
in its capacity as custodian for the assets of the Intermediate Government
Portfolio.
"Effective Time" shall mean 7:00 a.m. Central Time on the
Closing Date.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and all rules and regulations adopted by the SEC pursuant thereto.
"Excluded Assets" shall have the meaning set forth in Section
2.3 of this Agreement.
"Governmental Authority" means any foreign, United States or
state government, government agency, department, board, commission (including
the SEC) or instrumentality, and any court, tribunal or arbitrator of competent
jurisdiction, and any governmental or non-governmental self-regulatory
organization, agency or authority (including the National Association of
Securities Dealers, Inc., the Commodities and Futures Trading Commission, the
National Futures Association, the Investment Management Regulatory Organization
Limited and the Office of Fair Trading).
"Income Fund" means AIM Advisor Income Fund, a portfolio of
AAFI.
"IF Financial Statements" shall have the meaning set forth in
Section 3.3 of this Agreement.
"IF Shareholders" means the holders of record as of the
Closing Date of the issued and outstanding shares of the capital stock of
Income Fund.
"IF Shareholders Meeting" means a meeting of the shareholders
of Income Fund convened in accordance with applicable law and the articles of
incorporation of AAFI to consider and vote upon the approval of this Agreement
and the transactions contemplated by this Agreement.
"IF Shares" means the issued and outstanding shares of the
capital stock of Income Fund.
"Investment Company Act" means the Investment Company Act of
1940, as amended, and all rules and regulations adopted by the SEC pursuant
thereto.
"Intermediate Government Portfolio" means AIM Intermediate
Government Fund, an investment portfolio of AFG.
"Intermediate Government Portfolio Class A Shares" means Class
A Shares of the Intermediate Government Portfolio issued by AFG, each
representing an interest in the Intermediate Government Portfolio.
"Intermediate Government Portfolio Class C Shares" means Class
C Shares of the Intermediate Government Portfolio issued by AFG, each
representing an interest in the Intermediate Government Portfolio.
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<PAGE> 95
"Intermediate Government Portfolio Financial Statements" shall
have the meaning set forth in Section 4.3 of this Agreement.
"Intermediate Government Portfolio Shares" means Class A
Shares and Class C Shares of the Intermediate Government Portfolio issued by
AFG, each representing an interest in the Intermediate Government Portfolio.
"Lien" means any pledge, lien, security interest, charge,
claim or encumbrance of any kind.
"Material Adverse Effect" means an effect that would cause a
change in the condition (financial or otherwise), properties, assets or
prospects of an entity having an adverse monetary effect in an amount equal to
or greater than $50,000.
"Person" means an individual or a corporation, partnership,
joint venture, association, trust, unincorporated organization or other entity.
"Reorganization" means the acquisition of certain of the
assets of Income Fund by the Intermediate Government Portfolio in consideration
of the issuance of Intermediate Government Portfolio Class A Shares and
Intermediate Government Portfolio Class C Shares directly to IF Shareholders as
described in this Agreement.
"Required IF Shareholder Vote" shall have the meaning set
forth in Section 3.19 of this Agreement.
"Return" means any return, report or form or any attachment
thereto required to be filed with any taxing authority.
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and all rules and regulations adopted by the SEC pursuant thereto.
"Tax" means any tax or similar governmental charge, impost or
levy (including, without limitation, income taxes (including, without
limitation, alternative minimum tax and estimated tax), franchise taxes,
transfer taxes or fees, sales taxes, use taxes, gross receipts taxes, value
added taxes, employment taxes, excise taxes, ad valorem taxes, property taxes,
withholding taxes, payroll taxes, minimum taxes, or windfall profit taxes),
together with any related penalties, fines, additions to tax or interest,
imposed by the United States or any state, county, local or foreign government
or subdivision or agency thereof.
"Valuation Date" shall have the meaning set forth in Section
2.4 of this Agreement.
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<PAGE> 96
ARTICLE II
TRANSFER OF ASSETS
Section 2.1. Reorganization of Income Fund. At the
Effective Time, all of the assets of Income Fund, except the Excluded Assets,
shall be delivered to the Custodian for the account of the Intermediate
Government Portfolio, in exchange for, and against delivery by AFG directly to
the IF Shareholders at the opening of business on the Closing Date of a number
of Intermediate Government Portfolio Class A Shares (including, if applicable,
fractional shares rounded to the nearest thousandth) having an aggregate net
asset value equal to the net value of the assets of the Income Fund
attributable to the Class A Shares of the Income Fund, and a number of
Intermediate Government Portfolio Class C Shares (including, if applicable,
fractional shares rounded to the nearest thousandth) having an aggregate net
asset value equal to the net asset value of the assets of the Income Fund
attributable to the Class C Shares of the Income Fund, so transferred, assigned
and delivered, all determined and adjusted as provided in Section 2.2 below.
Upon delivery of such assets, the Intermediate Government Portfolio will
receive good and marketable title to such assets free and clear of all Liens.
Section 2.2. Computation of Net Asset Value.
(a) The net asset value of the Intermediate Government
Portfolio Class A Shares and the Intermediate Government Portfolio Class C
Shares and the net value of the assets of Income Fund subject to this Agreement
shall, in each case, be determined as of the close of business on the NYSE on
the Valuation Date.
(b) The net asset value of the Intermediate Government
Portfolio Class A Shares and the Intermediate Government Portfolio Class C
Shares shall be computed in accordance with the policies and procedures of the
Intermediate Government Portfolio as described in the AFG Registration
Statement.
(c) The net value of the assets of Income Fund subject
to this Agreement shall be computed by AFG and shall be subject to adjustment
by the amount, if any, agreed to by AAFI and AFG. In determining the value of
the securities transferred by Income Fund to the Intermediate Government
Portfolio, each security shall be priced in accordance with the policies and
procedures of the Intermediate Government Portfolio as described in the AFG
Registration Statement. For such purposes, market quotes and the security
characteristics relating to establishing such quotes shall be determined by
AFG, with the approval of AAFI. Securities for which market quotes are not
available shall be valued as mutually agreed by AFG and AAFI, provided that
such value is consistent with the pricing procedures adopted by AFG. All
computations shall be made by AFG in cooperation with the auditors of AFG and
the auditors of AAFI, who will apply certain procedures agreed to by AFG and
AAFI to test such computations.
Section 2.3. Excluded Assets. There shall be deducted
from the assets of Income Fund described in Section 2.1 all organizational
expenses, any prepaid expenses that would not have value to the Intermediate
Government Portfolio and cash in an amount estimated by AAFI to be sufficient
to pay all the liabilities of Income Fund, including, without limitation, (i)
amounts owed or to be owed to any IF Shareholder, including declared but unpaid
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<PAGE> 97
dividends, (ii) accounts payable, taxes and other accrued and unpaid expenses,
if any, incurred in the normal operation of its business up to and including
the Closing Date and (iii) the costs and expenses incurred by Income Fund in
making and carrying out the transactions contemplated by this Agreement.
Section 2.4. Valuation Date. The assets of Income Fund
and the net asset value per share of the Intermediate Government Portfolio
Shares shall be valued as of the close of business on the NYSE on the business
day next preceding the Closing Date (the "Valuation Date"). The stock transfer
books of Income Fund will be permanently closed as of the close of business on
the Valuation Date and only requests for the redemption of shares of Income
Fund received in proper form prior to the close of trading on the NYSE on the
Valuation Date shall be accepted by Income Fund. Redemption requests
thereafter received by Income Fund shall be deemed to be redemption requests
for Intermediate Government Portfolio Shares (assuming that the transactions
contemplated by this Agreement have been consummated) to be distributed to IF
Shareholders under this Agreement.
Section 2.5. Delivery.
(a) Assets held by Income Fund shall be delivered
by AAFI to the Custodian on the Closing Date. No later than three (3) business
days preceding the Closing Date, AAFI shall instruct Income Fund's custodian to
make such delivery to the Custodian. AAFI shall further instruct Income Fund's
custodian that any trade made by Income Fund during the three day period before
the Closing Date shall settle at the Custodian. The assets so delivered shall
be duly endorsed in proper form for transfer in such condition as to constitute
a good delivery thereof, in accordance with the custom of brokers, and shall be
accompanied by all necessary state stock transfer stamps, if any, or a check for
the appropriate purchase price thereof. Cash held by Income Fund (other than
cash held as part of the Excluded Assets) shall be delivered on the Closing Date
and shall be in the form of currency or wire transfer in Federal funds, payable
to the order of the account of the Intermediate Government Portfolio at the
Custodian.
(b) If, on the Closing Date, AAFI is unable to make
delivery in the manner contemplated by Section 2.5(a) of securities held by
Income Fund for the reason that any of such securities purchased prior to the
Closing Date have not yet been delivered to Income Fund, its broker or brokers,
then, AFG shall waive the delivery requirements of Section 2.5(a) with respect
to said undelivered securities, if Income Fund has delivered to the Custodian
by or on the Closing Date and with respect to said undelivered securities,
executed copies of an agreement of assignment and escrow agreement and due
bills executed on behalf of said broker or brokers, together with such other
documents as may be required by AFG or the Custodian, including brokers'
confirmation slips.
Section 2.6. Dissolution. As soon as reasonably
practicable after the Closing Date, Income Fund shall pay or make provisions
for all of its debts, liabilities and taxes and distribute all remaining assets
to the IF Shareholders, and Income Fund's status as a designated series of
shares of AAFI shall be terminated, provided that, in the event that the
transactions
6
<PAGE> 98
contemplated herein are not approved by the IF Shareholders, AAFI shall not be
obligated to so terminate Income Fund's designation as a series of shares.
Section 2.7. Issuance of AFG Shares. At the Closing
Date, AAFI shall instruct AFG that the pro rata interest of each of IF
Shareholders of record as of the close of business on the Valuation Date, as
certified by Income Fund's transfer agent, in Intermediate Government Portfolio
Class A Shares to holders of Class A Shares of Income Fund and in Intermediate
Government Portfolio Class C Shares to holders of Class C Shares of Income
Fund, be registered on the books of AFG in full and fractional shares in the
name of each IF Shareholder, and AFG agrees promptly to comply with said
instruction. All issued and outstanding shares of Income Fund's capital stock
shall thereupon be canceled on the books of AAFI. AFG shall have no obligation
to inquire as to the validity, propriety or correctness of any such
instruction, but shall, in each case, assume that such instruction is valid,
proper and correct. AFG shall record on its books the ownership of the
Intermediate Government Portfolio Class A Shares and Intermediate Government
Portfolio Class C Shares by IF Shareholders and shall forward a confirmation of
such ownership to the IF Shareholders. No redemption or repurchase of such
shares credited to former IF Shareholders in respect of Income Fund shares
represented by unsurrendered stock certificates shall be permitted until such
certificates have been surrendered to AFG for cancellation, or if such
certificates are lost or misplaced, until lost certificate affidavits have been
executed and delivered to AFG.
Section 2.8. Investment Securities. On or prior to the
Valuation Date, AAFI shall deliver a list setting forth the securities Income
Fund then owns together with the respective Federal income tax bases thereof.
AAFI shall provide to AFG on or before the Valuation Date, detailed tax basis
accounting records for each security to be transferred to it pursuant to this
Agreement. Such records shall be prepared in accordance with the requirements
for specific identification tax lot accounting and clearly reflect the bases
used for determination of gain and loss realized on the partial sale of any
security transferred to the Intermediate Government Portfolio hereunder. Such
records shall be made available by AAFI prior to the Valuation Date for
inspection by the Treasurer (or his designee) or the auditors of AFG upon
reasonable request.
Section 2.9 Liabilities and Expenses. The Intermediate
Government Portfolio shall not assume any liability of Income Fund and Income
Fund shall use its reasonable best efforts to discharge all known liabilities,
so far as may be possible, prior to the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AAFI
AAFI, on behalf of Income Fund, represents and warrants to AFG
that:
Section 3.1. Incorporation: Qualification and Corporate
Authority. AAFI has been duly incorporated and is validly existing and in
active status under the laws of the State of Maryland with all requisite
corporate power and authority to conduct its business as presently conducted.
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Section 3.2. Registration and Regulation of AAFI. AAFI
is duly registered with the SEC as an investment company under the Investment
Company Act and all IF Shares which have been or are being offered for sale
have been duly registered under the Securities Act and have been duly
registered, qualified or are exempt from registration or qualification under
the securities laws of each state or other jurisdiction in which such shares
have been or are being offered for sale, and no action has been taken by AAFI
to revoke or rescind any such registration or qualification. Income Fund is in
compliance in all material respects with all applicable laws, rules and
regulations, including, without limitation, the Investment Company Act, the
Securities Act, the Exchange Act and all applicable state securities laws.
Income Fund is in compliance in all material respects with the applicable
investment policies and restrictions set forth in its registration statement
currently in effect. The value of the net assets of Income Fund is determined
using portfolio valuation methods that comply in all material respects with the
requirements of the Investment Company Act and the policies of Income Fund and
all purchases and redemptions of IF Shares have been effected at the net asset
value per share calculated in such manner.
Section 3.3. Financial Statements. The books of account
and related records of Income Fund fairly reflect in reasonable detail its
assets, liabilities and transactions in accordance with generally accepted
accounting principles applied on a consistent basis. The audited financial
statements dated December 31, 1996 of Income Fund, and the unaudited financial
statements dated June 30, 1997 of Income Fund, previously delivered to AFG (the
"IF Financial Statements") present fairly in all material respects the
financial position of Income Fund as at the dates indicated and the results of
operations and changes in net assets for the periods then ended in accordance
with generally accepted accounting principles applied on a consistent basis for
the periods then ended.
Section 3.4. No Material Adverse Changes; Contingent
Liabilities. Since June 30, 1997, no material adverse change has occurred in
the financial condition, results of operations, business, assets or liabilities
of Income Fund or the status of Income Fund as a regulated investment company
under the Code, other than changes resulting from any change in general
conditions in the financial or securities markets or the performance of any
investments made by Income Fund or occurring in the ordinary course of business
of Income Fund or AAFI. There are no contingent liabilities of Income Fund not
disclosed in the IF Financial Statements which are required to be disclosed in
accordance with generally accepted accounting principles.
Section 3.5. IF Shares; Liabilities; Business
Operations.
(a) The IF Shares have been duly authorized and validly
issued and are fully paid and non- assessable.
(b) There is no plan or intention by the shareholders
of Income Fund who own five percent (5%) or more of the IF Shares, and to the
knowledge of AAFI's management, the remaining IF Shareholders have no present
plan or intention of selling, exchanging, redeeming or otherwise disposing of a
number of the Intermediate Government Portfolio Shares received by them in
connection with the Reorganization that would reduce the IF Shareholders'
ownership of Intermediate Government Portfolio Shares to a number of shares
having a value,
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<PAGE> 100
as of the Closing Date, of less than fifty percent (50%) of the value of all of
the formerly outstanding IF Shares as of the same date. For purposes of this
representation, IF Shares exchanged for cash or other property or exchanged for
cash in lieu of fractional shares of the Intermediate Government Portfolio will
be treated as outstanding IF Shares on the date of the Reorganization.
Moreover, IF Shares and Intermediate Government Portfolio Shares held by IF
Shareholders and otherwise sold, redeemed or disposed of prior or subsequent to
the Reorganization will be considered in making this representation, except for
IF Shares or Intermediate Government Portfolio Shares which have been, or will
be, redeemed by Income Fund or the Intermediate Government Portfolio in the
ordinary course of its business as an open-end, diversified management
investment company (or a series thereof) under the Investment Company Act.
(c) At the time of the Reorganization, Income Fund
shall not have outstanding any warrants, options, convertible securities or any
other type of right pursuant to which any Person could acquire IF Shares,
except for the right of investors to acquire IF Shares at net asset value in
the normal course of its business as an open-end diversified management
investment company operating under the Investment Company Act.
(d) From the date it commenced operations on April 10,
1984 (as INVESCO Advisor Income Fund) and ending on the Closing Date, Income
Fund will have conducted its historic business within the meaning of Section
1.368-1(d) of the Income Tax Regulations under the Code in a substantially
unchanged manner. In anticipation of the Reorganization, Income Fund will not
dispose of assets that, in the aggregate, will result in less than fifty
percent (50%) of its historic business assets being transferred to the
Intermediate Government Portfolio.
(e) AAFI does not have, and has not had during the six
(6) months prior to the date of this Agreement any employees, and shall not
hire any employees from and after the date of this Agreement through the
Closing Date.
Section 3.6. Accountants. Price Waterhouse, LLP, which
has reported upon IF Financial Statements for the period ended December 31,
1996, are independent public accountants as required by the Securities Act and
the Exchange Act.
Section 3.7. Binding Obligation. This Agreement has
been duly authorized, executed and delivered by AAFI on behalf of Income Fund
and, assuming this Agreement has been duly executed and delivered by AFG and
approved by the IF Shareholders, constitutes the legal, valid and binding
obligation of AAFI, enforceable against AAFI in accordance with its terms from
and with respect to the revenues and assets of Income Fund, except as the
enforceability hereof may be limited by bankruptcy, insolvency, reorganization
or similar laws relating to or affecting creditors' rights generally, or by
general equity principles (whether applied in a court of law or a court of
equity and including limitations on the availability of specific performance or
other equitable remedies).
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Section 3.8. No Breaches or Defaults . The execution
and delivery of this Agreement by AAFI on behalf of Income Fund and performance
of its obligations hereunder has been duly authorized by all necessary
corporate action on the part of AAFI, other than IF Shareholder approval, and
(i) does not and, on the Closing Date, will not result in any violation of the
articles of incorporation or by-laws of AAFI and (ii) does not and, will not on
the Closing Date, result in a breach of any of the terms or provisions of, or
constitute (with or without the giving of notice or the lapse of time or both)
a default under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of a material benefit under, or
result in the creation or imposition of any Lien upon any property or assets of
Income Fund (except for such breaches or defaults or Liens that would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect) under (A) any indenture, mortgage or loan agreement or any
other material agreement or instrument to which AAFI is a party or by which it
may be bound and which relates to the assets of Income Fund or to which any of
Income Fund's properties may be subject; (B) any Permit; or (C) any existing
applicable law, rule, regulation, judgment, order or decree of any Governmental
Authority having jurisdiction over AAFI or any of Income Fund's properties.
AAFI is not under the jurisdiction of a court in a Title 11 or similar case
within the meaning of Section 368(a)(3)(A) of the Code.
Section 3.9. Authorizations or Consents. Other than
those which shall have been obtained or made on or prior to the Closing Date
and those that must be made after the Closing Date to comply with Section 2.6
of this Agreement, no authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority will be required to be
obtained or made by AAFI in connection with the due execution and delivery by
AAFI of this Agreement and the consummation by AAFI of the transactions
contemplated hereby.
Section 3.10. Permits. AAFI has in full force and effect
all Federal, state, local and foreign governmental approvals, consents,
authorizations, certificates, filings, franchises, licenses, notices, permits
and rights (collectively, "Permits") necessary for it to conduct its business
as presently conducted as it relates to Income Fund, and there has occurred no
default under any Permit, except for the absence of Permits and for defaults
under Permits the absence or default of which would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect. To the
knowledge of AAFI there are no proceedings relating to the suspension,
revocation or modification of any Permit, except for such that would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
Section 3.11. No Actions, Suits or Proceedings.
(a) There is no pending action, litigation or
proceeding, nor, to the knowledge of AAFI, has any litigation been overtly
threatened in writing or orally, against AAFI before any Governmental Authority
which questions the validity or legality of this Agreement or of the actions
contemplated hereby or which seeks to prevent the consummation of the
transactions contemplated hereby, including the Reorganization.
(b) There are no legal, administrative or arbitration
actions, suits, or proceedings instituted or pending or, to the knowledge of
AAFI, threatened in writing or, if probable of assertion, orally against AAFI
affecting any property, asset, interest, or right of
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Income Fund, that could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect with respect to Income Fund. There are
not in existence on the date hereof any plea agreements, judgments,
injunctions, consents, decrees, exceptions or orders that were entered by,
filed with or issued by Governmental Authority relating to AAFI's conduct of
the business of Income Fund affecting in any significant respect the conduct of
such business. AAFI is not, and has not been, to the knowledge of AAFI, the
target of any investigation by the SEC or any state securities administrator
with respect to its conduct of the business of Income Fund.
Section 3.12. Contracts. AAFI is not in default under
any contract, agreement, commitment, arrangement, lease, insurance policy or
other instrument to which it is a party and which involves or affects the
assets of Income Fund, by which the assets, business, or operations of Income
Fund may be bound or affected, or under which it or the assets, business or
operations of Income Fund receives benefits, and which default could reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect, and, to the knowledge of AAFI, there has not occurred any event that,
with the lapse of time or the giving of notice or both, would constitute such a
default.
Section 3.13. Properties and Assets. Income Fund has
good and marketable title to all properties and assets reflected in the IF
Financial Statements as owned by it, free and clear of all Liens, except as
described in the IF Financial Statements.
Section 3.14. Taxes.
(a) Income Fund has elected to be treated as a
regulated investment company under Subchapter M of the Code. Income Fund has
qualified as such for each taxable year since inception and that has ended
prior to the Closing Date and will have satisfied the requirements of Section
851(b) of the Code for the period beginning on the first day of its current
taxable year and ending on the Closing Date. In order to (i) insure continued
qualification of Income Fund as a "regulated investment company" for tax
purposes and (ii) eliminate any tax liability of Income Fund arising by reason
of undistributed investment company taxable income or net taxable gain, AAFI
will declare to the IF Shareholders of record on or prior to the Valuation
Date, a dividend or dividends that, together with all previous such dividends
shall have the effect of distributing (A) all of Income Fund's investment
company taxable income (determined without regard to any deductions for
dividends paid) for the taxable year ended December 31, 1997 and for the short
taxable year beginning on January 1, 1998 and ending on the Closing Date and
(B) all of Income Fund's net capital gains realized in its taxable year ended
December 31, 1997 and in such short taxable year (after reduction for any
capital loss carryover).
(b) Income Fund has timely filed all Returns required
to be filed by it and all Taxes with respect thereto have been paid, except
where the failure so to file or so to pay, would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. Adequate
provision has been made in the financial statements of Income Fund for all
Taxes in respect of all periods ending on or before the date of such financial
statements, except where the failure to make such provisions would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. No deficiencies for any Taxes have been
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proposed, assessed or asserted in writing by any taxing authority against
Income Fund, and no deficiency has been proposed, assessed or asserted, in
writing, where such deficiency would reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect. No waivers of the time to
assess any such Taxes are outstanding nor are any written requests for such
waivers pending and no Return of Income Fund is currently being or has been
audited with respect to income taxes or other Taxes by any Federal, state,
local, or foreign Tax authority.
(c) Income Fund's fiscal year has not been changed for
tax purposes since the date on which it commenced operations.
Section 3.15. Benefit and Employment Obligations. On or
prior to the Closing Date, Income Fund has no obligation to provide any
post-retirement or post-employment benefit to any Person, including but not
limited to under any Benefit Plan, and has no obligation to provide unfunded
deferred compensation or other unfunded or self-funded benefits to any Person.
Section 3.16. Brokers. No broker, finder or similar
intermediary has acted for or on behalf of AAFI or Income Fund in connection
with this Agreement or the transactions contemplated hereby, and no broker,
finder, agent or similar intermediary is entitled to any broker's, finder's or
similar fee or other commission in connection therewith based on any agreement,
arrangement or understanding with AAFI or any action taken by it.
Section 3.17. Voting Requirements; Dissenter's Rights.
The affirmative votes of a majority of the holders of the outstanding IF Shares
(the "Required IF Shareholder Vote") are the only votes of the holders of any
class or series of Income Fund's capital stock necessary to approve this
Agreement and the transactions contemplated by this Agreement. The IF
Shareholders may not exercise dissenter's rights granted under the Maryland
Business Corporation Law with respect to the Reorganization.
Section 3.18. State Takeover Statutes. No state takeover
statute or similar statute or regulation applies or purports to apply to the
Reorganization, this Agreement or any of the transactions contemplated by this
Agreement.
Section 3.19. Books and Records. The books and records
of AAFI relating to Income Fund, reflecting, among other things, the purchase
and sale of IF Shares by IF Shareholders, the number of issued and outstanding
shares owned by each IF Shareholder and the state or other jurisdiction in
which such shares were offered and sold, are complete and accurate in all
material respects.
Section 3.20. Prospectus. The current prospectus and
statement of additional information for Income Fund as of the date on which
they were issued did not contain, and as supplemented by any supplement thereto
dated prior to or on the Closing Date, do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided however, that
no representation or warranty is made with respect to written information
provided by AFG for
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inclusion in the prospectus or statement of additional information of Income
Fund, or any supplement thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AFG
AFG, on behalf of the Intermediate Government Portfolio,
represents and warrants to AAFI as follows:
Section 4.1. Organization; Authority. AFG is duly
organized, validly existing and in good standing under the Business Trust Act
of the State of Delaware, with all requisite trust power and authority to enter
into this Agreement and perform its obligations hereunder.
Section 4.2. Binding Obligation. This Agreement has
been duly authorized, executed and delivered by AFG and, assuming this
Agreement has been duly executed and delivered by AAFI, constitutes the legal,
valid and binding obligation of AFG, enforceable against AFG in accordance with
its terms from and with respect to the revenues and assets of the Intermediate
Government Portfolio, except as the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization or similar laws relating to or affecting
creditors' rights generally, or by general equity principles (whether applied
in a court or law or a court of equity and including limitations on the
availability of specific performance or other equitable remedies).
Section 4.3. Financial Statements. The books of account
and related records of the Intermediate Government Portfolio fairly reflect in
reasonable detail its assets, liabilities and transactions in accordance with
generally accepted accounting principles applied on a consistent basis. The
audited financial statements dated December 31, 1996 of the Intermediate
Government Portfolio, and unaudited financial statements dated June 30, 1997,
of the Intermediate Government Portfolio, previously delivered to AAFI (the
"Intermediate Government Portfolio Financial Statements") present fairly in all
material respects the financial position of the Intermediate Government
Portfolio as at the dates indicated and the results of operations and changes
in net assets for the periods then ended in accordance with generally accepted
accounting principles applied on a consistent basis for the periods then ended.
Section 4.4. No Material Adverse Changes; Contingent
Liabilities. Since June 30, 1997, no material adverse change has occurred in
the financial condition, results of operations, business, assets or liabilities
of the Intermediate Government Portfolio or the status of the Intermediate
Government Portfolio as a regulated investment company under the Code, other
than changes resulting from any change in general conditions in the financial
or securities markets or the performance of any investments made by the
Intermediate Government Portfolio or occurring in the ordinary course of
business of the Intermediate Government Portfolio or AFG. There are no
contingent liabilities of the Intermediate Government Portfolio not disclosed
in the Intermediate Government Portfolio Financial Statements which are
required to be disclosed in accordance with generally accepted accounting
principles.
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Section 4.5. No Breaches or Defaults. The execution
and delivery of this Agreement by AFG and performance by AFG of its obligations
hereunder have been duly authorized by all necessary trust action on the part
of AFG and (i) do not, and on the Closing Date will not, result in any
violation of the Agreement and Declaration of Trust, as amended, or by-laws, as
amended, of AFG and (ii) does not, and on the Closing Date will not, result in
a breach of any of the terms or provisions of, or constitute (with or without
the giving of notice or the lapse of time or both) a default under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to the loss of a material benefit under, or result in the creation or
imposition of any Lien upon any property or assets of the Intermediate
Government Portfolio (except for such breaches or defaults or Liens that would
not reasonably be expected, individually or in the aggregate, to adversely
affect the consummation of the Reorganization) under (A) any indenture,
mortgage or loan or any other material agreement or instrument to which AFG is
a party or by which it may be bound which relates to the Intermediate
Government Portfolio or to which any properties of the Intermediate Government
Portfolio may be subject; (B) any Permit; or (C) any existing applicable law,
rule, regulation, judgment, order or decree of any Governmental Authority
having jurisdiction over AFG or any of the Intermediate Government Portfolio's
properties.
Section 4.6. Accountants. KPMG Peat Marwick LLP, which
has reported upon the Intermediate Government Portfolio Financial Statements
for the period ended December 31, 1996, are independent public accountants as
required by the Securities Act and the Exchange Act.
Section 4.7. Authorizations or Consents. Other than
those which shall have been obtained or made on or prior to the Closing Date,
no authorization or approval or other action by, and no notice to or filing
with, any Governmental Authority will be required to be obtained or made by AFG
in connection with the due execution and delivery by AFG of this Agreement and
the consummation by AFG of the transactions contemplated hereby.
Section 4.8. Permits. AFG has in full force and effect
all Permits necessary for it to conduct its business as presently conducted as
it relates to the Intermediate Government Portfolio, and there has occurred no
default under any Permit, except for the absence of Permits and for defaults
under Permits the absence or default of which would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect. To the
knowledge of AFG there are no proceedings relating to the suspension,
revocation or modification of any Permit, except for such that would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
Section 4.9. No Actions, Suits or Proceedings.
(a) There is no pending action, suit or proceeding,
nor, to the knowledge of AFG, has any litigation been overtly threatened in
writing or, if probable of assertion, orally, against AFG before any
Governmental Authority which questions the validity or legality of this
Agreement or of the transactions contemplated hereby, or which seeks to prevent
the consummation of the transactions contemplated hereby, including the
Reorganization.
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(b) There are no legal, administrative or arbitration
actions, suits, or proceedings instituted or pending or, to the knowledge of
AFG, threatened in writing or, if probable of assertion, orally against AFG
affecting any property, asset, interest, or right of the Intermediate
Government Portfolio, that could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect with respect to the Intermediate
Government Portfolio. There are not in existence on the date hereof any plea
agreements, judgments, injunctions, consents, decrees, exceptions or orders
that were entered by, filed with or issued by Governmental Authority relating
to AFG's conduct of the business of the Intermediate Government Portfolio
affecting in any significant respect the conduct of such business. AFG is not,
and has not been, to the knowledge of AFG, the target of any investigation by
the SEC or any state securities administrator with respect to its conduct of
the business of the Intermediate Government Portfolio.
Section 4.10. Taxes.
(a) The Intermediate Government Portfolio has elected
to be treated as a regulated investment company under Subchapter M of the Code.
The Intermediate Government Portfolio has qualified as such for each taxable
year since inception that has ended prior to the Closing Date.
(b) The Intermediate Government Portfolio has timely
filed all Returns required to be filed by it and all Taxes with respect thereto
have been paid, except where the failure so to file or so to pay, would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. Adequate provision has been made in the financial statements
of the Intermediate Government Portfolio for all Taxes in respect of all
periods ending on or before the date of such financial statements, except where
the failure to make such provisions would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. No
deficiencies for any Taxes have been proposed, assessed or asserted in writing
by any taxing authority against the Intermediate Government Portfolio, and no
deficiency has been proposed, assessed or asserted, in writing, where such
deficiency would reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect. No waivers of the time to assess any such
Taxes are outstanding nor are any written requests for such waivers pending
and, to the best of AFG's knowledge, no Return of the Intermediate Government
Portfolio is currently being or has been audited with respect to income taxes
or all other Taxes by any Federal, state, local, or foreign Tax authority.
(c) The Intermediate Government Portfolio's fiscal year
has not been changed for tax purposes since the date on which it commenced
operations.
Section 4.11. Brokers. No broker, finder or similar
intermediary has acted for or on behalf of AFG or the Intermediate Government
Portfolio in connection with this Agreement or the transactions contemplated
hereby, and no broker, finder, agent or similar intermediary is entitled to any
broker's, finder's or similar fee or other commission in connection therewith
based on any agreement, arrangement or understanding with AFG or any action
taken by AFG.
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Section 4.12. Registration and Regulation of Company.
AFG is registered with the SEC under the Investment Company Act as an open-end,
management, series, investment company and the Portfolio has elected to qualify
as a regulated investment company under Section 851 of the Code. The
Intermediate Government Portfolio is in compliance in all material respects
with all applicable laws, rules and regulations, including without limitation
the Investment Company Act, the Securities Act, the Exchange Act and all
applicable state securities laws. The Intermediate Government Portfolio is in
compliance in all material respects with the applicable investment policies and
restrictions set forth in its registration statement currently in effect. The
value of the net assets of the Intermediate Government Portfolio is determined
using portfolio valuation methods that comply in all material respects with the
requirements of the Investment Company Act.
Section 4.13. Registration of Intermediate Government
Portfolio Shares.
(a) The shares of beneficial interest of AFG are divided
into nine portfolios, including the Intermediate Government Portfolio. The
Intermediate Government Portfolio has three classes of shares, Class A Shares,
Class B Shares and Class C Shares Under the Delaware Business Trust Act and
its Agreement and Declaration of Trust, as amended, AFG is authorized to issue
an unlimited number of shares of any class representing an investment in each
of its portfolios, including the Intermediate Government Portfolio.
(b) The Intermediate Government Portfolio Shares and
the to be issued pursuant to Section 2.7 shall on the Closing Date be duly
registered under the Securities Act by a Registration Statement on Form N-14 of
AFG then in effect.
(c) The Intermediate Government Portfolio Shares to be
issued pursuant to Section 2.7 are duly authorized and on the Closing Date will
be validly issued and fully paid and non-assessable and will conform to the
description thereof contained in the Registration Statement on Form N-14 then
in effect. At the time of the Reorganization, the Intermediate Government
Portfolio shall not have outstanding any warrants, options, convertible
securities or any other type of right pursuant to which any Person could
acquire Intermediate Government Portfolio Shares, or except for the right of
investors to acquire Intermediate Government Portfolio Shares at net asset
value in the normal course of its business as an open-ended diversified
management investment company operating under the Investment Company Act.
(d) The combined proxy statement/prospectus (the
"Combined Proxy Statement/Prospectus") which forms a part of AFG's Registration
Statement on Form N-14 shall be furnished to AAFI and IF Shareholders entitled
to vote at the IF Shareholders Meeting. The Combined Proxy
Statement/Prospectus and related Statement of Additional Information of the
Intermediate Government Portfolio, when they become effective, shall conform to
the applicable requirements of the Securities Act and the Investment Company
Act and shall not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not materially misleading, provided, however, that no representation or
warranty is made with respect to written information provided by AAFI for
inclusion in the Combined Prospectus/Proxy Statement.
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(e) The shares of the Intermediate Government Portfolio
which have been or are being offered for sale (other than Intermediate
Government Portfolio Shares to be issued in connection with the Reorganization)
have been duly registered under the Securities Act by the AFG Registration
Statement then in effect and have been duly registered, qualified or are exempt
from registration or qualification under the securities laws of each state or
other jurisdiction in which such shares have been or are being offered for
sale, and no action has been taken by AFG to revoke or rescind any such
registration or qualification.
Section 4.14. Representations Concerning the
Reorganization.
(a) AFG has no plan or intention to reacquire any of
the Intermediate Government Portfolio Shares issued in the Reorganization,
except to the extent that the Intermediate Government Portfolio is required by
the Investment Company Act to redeem any of its shares presented for
redemption.
(b) The Intermediate Government Portfolio has no plan
or intention to sell or otherwise dispose of any of the assets of Income Fund
acquired in the Reorganization, other than in the ordinary course of its
business and to the extent necessary to maintain its status as a "regulated
investment company" under the Code.
(c) Following the Reorganization, the Intermediate
Government Portfolio will continue the "historic business" of Income Fund
(within the meaning of Section 1.368-1(d) of the Income Tax Regulations under
the Code) or use a significant portion of Income Fund's historic business
assets in a business.
Section 4.15. Prospectus. The current prospectus and
statement of additional information for the Intermediate Government Portfolio
as of the date on which they were issued did not contain, and as supplemented
by any supplement thereto dated prior to or on the Closing Date do not contain,
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
ARTICLE V
COVENANTS
Section 5.1. Conduct of Business.
(a) From the date of this Agreement up to and including the
Closing Date (or, if earlier, the date upon which this Agreement is terminated
pursuant to Article VII), AAFI shall conduct the business of Income Fund only
in the ordinary course and substantially in accordance with past practices, and
shall use its reasonable best efforts to preserve intact its business
organization and material assets and maintain the rights, franchises and
business and customer relations necessary to conduct the business of Income
Fund in the ordinary course in all material respects. Without limiting the
generality of the foregoing, AAFI shall not do any of the following with
respect to Income Fund without the prior written consent of AFG, which consent
shall not be unreasonably withheld:
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(i) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital
stock;
(ii) amend its articles of incorporation or
by-laws;
(iii) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization
or division thereof or any assets that are material, individually or
in the aggregate, to Income Fund taken as a whole, except purchases of
assets in the ordinary course of business consistent with past
practice;
(iv) sell, lease or otherwise dispose of any of its
material properties or assets, or mortgage or otherwise encumber or
subject to any Lien any of its material properties or assets, other
than in the ordinary course of business;
(v) incur any indebtedness for borrowed money or
guarantee any indebtedness of another Person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities
of Income Fund, guarantee any debt securities of another Person, enter
into any "keep well" or other agreement to maintain any financial
statement condition of another Person, or enter into any arrangement
having the economic effect of any of the foregoing;
(vi) settle or compromise any income tax liability
or make any material tax election;
(vii) pay, discharge or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than in the ordinary
course of business;
(viii) change its methods of accounting, except as
required by changes in generally accepted accounting principles as
concurred in by its independent auditors, or change its fiscal year;
(ix) make or agree to make any material severance,
termination, indemnification or similar payments except pursuant to
existing agreements; or
(x) adopt any Benefit Plan.
(b) From the date of this Agreement up to and including
the Closing Date (or, if earlier, the date upon which this Agreement is
terminated pursuant to Article VII), AFG shall conduct the business of the
Intermediate Government Portfolio only in the ordinary course and substantially
in accordance with past practices, and shall use its reasonable best efforts to
preserve intact its business organization and material assets and maintain the
rights, franchises
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and business relations necessary to conduct the business operations of the
Intermediate Government Portfolio in the ordinary course in all material
respects.
Section 5.2. Announcements. Promptly following
execution and delivery of this Agreement, AAFI and AFG shall agree upon and
release a mutually acceptable press release and AAFI shall give any and all
notices required to be given by law.
Section 5.3. Expenses. Income Fund and the Intermediate
Government Portfolio shall each bear the expenses it incurs in connection with
this Agreement and the Reorganization and other transactions contemplated
hereby.
Section 5.4. Further Assurances. Each of the parties
hereto shall execute such documents and other papers and perform such further
acts as may be reasonably required to carry out the provisions hereof and the
transactions contemplated hereby. Each such party shall, on or prior to the
Closing Date, use its reasonable best efforts to fulfill or obtain the
fulfillment of the conditions precedent to the consummation of the
Reorganization, including the execution and delivery of any documents,
certificates, instruments or other papers that are reasonably required for the
consummation of the Reorganization.
Section 5.5. Notice of Events. AFG shall give prompt
notice to AAFI, and AAFI shall give prompt notice to AFG, of (i) the occurrence
or nonoccurrence of any event of which to the knowledge of AFG or to the
knowledge of AAFI, the occurrence or non-occurrence of which would be likely to
result in any of the conditions specified in (x) in the case of AFG, Sections
6.1 and 6.2 or (y) in the case of AAFI, Sections 6.2 and 6.3, not being
satisfied so as to permit the consummation of the Reorganization and (ii) any
material failure on its part, or on the part of the other party hereto of which
it has knowledge, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 5.5 shall not limit or
otherwise affect the remedies available hereunder to any party.
Section 5.6. Access to Information.
(a) AAFI will, during regular business hours and on reasonable
prior notice, allow AFG and its authorized representatives reasonable access to
the books and records of AAFI pertaining to the assets of Income Fund and to
employees of AAFI knowledgeable thereof; provided, however, that any such
access shall not significantly interfere with the business or operations of
AAFI.
(b) AFG will, during regular business hours and on reasonable
notice, allow AAFI and its authorized representatives reasonable access to the
books and records of AFG pertaining to the assets of the Intermediate
Government Portfolio and to employees of AFG knowledge thereof; provided,
however, that any such access shall not significantly interfere with the
business or operations of AFG.
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Section 5.7. Consents, Approvals and Filings. Each of
AAFI and AFG shall make all necessary filings, as soon as reasonably
practicable, including, without limitation, those required under the Securities
Act, the Exchange Act, the Investment Company Act and the Advisers Act, in
order to facilitate prompt consummation of the Reorganization and the other
transactions contemplated by this Agreement. In addition, each of AAFI and AFG
shall use its reasonable best efforts, and shall cooperate fully with each
other (i) to comply as promptly as reasonably practicable with all requirements
of Governmental Authorities applicable to the Reorganization and the other
transactions contemplated herein and (ii) to obtain as promptly as reasonably
practicable all necessary permits, orders or other consents of Governmental
Authorities and consents of all third parties necessary for the consummation of
the Reorganization and the other transactions contemplated herein. Each of
AAFI and AFG shall use reasonable efforts to provide such information and
communications to Governmental Authorities as such Governmental Authorities may
request.
Section 5.8. Submission of Agreement to Shareholders.
AAFI shall take all action necessary in accordance with applicable law and its
articles of incorporation and by-laws to convene the IF Shareholders Meeting.
AAFI shall, through its Board of Directors, recommend to the IF Shareholders
approval of this Agreement and the other transactions contemplated by this
Agreement. AAFI shall use its reasonable best efforts to hold the IF
Shareholders Meeting as soon as practicable after the date hereof.
ARTICLE VI
CONDITIONS PRECEDENT TO THE REORGANIZATION
Section 6.1. Conditions Precedent of AFG. The
obligation of AFG to consummate the Reorganization is subject to the
satisfaction, at or prior to the Closing Date, of all of the following
conditions, any one or more of which may be waived in writing by AFG.
(a) The representations and warranties of AAFI on
behalf of Income Fund set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing
Date with the same effect as though all such representations and warranties had
been made as of the Closing Date.
(b) AAFI shall have complied with and satisfied in all
material respects all agreements and conditions set forth herein on its part to
be performed or satisfied at or prior to the Closing Date.
(c) AFG shall have received at the Closing Date (i) a
certificate, dated as of the Closing Date, from an officer of AAFI on behalf of
AAFI, in such individual's capacity as an officer of AAFI and not as an
individual, to the effect that the conditions specified in Section 6.1(a) and
(b) have been satisfied and (ii) a certificate, dated as of the Closing Date,
from the Secretary or Assistant Secretary of AAFI certifying as to the accuracy
and completeness of the attached articles of incorporation and by-laws, and
resolutions, consents and authorizations with respect to the execution and
delivery of this Agreement and the transactions contemplated hereby.
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<PAGE> 112
(d) AFG shall have received the signed opinion of
Ballard Spahr Andrews & Ingersoll, counsel to AAFI, or other counsel reasonably
acceptable to AFG, in form and substance reasonably acceptable to counsel for
AFG, as to the matters set forth in Schedule 6.1(d).
Section 6.2. Mutual Conditions. The obligation of AAFI
and AFG to consummate the Reorganization is subject to the satisfaction, at or
prior to the Closing Date, of all of the following further conditions, any one
or more may be waived in writing by AAFI and AFG, but only if and to the extent
that such waiver is mutual.
(a) All filings required to be made prior to the
Closing Date with, and all consents, approvals, permits and authorizations
required to be obtained on or prior to the Closing Date from Governmental
Authorities, in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein by AAFI and AFG
shall have been made or obtained, as the case may be; provided, however, that
such consents, approvals, permits and authorizations may be subject to
conditions that would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
(b) This Agreement, the Reorganization and related
corporate matters shall have been approved and adopted at the IF Shareholders
Meeting by the shareholders of Income Fund on the record date by the Required
IF Shareholder Vote.
(c) The assets of Income Fund to be acquired by the
Intermediate Government Portfolio shall constitute at least 90% of the fair
market value of the net assets and at least 70% of the fair market value of the
gross assets held by Income Fund immediately prior to the Reorganization. For
purposes of this Section 6.2(c), assets used by Income Fund to pay the expenses
it incurs in connection with this Agreement and the Reorganization and to
effect all shareholder redemptions and distributions (other than regular,
normal dividends and regular, normal redemptions pursuant to the Investment
Company Act, and not in excess of the requirements of Section 852 of the Code,
occurring in the ordinary course of Income Fund's business as an open-end
diversified management investment company) after the date of this Agreement
shall be included as assets of Income Fund immediately prior to the
Reorganization.
(d) No temporary restraining order, preliminary or
permanent injunction or other order issued by any Governmental Authority
preventing the consummation of the Reorganization on the Closing Date shall be
in effect; provided, however, that the party or parties invoking this condition
shall use reasonable efforts to have any such order or injunction vacated.
(e) The Registration Statement on Form N-14 filed by
AFG with respect to the Intermediate Government Portfolio Shares to be issued
to IF Shareholders in connection with the Reorganization shall have become
effective under the Securities Act and no stop order suspending the
effectiveness thereof shall have been issued and, to the best knowledge of the
parties hereto, no investigation or proceeding for that purpose shall have been
instituted or be pending, threatened or contemplated under the Securities Act.
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<PAGE> 113
(f) AAFI and AFG shall have received on or before the
Closing Date an opinion of Ballard Spahr Andrews & Ingersoll in form, scope and
substance satisfactory to AAFI and AFG, set forth on Schedule 6.2(f).
(g) The dividend or dividends described in the last
sentence of Section 3.14(a) shall have been declared.
Section 6.3. Conditions Precedent of AAFI. The
obligation of AAFI to consummate the Reorganization is subject to the
satisfaction, at or prior to the Closing Date, of all of the following
conditions, any one or more of which may be waived in writing by AAFI.
(a) The representations and warranties of AFG on behalf
of the Intermediate Government Portfolio set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date with the same effect as though all such representations
and warranties had been made as of the Closing Date.
(b) AFG shall have complied with and satisfied in all
material respects all agreements and conditions set forth herein on its part to
be performed or satisfied at or prior to the Closing Date.
(c) AAFI shall have received on the Closing Date (i) a
certificate, dated as of the Closing Date, from an officer of AFG, in such
individual's capacity as an officer of AFG and not as an individual, to the
effect that the conditions specified in Section 6.3(a) and (b) have been
satisfied and (ii) a certificate, dated as of the Closing Date, of AFG,
certifying as to the accuracy and completeness of the attached Agreement and
Declaration of Trust, as amended, and by-laws, as amended, and resolutions,
consents and authorizations with respect to the execution and delivery of this
Agreement and the transactions contemplated hereby.
(d) AAFI shall have received the signed opinion of
Ballard Spahr Andrews & Ingersoll, counsel to AFG, or other counsel reasonably
acceptable to AAFI, in form and substance reasonably acceptable to counsel for
AAFI, as to the matters set forth on Schedule 6.3(d).
ARTICLE VII
TERMINATION OF AGREEMENT
Section 7.1. Termination.
(a) This Agreement may be terminated on or prior to the
Closing Date as follows:
(i) by mutual written consent of AAFI and AFG;
and
(ii) at the election of AAFI or AFG:
(A) if the Closing Date shall not be on or
before June 30, 1998, or such later date as the parties hereto
may agree upon, unless the failure to
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<PAGE> 114
consummate the Reorganization is the result of a willful and
material breach of this Agreement by the party seeking to
terminate this Agreement;
(B) if, upon a vote at IF Shareholders Meeting
or any adjournment thereof, the Required IF Shareholder Vote
shall not have been obtained as contemplated by Section 5.8;
or
(C) if any Governmental Authority shall have
issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting
the Reorganization and such order, decree, ruling or other
action shall have become final and nonappealable.
(b) The termination of this Agreement shall be effectuated by
the delivery by the terminating party to the other party of a written notice of
such termination. If this Agreement so terminates, it shall become null and
void and have no further force or effect, except as provided in Section 7.2.
Section 7.2. Survival After Termination. If this
Agreement is terminated in accordance with Section 7.1 hereof and the
transactions contemplated hereby are not consummated, this Agreement shall
become void and of no further force and effect, except for the provisions of
Section 5.3.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Nonsurvival of Representations and
Warranties. Except for those contained in Sections 2.6, 3.5, 3.15(a) and 4.14,
none of the representations, warranties or covenants in this Agreement or in
any certificate or instrument delivered pursuant to this Agreement shall
survive the Closing Date and no party shall, therefore, have any recourse
therefor against any other party in connection therewith. This Section 8.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Closing Date.
Section 8.2. Law Governing. This Agreement shall be
construed and interpreted according to the laws of the State of Delaware
applicable to contracts made and to be performed wholly within such state.
Section 8.3. Binding Effect, Persons Benefiting, No
Assignment. This Agreement shall inure to the benefit of and be binding upon
the parties hereto and the respective successors and assigns of the parties and
such Persons. Nothing in this Agreement is intended or shall be construed to
confer upon any entity or Person other than the parties hereto and their
respective successors and permitted assigns any right, remedy or claim under or
by reason of this Agreement or any part hereof. Without the prior written
consent of the parties hereto, this Agreement may not be assigned by any of the
parties hereto.
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Section 8.4. Obligations of AFG and AAFI.
(a) AAFI and AFG hereby acknowledge and agree that the
Intermediate Government Portfolio is a separate investment portfolio of AFG,
that AFG is executing this Agreement on behalf of the Intermediate Government
Portfolio, and that any amounts payable by AFG under or in connection with this
Agreement shall be payable solely from the revenues and assets of the
Intermediate Government Portfolio. AAFI further acknowledges and agrees that
this Agreement has been executed by an authorized officer of AFG in his or her
capacity as an officer of AFG intending to bind AFG as provided herein, and
that no officer, trustee or shareholder of AFG shall be personally liable for
the liabilities or obligations of AFG incurred hereunder.
(b) AAFI and AFG hereby acknowledge and agree that
Income Fund is a separate investment portfolio of AAFI, that AAFI is executing
this Agreement on behalf of Income Fund and that any amounts payable by AAFI
under or in connection with this Agreement shall be payable solely from the
revenues and assets of Income Fund.
Section 8.5. Amendments. This Agreement may not be
amended, altered or modified except by a written instrument executed by AAFI
and AFG.
Section 8.6. Enforcement. The parties agree irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States or any state having jurisdiction, in addition to any other remedy
to which they are entitled at law or in equity.
Section 8.7. Interpretation. When a reference is made
in this Agreement to a Section or Schedule, such reference shall be to a
Section of, or a Schedule to, this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation". Each representation and warranty contained in Article
III or IV that relates to a general category of a subject matter shall be
deemed superseded by a specific representation and warranty relating to a
subcategory thereof to the extent of such specific representation or warranty.
Section 8.8. Counterparts. This Agreement may be
executed in counterparts, each of which shall be deemed an original and each of
which shall constitute one and the same instrument.
Section 8.9. Entire Agreement; Schedules. This
Agreement, including the Schedules, certificates and lists referred to herein,
and any documents executed by the parties simultaneously herewith or pursuant
thereto, constitute the entire understanding and agreement of the parties
hereto with respect to the subject matter hereof and supersedes all other prior
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<PAGE> 116
agreements and understandings, written or oral, between the parties with
respect to such subject matter.
Section 8.10. Notices. All notices, requests, demands
and other communications hereunder shall be in writing and shall he deemed to
have been duly given when delivered by hand or by overnight courier, two days
after being sent by registered mail, return receipt requested, or when sent by
telecopier (with receipt confirmed), provided, in the case of a telecopied
notice, a copy is also sent by registered mail, return receipt requested, or by
courier, addressed as follows (or to such other address as a party may
designate by notice to the other):
(a) If to AFG:
AIM Funds Group
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attn: Carol F. Relihan, Esq.
Fax: (713) 993-9185
with a copy to:
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103-7599
Attn: William H. Rheiner, Esq.
Fax: (215) 864-8999
(b) If to AAFI:
AIM Funds Group
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attn: Carol F. Relihan, Esq.
Fax: (713) 993-9185
with a copy to:
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103-7599
Attn: William H. Rheiner, Esq.
Fax: (215) 864-8999
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
AIM ADVISOR FUNDS, INC., acting
on behalf of AIM Advisor Income Fund
By: /s/ ROBERT H. GRAHAM
--------------------------------------
AIM FUNDS GROUP, acting on behalf of
AIM Intermediate Government Fund
By: /s/ ROBERT H. GRAHAM
--------------------------------------
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Schedule 6.1(d)
OPINION OF COUNSEL TO AIM Advisor Income Fund
1. AAFI is a corporation duly incorporated and validly existing
under the laws of the State of Maryland.
2. AAFI is an open-end, management investment company registered
under the Investment Company Act of 1940.
3. The execution, delivery and performance of the Agreement by
AAFI have been duly authorized and approved by all requisite
corporate action on the part of AAFI. The Agreement has been
duly executed and delivered by AAFI and constitutes the valid
and binding obligation of Income Fund.
4. The IF Shares outstanding on the date hereof have been duly
authorized and validly issued, are fully paid and are
non-assessable.
5. AAFI is not required to submit any notice, report or other
filing with or obtain any authorization consent or approval
from any governmental authority or self regulatory
organization prior to the consummation of the transactions
contemplated by the Agreement.
We confirm to you that to our knowledge after inquiry of each lawyer
who is the current primary contact for AAFI or who has devoted substantive
attention on behalf of AAFI during the preceding twelve months and who is still
currently employed by or is currently a member of this firm, no litigation or
governmental proceeding is pending or threatened in writing against Income Fund
(i) with respect to the Agreement or (ii) which involves in excess of $500,000
in damages.
<PAGE> 119
Schedule 6.2(f)
Tax Opinions.
(i) The transfer of the assets of Income Fund
to the Intermediate Government Portfolio in exchange for the Portfolio
Shares distributed directly to the IF Shareholders, as provided in the
Agreement, will constitute a "reorganization" within the meaning of
Section 368(a) of the Code and that Income Fund and AFG will each be a
"party to a reorganization" within the meaning of 368(b) of the Code.
(ii) In accordance with Section 361(a) and
Section 361(c)(1) of the Code, no gain or loss will be recognized by
Income Fund as a result of such transaction.
(iii) In accordance with Section 1032 of the
Code, no gain or loss will be recognized by the Intermediate
Government Portfolio upon the receipt of assets of Income Fund in
exchange for Intermediate Government Portfolio Shares issued directly
to the IF Shareholders
(iv) In accordance with Section 354(a)(1) of the
Code, no gain or loss will be recognized by IF Shareholders on
issuance by AFG of Intermediate Government Portfolio Shares in
exchange for their IF Shares.
(v) In accordance with Section 362(b) of the
Code, the basis to the Intermediate Government Portfolio of the assets
of Income Fund transferred to it will be the same as the basis of such
assets in the hands of Income Fund immediately prior to the exchange.
(vi) In accordance with Section 358(a) of the
Code, a IF Shareholder's basis for Intermediate Government Portfolio
Shares issued to such IF Shareholder pursuant to Section 2.7 of the
Agreement ("Issued Shares") will be the same as his basis for IF
Shares.
(vii) In accordance with Section 1223(1) of the
Code, a IF Shareholder's holding period for Intermediate Government
Portfolio Shares will be determined by including said IF Shareholder's
holding period for IF Shares exchanged therefor, provided that IF
Shareholder held such IF Shares as a capital asset.
(viii) In accordance with Section 1223(2) of the
Code, the holding period with respect to the assets of Income Fund
transferred to the Intermediate Government Portfolio will include the
holding period for such assets in the hands of Income Fund.
(ix) In accordance with Section 381(a)(2) of the
Code, the Intermediate Government Portfolio will succeed to and take
into account the items of Income Fund described in Section 381(c) of
the Code, subject to the conditions and limitations specified in
Sections 381 through 384 of the Code and the Internal Revenue Service
regulations thereunder.
<PAGE> 120
<PAGE> 121
Schedule 6.3(d)
OPINION OF COUNSEL TO AFG
1. AFG is duly organized and validly existing as a business trust
under the Business Trust Law of the State of Delaware.
2. AFG is an open-end, management investment company registered
under the Investment Company Act of 1940.
3. The execution, delivery and performance of the Agreement by
AFG have been duly authorized and approved by all requisite
trust action on the part of AFG. The Agreement has been duly
executed and delivered by AFG and constitutes the valid and
binding obligation of the Intermediate Government Portfolio.
4. The Intermediate Government Portfolio Shares outstanding on
the date hereof have been duly authorized and validly issued,
are fully paid and are non-assessable.
5. AFG is not required to submit any notice, report or other
filing with or obtain any authorization consent or approval
from any governmental authority or self regulatory
organization prior to the consummation of the transactions
contemplated by the Agreement.
We confirm to you that to our knowledge after inquiry of each lawyer
who is the current primary contact for AFG or who has devoted substantive
attention on behalf of AFG during the preceding twelve months and who is still
currently employed by or is currently a member of this firm, no litigation or
governmental proceeding is pending or threatened in writing against the
Intermediate Government Portfolio (i) with respect to the Agreement or (ii)
which involves in excess of $500,000 in damages.
<PAGE> 122
APPENDIX III
[APPLICATION INSIDE]
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
AIM BALANCED FUND
AIM GLOBAL UTILITIES FUND
AIM GROWTH FUND
AIM HIGH YIELD FUND
AIM INCOME FUND
AIM INTERMEDIATE GOVERNMENT FUND
AIM MONEY MARKET FUND
AIM MUNICIPAL BOND FUND
AIM VALUE FUND
(SERIES PORTFOLIOS OF AIM FUNDS GROUP)
PROSPECTUS
AUGUST 4, 1997
This Prospectus contains information about the nine mutual funds listed above
(the "Funds") which are separate series portfolios of AIM Funds Group (the
"Trust"), a Delaware business trust. The investment objectives of the Funds are
listed on the inside cover page.
This Prospectus sets forth basic information about the Funds that prospective
investors should know before investing. It should be read and retained for
future reference. A Statement of Additional Information, dated August 4, 1997,
has been filed with the United States Securities and Exchange Commission ("SEC")
and is incorporated herein by reference. The Statement of Additional Information
is available without charge upon written request to the Trust at P.O. Box 4739,
Houston, Texas 77210-4739 or by calling (800) 347-4246. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Trust. Additional information about the Funds may also be obtained from
http://www.aimfunds.com.
AIM HIGH YIELD FUND MAY INVEST UP TO 100% OF ITS NET ASSETS IN NON-INVESTMENT
GRADE DEBT SECURITIES, COMMONLY REFERRED TO AS "JUNK BONDS." JUNK BONDS ARE
CONSIDERED TO BE SPECULATIVE, AND ENTAIL GREATER RISKS, INCLUDING DEFAULT RISKS,
THAN THOSE FOUND IN HIGHER RATED SECURITIES. PURCHASERS SHOULD CAREFULLY
CONSIDER THE RISKS ASSOCIATED WITH AN INVESTMENT IN THIS FUND PRIOR TO
INVESTING. SEE "INVESTMENT PROGRAMS -- AIM HIGH YIELD FUND," "CERTAIN INVESTMENT
STRATEGIES AND POLICIES -- RISK FACTORS REGARDING NON-INVESTMENT GRADE DEBT
SECURITIES" AND "APPENDIX C -- DESCRIPTIONS OF RATING CATEGORIES."
THE FUNDS' SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE FUNDS' SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF THE FUNDS INVOLVE INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THERE CAN BE NO ASSURANCE THAT AIM MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 123
INVESTMENT OBJECTIVES
- --------------------------------------------------------------------------------
The investment objectives of the Funds are as follows:
AIM BALANCED FUND: To achieve as high a total return as possible, consistent
with preservation of capital, by investing in a broadly diversified portfolio of
high-yielding securities, including common stocks, preferred stocks, convertible
securities and bonds.
AIM GLOBAL UTILITIES FUND: To achieve a high level of current income, and as a
secondary objective to achieve capital appreciation, by investing primarily in
the common and preferred stocks of public utility companies.
AIM GROWTH FUND: To achieve long-term growth of capital by investing primarily
in the common stocks of established medium-to-large size companies with
prospects for above-average, long-term earnings growth.
AIM HIGH YIELD FUND: To achieve a high level of current income by investing
primarily in publicly traded debt securities of less than investment grade.
AIM INCOME FUND: To achieve a high level of current income consistent with
reasonable concern for safety of principal by investing primarily in fixed rate
corporate debt and U.S. Government obligations.
AIM INTERMEDIATE GOVERNMENT FUND: To achieve a high level of current income
consistent with reasonable concern for safety of principal by investing in debt
securities issued, guaranteed or otherwise backed by the United States
Government.
AIM MONEY MARKET FUND: To provide as high a level of current income as is
consistent with the preservation of capital and liquidity.
AIM MUNICIPAL BOND FUND: To achieve a high level of current income exempt from
federal income taxes consistent with the preservation of principal by investing
in a diversified portfolio of municipal bonds.
AIM VALUE FUND: To achieve long-term growth of capital by investing primarily
in equity securities judged by the Fund's investment advisor to be undervalued
relative to the investment advisor's appraisal of the current or projected
earnings of the companies issuing the securities, or relative to current market
values of assets owned by the companies issuing the securities or relative to
the equity market generally. Income is a secondary objective.
SUMMARY
- --------------------------------------------------------------------------------
THE FUNDS. AIM Funds Group (the "Trust") is a Delaware business trust
organized as an open-end, series, management investment company. Currently the
Trust offers nine separate series portfolios, each of which pursues unique
investment objectives. This Prospectus relates to all of such portfolios (the
"Funds"), which are listed on the cover.
THE ADVISOR. A I M Advisors, Inc. ("AIM") serves as each Fund's investment
advisor pursuant to a Master Investment Advisory Agreement (the "Advisory
Agreement").
AIM, together with its subsidiaries, manages or advises 53 investment company
portfolios. As of July 15, 1997, the total assets of the investment company
portfolios advised or managed by AIM or its subsidiaries were approximately
$76.0 billion. Under the terms of the Advisory Agreement, AIM supervises all
aspects of each Fund's operations and provides investment advisory services to
each Fund. As compensation for these services AIM receives a fee based on each
Fund's average daily net assets. Under a Master Administrative Services
Agreement, AIM may be reimbursed by each Fund for its costs of performing, or
arranging for the performance of, certain accounting, shareholder servicing and
other administrative services for the Funds.
MULTIPLE DISTRIBUTION SYSTEM. Investors may select Class A, Class B or Class C
shares of each Fund and, in the case of AIM MONEY MARKET FUND, AIM Cash Reserve
Shares, all of which are offered by this Prospectus at an offering price that
reflects differing sales charges and expense levels. See "Terms and Conditions
of Purchase of the AIM Funds -- Sales Charges and Dealer Concessions."
Class A Shares -- Shares are offered at net asset value plus any
applicable initial sales charge.
Class B Shares -- Shares are offered at net asset value, without an
initial sales charge, and are subject to a maximum contingent deferred
sales charge of 5% on certain redemptions made within six years from the
date such shares were purchased. Class B shares automatically convert to
Class A shares of the same Fund eight years following the end of the
calendar month in which a purchase was made. Class B shares are subject to
higher expenses than Class A shares.
Class C Shares -- Shares are offered at net asset value, without an
initial sales charge, and are subject to a contingent deferred sales charge
of 1% on certain redemptions made within one year from the date such shares
were purchased.
AIM Cash Reserve Shares (AIM MONEY MARKET FUND only) -- Shares are
offered at net asset value, without an initial sales charge and without
contingent deferred sales charges.
SUITABILITY FOR INVESTORS. The multiple class structure permits an investor to
choose the method of purchasing shares that is most beneficial given the amount
of the purchase, the length of time the shares are expected to be held, whether
dividends will be paid in cash or reinvested in additional shares of a Fund and
other circumstances. Class A shares of AIM MONEY MARKET FUND are designed to
meet the needs of an investor who wishes to establish a dollar cost averaging
program, pursuant to which Class A shares of
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<PAGE> 124
AIM MONEY MARKET FUND are exchanged for shares of other funds advised by AIM
that are sold with an initial sales charge. Investors should consider whether,
during the anticipated life of their investment in a Fund, the accumulated
distribution fees and any applicable contingent deferred sales charges on Class
B shares prior to conversion or on Class C shares would be less than the initial
sales charge and accumulated distribution fees on Class A shares purchased at
the same time, and to what extent such differential would be offset by the
higher return on Class A shares. To assist investors in making this
determination, the table under the caption "Table of Fees and Expenses" sets
forth examples of the charges applicable to each class of shares. Class A shares
will normally be more beneficial than Class B or Class C shares to the investor
who qualifies for reduced initial sales charges, as described below. Therefore,
A I M Distributors, Inc. will reject any order for purchase of more than
$250,000 for Class B shares.
PURCHASING SHARES. Initial investments in any class of shares must be at least
$500 and additional investments must be at least $50. The minimum initial
investment is modified for investments through tax-qualified retirement plans
and accounts initially established with an Automatic Investment Plan. The
distributor of the Funds' shares is A I M Distributors, Inc. ("AIM
Distributors"), P.O. Box 4739, Houston, Texas 77210-4739. See "How to Purchase
Shares" and "Special Plans."
EXCHANGE PRIVILEGE. The Funds are among those mutual funds distributed by AIM
Distributors (collectively, "The AIM Family of Funds"). Class A, Class B and
Class C shares of the Funds, and AIM Cash Reserve Shares of AIM MONEY MARKET
FUND, may be exchanged for shares of other funds in The AIM Family of Funds in
the manner and subject to the policies and charges set forth herein. See
"Exchange Privilege."
REDEEMING SHARES. Holders of Class A shares may redeem all or a portion of
their shares at net asset value on any business day, generally without charge. A
contingent deferred sales charge of 1% may apply to certain redemptions of Class
A shares, where purchases of $1 million or more were made at net asset value.
See "How to Redeem Shares -- Contingent Deferred Sales Charge Program for Large
Purchases."
Holders of Class B shares may redeem all or a portion of their shares at net
asset value on any business day, less a contingent deferred sales charge for
redemptions made within six years from the date such shares were purchased.
Class B shares redeemed after six years from the date such shares were purchased
will not be subject to any contingent deferred sales charge. See "How to Redeem
Shares -- Multiple Distribution System."
Holders of Class C shares may redeem all or a portion of their shares at net
asset value on any business day, less a 1% contingent deferred sales charge for
redemptions made within one year from the date such shares were purchased. See
"How to Redeem Shares -- Multiple Distribution System."
Holders of AIM Cash Reserve Shares of AIM MONEY MARKET FUND may redeem all or
a portion of their shares at net asset value on any business day, without
charge.
DISTRIBUTIONS. AIM GLOBAL UTILITIES FUND, AIM HIGH YIELD FUND, AIM INCOME
FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM MONEY MARKET FUND and AIM MUNICIPAL
BOND FUND currently declare dividends from net investment income on a daily
basis and pay such dividends on a monthly basis. AIM BALANCED FUND currently
declares and pays dividends from net investment income on a quarterly basis. AIM
GROWTH FUND and AIM VALUE FUND currently declare and pay dividends from net
investment income, if any, on an annual basis. All of the Funds make
distributions of realized capital gains, if any, on an annual basis, although
AIM MONEY MARKET FUND may distribute net realized short-term capital gains more
frequently. Dividends and distributions paid with respect to Class A shares of a
Fund may be paid by check, reinvested in additional Class A shares of the Fund
or reinvested in shares of another fund in The AIM Family of Funds, subject to
certain conditions. Dividends and distributions paid with respect to Class B
shares of a Fund may be paid by check or reinvested in additional Class B shares
of other funds in The AIM Family of Funds at net asset value. Dividends and
distributions paid with respect to Class C shares of a Fund may be paid by check
or reinvested in additional Class C shares of another fund in The AIM Family of
Funds at net asset value. Dividends and distributions paid with respect to AIM
Cash Reserve Shares of AIM MONEY MARKET FUND may be paid by check, reinvested in
additional AIM Cash Reserve Shares of the Fund, or reinvested in shares of
another fund in The AIM Family of Funds, subject to certain conditions. See
"Dividends, Distributions and Tax Matters" and "Special Plans."
RISK FACTORS. Subject to certain restrictions designed to reduce any
associated risks, AIM MONEY MARKET FUND may invest in securities such as money
market instruments which are not rated (but are determined by AIM to be of
comparable quality to securities which have received the highest ratings),
certain repurchase agreements, and U.S. dollar-denominated obligations issued by
foreign banks. Accordingly, an investment in AIM MONEY MARKET FUND may entail
somewhat different risks from an investment in an investment company which does
not engage in such investment practices. See "Investment Programs."
AIM HIGH YIELD FUND, and to a lesser extent AIM BALANCED FUND, AIM GLOBAL
UTILITIES FUND, AIM INCOME FUND and AIM MUNICIPAL BOND FUND, seek to meet their
respective investment objectives by investing in non-investment grade debt
securities, commonly known as "junk bonds." Investments in junk bonds, while
generally providing greater income and opportunity for gain, may be subject to
greater risks than higher rated securities. Such risks may include: greater
market fluctuations and risk of loss of income and principal, limited liquidity
and secondary market support, greater sensitivity to economic and business
downturns, and certain other risks. See "Certain Investment Strategies and
Policies -- Risk Factors Regarding Non-Investment Grade Debt Securities."
Investors should carefully consider the relative risks and rewards of investing
in each of the above-named Funds prior to investing, and should not consider an
investment in any of those Funds to represent a complete investment program.
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK and AIM Institutional Funds, La Familia AIM
de Fondos and La Familia AIM de Fondos and Design are registered service marks
and aimfunds.com and Invest With Discipline are service mark of A I M
Management Group Inc.
3
<PAGE> 125
THE FUNDS
- --------------------------------------------------------------------------------
TABLE OF FEES AND EXPENSES
The following table is designed to help an investor in the Funds understand
the various costs that an investor will bear, both directly and indirectly.
Except where noted, the fees and expenses set forth in the table are based on
the expenses of the Funds for the most recent fiscal year. The fees and expenses
for Class C shares set forth in the table below are based on estimated average
net assets of Class C shares of each Fund for the first period of operation. The
rules of the SEC require that the maximum sales charge be reflected in the table
even though certain investors may qualify for reduced sales charges. See "How to
Purchase Shares."
<TABLE>
<CAPTION>
AIM
AIM GLOBAL AIM AIM AIM
BALANCED UTILITIES GROWTH HIGH YIELD INCOM
FUND FUND FUND FUND FUND
--------------------- --------------------- --------------------- --------------------- -----
CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
A B C A B C A B C A B C A
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum sales load
imposed on purchase
of shares (as a % of
the offering
price)............... 4.75% None None 5.50% None None 5.50% None None 4.75% None None 4.75%
Maximum sales load on
reinvested
dividends............ None None None None None None None None None None None None None
Deferred sales load (as
a % of
original purchase
price or
redemption proceeds,
whichever is
lower)............... None* 5.0% 1.0% None* 5.0% 1.0% None* 5.0% 1.0% None* 5.0% 1.0% None*
Redemption fees........ None None None None None None None None None None None None None
Exchange fee........... None None None None None None None None None None None None None
Annual Fund Operating
Expenses
(as a % of average net
assets)
Management fees........ 0.61% 0.61% 0.61% 0.58% 0.58% 0.58% 0.69% 0.69% 0.69% 0.50% 0.50% 0.50% 0.46%
Rule 12b-1 distribution
plan payments........ 0.25% 1.00% 1.00% 0.25% 1.00% 1.00% 0.25% 1.00% 1.00% 0.25% 1.00% 1.00% 0.25%
All other expenses..... 0.29% 0.36% 0.36% 0.34% 0.38% 0.38% 0.24% 0.34% 0.34% 0.22% 0.18% 0.18% 0.27%
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total fund
operating
expenses....... 1.15% 1.97% 1.97% 1.17% 1.96% 1.96% 1.18% 2.03% 2.03% 0.97% 1.68% 1.68% 0.98%
==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ====
<CAPTION>
AIM
INCOME
FUND
-------------
CLASS CLASS
B C
----- -----
<S> <C> <C>
Shareholder Transaction
Expenses
Maximum sales load
imposed on purchase
of shares (as a % of
the offering
price)............... None None
Maximum sales load on
reinvested
dividends............ None None
Deferred sales load (as
a % of
original purchase
price or
redemption proceeds,
whichever is
lower)............... 5.0% 1.0%
Redemption fees........ None None
Exchange fee........... None None
Annual Fund Operating
Expenses
(as a % of average net
assets)
Management fees........ 0.46% 0.46%
Rule 12b-1 distribution
plan payments........ 1.00% 1.00%
All other expenses..... 0.34% 0.34%
---- ----
Total fund
operating
expenses....... 1.80% 1.80%
==== ====
</TABLE>
<TABLE>
<CAPTION>
AIM
AIM MONEY
INTERMEDIATE MARKET FUND AIM AIM
GOVERNMENT ------------------------------- MUNICIPAL VALUE
FUND AIM BOND FUND FUND
--------------------- CASH --------------------- -----
CLASS CLASS CLASS CLASS CLASS CLASS RESERVE CLASS CLASS CLASS CLASS
A B C A B C SHARES A B C A
----- ----- ----- ----- ----- ----- ------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum sales load imposed on
purchase of shares (as a % of the
offering price)................... 4.75% None None 5.50% None None None 4.75% None None 5.50%
Maximum sales load on reinvested
dividends......................... None None None None None None None None None None None
Deferred sales load (as a % of
original purchase price or
redemption proceeds, whichever is
lower)............................ None* 5.0% 1.0% None* 5.0% 1.0% None None* 5.0% 1.0% None*
Redemption fees..................... None None None None None None None None None None None
Exchange fee........................ None None None None None None None None None None None
Annual Fund Operating Expenses (as a %
of average net assets)
Management fees (after fee
waivers).......................... 0.48% 0.48% 0.48% 0.55% 0.55% 0.55% 0.55% 0.47% 0.47% 0.47% 0.61%(1)
Rule 12b-1 distribution plan
payments.......................... 0.25% 1.00% 1.00% 0.25% 1.00% 1.00% 0.25% 0.25% 1.00% 1.00% 0.25%
All other expenses.................. 0.27% 0.28% 0.28% 0.27% 0.26% 0.26% 0.28% 0.08% 0.14% 0.14% 0.25%
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total fund operating
expenses.................... 1.00% 1.76% 1.76% 1.07% 1.81% 1.81% 1.08% 0.80% 1.61% 1.61% 1.11%
==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ====
<CAPTION>
AIM
VALUE
FUND
---------------
CLASS CLASS
B C
----- -----
<S> <C> <C>
Shareholder Transaction Expenses
Maximum sales load imposed on
purchase of shares (as a % of the
offering price)................... None None
Maximum sales load on reinvested
dividends......................... None None
Deferred sales load (as a % of
original purchase price or
redemption proceeds, whichever is
lower)............................ 5.0% 1.0%
Redemption fees..................... None None
Exchange fee........................ None None
Annual Fund Operating Expenses (as a %
of average net assets)
Management fees (after fee
waivers).......................... 0.61%(1) 0.61%(1)
Rule 12b-1 distribution plan
payments.......................... 1.00% 1.00%
All other expenses.................. 0.33% 0.33%
---- ----
Total fund operating
expenses.................... 1.94% 1.94%
==== ====
</TABLE>
- ------------------------
(1) After fee waivers. If management fees were not being waived, they would be
0.63% on all classes of AIM VALUE FUND.
* Purchases of $1 million or more are not subject to an initial sales charge.
However, a contingent deferred sales charge of 1% applies to certain
redemptions made within 18 months from the date such shares were purchased.
See the Investor's Guide, under the caption "How to Redeem Shares --
Contingent Deferred Sales Charge Program for Large Purchases."
4
<PAGE> 126
- --------------------------------------------------------------------------------
EXAMPLES. You would pay the following expenses on a $1,000 investment in Class
A shares of the Funds, assuming (1) a 5% annual return and (2) redemption at the
end of each time period:
<TABLE>
<CAPTION>
AIM AIM AIM AIM AIM
AIM GLOBAL AIM HIGH AIM INTERMEDIATE MONEY MUNICIPAL AIM
BALANCED UTILITIES GROWTH YIELD INCOME GOVERNMENT MARKET BOND VALUE
FUND FUND FUND FUND FUND FUND FUND FUND FUND
-------- --------- ------ ---- ------ ------------ ------ --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year.................. $59 $66 $66 $57 $57 $57 $65 $55 $66
3 years................. 82 90 90 77 77 78 87 72 88
5 years................. 108 116 116 99 99 100 111 90 113
10 years................ 181 189 190 161 162 164 178 142 183
</TABLE>
The above examples assume payment of a sales charge at the time of purchase;
actual expenses may vary for purchases of $1 million or more, which are made at
net asset value and are subject to a contingent deferred sales charge for 18
months from the date such shares were purchased.
You would pay the following expenses on a $1,000 investment in Class B shares
of the Funds, assuming (1) a 5% annual return and (2) redemption at the end of
each time period:
<TABLE>
<CAPTION>
AIM AIM AIM AIM AIM
AIM GLOBAL AIM HIGH AIM INTERMEDIATE MONEY MUNICIPAL AIM
BALANCED UTILITIES GROWTH YIELD INCOME GOVERNMENT MARKET BOND VALUE
FUND FUND FUND FUND FUND FUND FUND FUND FUND
-------- --------- ------ ---- ------ ------------ ------ --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year.................. $70 $70 $71 $67 $68 $68 $68 $66 $70
3 years................. 92 92 94 83 87 85 87 81 91
5 years................. 126 126 129 111 117 115 118 108 125
10 years*............... 208 208 214 180 190 187 193 169 205
</TABLE>
You would pay the following expenses on the same $1,000 investment in Class B
shares, assuming no redemption at the end of each time period:
<TABLE>
<CAPTION>
AIM AIM AIM AIM AIM
AIM GLOBAL AIM HIGH AIM INTERMEDIATE MONEY MUNICIPAL AIM
BALANCED UTILITIES GROWTH YIELD INCOME GOVERNMENT MARKET BOND VALUE
FUND FUND FUND FUND FUND FUND FUND FUND FUND
-------- --------- ------ ---- ------ ------------ ------ --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year.................. $20 $20 $21 $17 $18 $18 $18 $16 $20
3 years................. 62 62 64 53 57 55 57 51 61
5 years................. 106 106 109 91 97 95 98 88 105
10 years*............... 208 208 214 180 190 187 193 169 205
</TABLE>
You would pay the following expenses on a $1,000 investment in Class C shares
of the Funds, assuming (1) a 5% annual return and (2) redemption at the end of
each time period:
<TABLE>
<CAPTION>
AIM AIM AIM AIM AIM
AIM GLOBAL AIM HIGH AIM INTERMEDIATE MONEY MUNICIPAL AIM
BALANCED UTILITIES GROWTH YIELD INCOME GOVERNMENT MARKET BOND VALUE
FUND FUND FUND FUND FUND FUND FUND FUND FUND
-------- --------- ------ ---- ------ ------------ ------ --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year.................. $30 $30 $31 $27 $28 $28 $28 $26 $30
3 years................. 62 62 64 53 57 55 57 51 61
</TABLE>
You would pay the following expenses on the same $1,000 investment in Class C
shares, assuming no redemption at the end of each time period:
<TABLE>
<CAPTION>
AIM AIM AIM AIM AIM
AIM GLOBAL AIM HIGH AIM INTERMEDIATE MONEY MUNICIPAL AIM
BALANCED UTILITIES GROWTH YIELD INCOME GOVERNMENT MARKET BOND VALUE
FUND FUND FUND FUND FUND FUND FUND FUND FUND
-------- --------- ------ ---- ------ ------------ ------ --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year.................. $20 $20 $21 $17 $18 $18 $18 $16 $20
3 years................. 62 62 64 53 57 55 57 51 61
</TABLE>
- ---------------
* Reflects the conversion to Class A shares eight years following the end of the
calendar month in which a purchase was made; therefore years nine and ten
reflect Class A expenses.
You would pay the following expenses on a $1,000 investment in AIM Cash
Reserve Shares of AIM MONEY MARKET FUND, assuming (1) a 5% annual return and (2)
redemption at the end of each time period:
<TABLE>
<CAPTION>
AIM
MONEY
MARKET
FUND
------
<S> <C>
1 year................................. $11
3 years................................ 34
5 years................................ 60
10 years............................... 132
</TABLE>
5
<PAGE> 127
- --------------------------------------------------------------------------------
As a result of 12b-1 distribution plan payments, a long-term shareholder of
the Funds may pay more than the economic equivalent of the maximum front-end
sales charges permitted by rules of the National Association of Securities
Dealers, Inc. Given the maximum front-end and contingent deferred sales charges
and the 12b-1 distribution plan payments applicable to Class A shares, Class B
shares and Class C shares of the Funds, it is estimated that it would require a
substantial number of years to exceed the maximum permissible front-end sales
charges.
The above examples should not be considered to be representative of the Funds'
actual or future expenses, which may be greater or less than those shown. In
addition, while the examples assume a 5% annual return, each Fund's actual
performance will vary and may result in an actual return that is greater or less
than 5%. The examples assume reinvestment of all dividends and distributions
and that the percentage amounts for total fund operating expenses remain the
same for each year.
6
<PAGE> 128
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following per share data, ratios and supplemental data for the Class A
shares of AIM BALANCED FUND, AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND, AIM
HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM
MUNICIPAL BOND FUND and AIM VALUE FUND for (i) all periods presented for AIM
BALANCED FUND and (ii) the years ended December 31, 1996, 1995, 1994 and 1993
for the Funds other than AIM BALANCED FUND have been audited by KPMG Peat
Marwick LLP, independent auditors, whose reports thereon were unqualified. The
per share data, ratios and supplemental data for the Class A shares of AIM
GLOBAL UTILITIES FUND, AIM GROWTH FUND, AIM HIGH YIELD FUND, AIM INCOME FUND,
AIM INTERMEDIATE GOVERNMENT FUND, AIM MUNICIPAL BOND FUND and AIM VALUE FUND for
each of the periods presented other than those described above have been derived
from financial statements audited by Price Waterhouse LLP, independent
accountants, whose reports thereon were also unqualified. This information
should be read in conjunction with the Funds' financial statements included in
the Statement of Additional Information. Class C shares of the Funds commenced
operations on August 4, 1997. The investment advisor to the above-named Funds,
other than AIM BALANCED FUND, changed on June 30, 1992.+
(PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
AIM BALANCED FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 1,
DECEMBER 31, 1993 TO YEAR ENDED AUGUST 31,
---------------------------------- DECEMBER 31, -----------------------------
1996 1995 1994 1993 1993 1992 1991
-------- ------- ------- ------------ ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 19.22 $ 14.62 $ 16.10 $ 15.97 $ 12.77 $ 12.04 $ 9.73
Income from investment operations:
Net investment income.................. 0.66 0.49 0.44 0.10 0.32 0.29 0.28
Net gains or losses on securities (both
realized and unrealized)............... 2.99 4.57 (1.31) 0.18 3.18 0.74 2.33
-------- ------- ------- -------- ------- -------- --------
Total from investment operations....... 3.65 5.06 (0.87) 0.28 3.50 1.03 2.61
-------- ------- ------- -------- ------- -------- --------
Less distributions:
Dividends from net investment income... (0.55) (0.46) (0.39) (0.15) (0.30) (0.30) (0.30)
Distributions from net realized capital
gains................................ (0.48) -- (0.22) -- -- -- --
-------- ------- ------- -------- ------- -------- --------
Total distributions.................... (1.03) (0.46) (0.61) (0.15) (0.30) (0.30) (0.30)
-------- ------- ------- -------- ------- -------- --------
Net asset value, end of period.......... $ 21.84 $ 19.22 $ 14.62 $ 16.10 $ 15.97 $ 12.77 $ 12.04
======== ======= ======= ======== ======= ======== ========
Total return(a)......................... 19.25% 34.97% (5.44)% 1.76% 27.75% 8.66% 27.41%
======== ======= ======= ======== ======= ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................. $334,189 $92,241 $37,572 $ 23,520 $19,497 $ 11,796 $ 11,750
======== ======= ======= ======== ======= ======== ========
Ratio of expenses to average net
assets............................... 1.15%(b)(c) 1.43%(d) 1.25%(e) 2.17%(f) 2.07% 2.12% 2.39%
======== ======= ======= ======== ======= ======== ========
Ratio of net investment income to
average net assets..................... 2.97%(b) 2.81%(d) 3.07%(e) 1.81%(f) 2.23% 2.32% 2.74%
======== ======= ======= ======== ======= ======== ========
Portfolio turnover rate................ 72% 77% 76% 233% 154% 166% 208%
======== ======= ======= ======== ======= ======== ========
Average broker commission rate(g)...... $ 0.0558 N/A N/A N/A N/A N/A N/A
======== ======= ======= ======== ======= ======== ========
Borrowings for the period:
Amount of debt outstanding at end of
period............................... -- -- -- -- -- -- --
Average amount of debt outstanding
during the period(h)................. -- -- -- -- -- -- --
Average number of shares outstanding
during the period (000s
omitted)(h).......................... 9,778 3,173 2,061 1,305 1,046 939 1,051
Average amount of debt per share during
the period........................... -- -- -- -- -- -- --
<CAPTION>
YEAR ENDED AUGUST 31,
-----------------------------
1990 1989 1988
-------- -------- -------
<S> <C> <C> <C>
Net asset value, beginning of period.... $ 10.67 $ 9.08 $ 11.89
Income from investment operations:
Net investment income.................. 0.32 0.39 0.42
Net gains or losses on securities (both
realized and unrealized)............... (0.91) 1.63 (2.65)
-------- -------- -------
Total from investment operations....... (0.59) 2.02 (2.23)
-------- -------- -------
Less distributions:
Dividends from net investment income... (0.35) (0.43) (0.50)
Distributions from net realized capital
gains................................ -- -- (0.08)
-------- -------- -------
Total distributions.................... (0.35) (0.43) (0.58)
-------- -------- -------
Net asset value, end of period.......... $ 9.73 $ 10.67 $ 9.08
======== ======== =======
Total return(a)......................... (5.67)% 22.96% (18.57)%
======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................. $ 10,965 $ 14,405 $16,789
======== ======== =======
Ratio of expenses to average net
assets............................... 2.15% 1.94% 2.31%
======== ======== =======
Ratio of net investment income to
average net assets..................... 3.18% 3.99% 4.50%
======== ======== =======
Portfolio turnover rate................ 307% 149% 118%
======== ======== =======
Average broker commission rate(g)...... N/A N/A N/A
======== ======== =======
Borrowings for the period:
Amount of debt outstanding at end of
period............................... -- $260,000 --
Average amount of debt outstanding
during the period(h)................. $138,181 $ 83,195 --
Average number of shares outstanding
during the period (000s
omitted)(h).......................... 1,238 1,589 2,131
Average amount of debt per share during
the period........................... $ 0.110 $ 0.052 --
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges and are not annualized for periods
of less than one year.
(b) Ratios are based on average daily net assets of $205,275,849.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have remained the same.
(d) After waiver of advisory fees. Ratios of expenses and net investment income
to average net assets prior to waiver of advisory fees are 1.46% and 2.78%,
respectively.
(e) After waiver of advisory fees. Ratios of expenses and net investment income
to average net assets prior to waiver of advisory fees are 1.68% and 2.64%,
respectively.
(f) Annualized.
(g) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
(h) Averages computed on a daily basis.
7
<PAGE> 129
AIM GLOBAL UTILITIES FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 14.59 $ 11.85 $ 14.09 $ 13.31 $ 13.75
Income from investment operations:
Net investment income...................... 0.55 0.55 0.59 0.60 0.67
Net gains or losses on securities (both
realized and unrealized)................. 1.43 2.71 (2.20) 1.02 0.36
-------- -------- -------- -------- --------
Total from investment operations........... 1.98 3.26 (1.61) 1.62 1.03
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income....... (0.56) (0.52) (0.60) (0.61) (0.68)
Distributions from net realized capital
gains.................................... -- -- -- (0.23) (0.79)
Returns of capital......................... -- -- (0.03) -- --
-------- -------- -------- -------- --------
Total distributions........................ (0.56) (0.52) (0.63) (0.84) (1.47)
-------- -------- -------- -------- --------
Net asset value, end of period.............. $ 16.01 $ 14.59 $ 11.85 $ 14.09 $ 13.31
======== ======== ======== ======== ========
Total return(a)............................. 13.88% 28.07% (11.57)% 12.32% 7.92%
======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted)... $164,001 $170,624 $150,515 $200,016 $111,771
======== ======== ======== ======== ========
Ratio of expenses to average net assets.... 1.17%(b)(c) 1.21% 1.18% 1.16% 1.17%
======== ======== ======== ======== ========
Ratio of net investment income to average
net assets............................... 3.62%(b) 4.20% 4.67% 4.21% 4.96%
======== ======== ======== ======== ========
Portfolio turnover rate.................... 48% 88% 101% 76% 148%
======== ======== ======== ======== ========
Average broker commission rate(g).......... $ 0.0460 N/A N/A N/A N/A
======== ======== ======== ======== ========
<CAPTION>
JANUARY 18, 1988*
YEAR ENDED DECEMBER 31, TO
-------------------------------- DECEMBER 31,
1991 1990 1989 1988
-------- -------- -------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 12.45 $ 13.73 $ 10.99 $ 10.00
Income from investment operations:
Net investment income...................... 0.70 0.66 0.77 0.82
Net gains or losses on securities (both
realized and unrealized)................. 2.12 (1.10) 3.06 0.83
------- ------- ------- ------
Total from investment operations........... 2.82 (0.44) 3.83 1.65
------- ------- ------- ------
Less distributions:
Dividends from net investment income....... (0.66) (0.70) (0.69) (0.66)
Distributions from net realized capital
gains.................................... (0.86) (0.14) (0.40) --
Returns of capital......................... -- -- -- --
------- ------- ------- ------
Total distributions........................ (1.52) (0.84) (1.09) (0.66)
------- ------- ------- ------
Net asset value, end of period.............. $ 13.75 $ 12.45 $ 13.73 $ 10.99
======= ======= ======= ======
Total return(a)............................. 23.65% (2.98)% 36.11% 17.03%
======= ======= ======= ======
Ratios/supplemental data:
Net assets, end of period (000s omitted)... $91,939 $69,541 $58,307 $20,104
======= ======= ======= ======
Ratio of expenses to average net assets.... 1.23% 1.21%(d) 1.05%(d) 1.22%(d)(f)
======= ======= ======= ======
Ratio of net investment income to average
net assets............................... 5.36% 5.21%(e) 6.13%(e) 7.63%(e)(f)
======= ======= ======= ======
Portfolio turnover rate.................... 169% 123% 115% 87%
======= ======= ======= ======
Average broker commission rate(g).......... N/A N/A N/A N/A
======= ======= ======= ======
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges and are not annualized for periods
of less than one year.
(b) Ratios are based on average daily net assets of $163,634,721.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(d) Ratios of expenses to average net assets prior to reduction of advisory fees
were 1.22%, 1.11% and 1.69% (annualized) for 1990-1988, respectively.
(e) Ratios of net investment income to average net assets prior to reduction of
advisory fees were 5.20%, 6.07% and 7.16% (annualized) for 1990-1988,
respectively.
(f) Annualized.
(g) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
AIM GROWTH FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period... $ 13.05 $ 10.32 $ 11.32 $ 12.28 $ 14.73 $ 12.35 $ 13.92
Income from investment operations:
Net investment income................. 0.07 0.02 -- -- 0.06 0.11 0.21
Net gains or losses on securities
(both realized and unrealized)...... 2.34 3.50 (0.57) 0.41 (0.04) 4.33 (0.91)
-------- -------- -------- -------- -------- -------- --------
Total from investment operations...... 2.41 3.52 (0.57) 0.41 0.02 4.44 (0.70)
-------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income.............................. -- -- -- -- (0.06) (0.13) (0.20)
Distributions from net realized
capital gains....................... (0.68) (0.79) (0.43) (1.37) (2.41) (1.93) (0.67)
-------- -------- -------- -------- -------- -------- --------
Total distributions................... (0.68) (0.79) (0.43) (1.37) (2.47) (2.06) (0.87)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period......... $ 14.78 $ 13.05 $ 10.32 $ 11.32 $ 12.28 $ 14.73 $ 12.35
======== ======== ======== ======== ======== ======== ========
Total return(a)........................ 18.61% 34.31% (4.99)% 3.64% 0.19% 37.05% (5.04)%
======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................ $227,882 $168,217 $123,271 $146,723 $168,395 $185,461 $153,245
======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets.............................. 1.18%(b)(c) 1.28% 1.22% 1.17% 1.17% 1.21% 1.16%
======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets.................. 0.46%(b) 0.20% 0.02% 0.02% 0.42% 0.73% 1.41%
======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate............... 97% 87% 201% 192% 133% 73% 61%
======== ======== ======== ======== ======== ======== ========
Average broker commission rate(d)..... $ 0.0621 N/A N/A N/A N/A N/A N/A
======== ======== ======== ======== ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1989 1988 1987
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period... $ 11.93 $ 11.04 $ 12.91
Income from investment operations:
Net investment income................. 0.25 0.23 0.24
Net gains or losses on securities
(both realized and unrealized)...... 3.16 0.89 0.30
-------- -------- --------
Total from investment operations...... 3.41 1.12 0.54
-------- -------- --------
Less distributions:
Dividends from net investment
income.............................. (0.27) (0.23) (0.31)
Distributions from net realized
capital gains....................... (1.15) -- (2.10)
-------- -------- --------
Total distributions................... (1.42) (0.23) (2.41)
-------- -------- --------
Net asset value, end of period......... $ 13.92 $ 11.93 $ 11.04
======== ======== ========
Total return(a)........................ 28.87% 10.13% 3.62%
======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................ $187,805 $180,793 $203,329
======== ======== ========
Ratio of expenses to average net
assets.............................. 1.00% 0.98% 0.84%
======== ======== ========
Ratio of net investment income to
average net assets.................. 1.62% 1.73% 1.51%
======== ======== ========
Portfolio turnover rate............... 53% 38% 78%
======== ======== ========
Average broker commission rate(d)..... N/A N/A N/A
======== ======== ========
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges.
(b) Ratios are based on average net assets of $204,456,793.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(d) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
8
<PAGE> 130
AIM HIGH YIELD FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
---------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 9.43 $ 8.93 $ 10.05 $ 9.40 $ 8.86 $ 7.07 $ 8.94
Income from investment operations:
Net investment income.................. 0.92 0.93 0.96 0.97 1.04 1.02 1.09
Net gains or losses on securities (both
realized and unrealized)............. 0.46 0.52 (1.12) 0.69 0.55 1.81 (1.84)
---------- -------- -------- -------- -------- -------- --------
Total from investment operations....... 1.38 1.45 (0.16) 1.66 1.59 2.83 (0.75)
---------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income... (0.93) (0.95) (0.96) (1.01) (1.05) (1.04) (1.12)
---------- -------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 9.88 $ 9.43 $ 8.93 $ 10.05 $ 9.40 $ 8.86 $ 7.07
========== ======== ======== ======== ======== ======== ========
Total return(a)......................... 15.44% 16.86% (1.67)% 18.40% 18.60% 42.18% (9.03)%
========== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)....................... $1,272,974 $886,106 $578,959 $550,760 $324,518 $259,677 $204,932
========== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets............................... 0.97%(b)(c) 0.96% 1.00% 1.12% 1.15% 1.22% 1.21%(d)
========== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets................... 9.67%(b) 9.95% 10.07% 9.82% 11.00% 12.67% 13.59%(e)
========== ======== ======== ======== ======== ======== ========
Portfolio turnover rate................ 77% 61% 53% 53% 56% 61% 27%
========== ======== ======== ======== ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1989 1988 1987
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.... $ 10.01 $ 9.67 $ 10.54
Income from investment operations:
Net investment income.................. 1.21 1.18 1.16
Net gains or losses on securities (both
realized and unrealized)............. (1.07) 0.34 (0.83)
-------- -------- --------
Total from investment operations....... 0.14 1.52 0.33
-------- -------- --------
Less distributions:
Dividends from net investment income... (1.21) (1.18) (1.20)
-------- -------- --------
Net asset value, end of period.......... $ 8.94 $ 10.01 $ 9.67
======== ======== ========
Total return(a)......................... 1.18% 16.41% 3.07%
======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)....................... $261,920 $274,631 $242,858
======== ======== ========
Ratio of expenses to average net
assets............................... 0.99% 0.96%(d) 0.92%
======== ======== ========
Ratio of net investment income to
average net assets................... 12.40% 11.84%(e) 11.21%
======== ======== ========
Portfolio turnover rate................ 36% 76% 81%
======== ======== ========
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges.
(b) Ratios are based on average net assets of $1,052,462,336.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(d) Ratios of expenses to average net assets prior to reduction of advisory fees
were 1.22% and 1.00% for 1990 and 1988, respectively.
(e) Ratios of net investment income to average net assets prior to reduction of
advisory fees were 13.58% and 11.80% for 1990 and 1988, respectively.
AIM INCOME FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 8.17 $ 7.20 $ 8.45 $ 8.03 $ 8.07 $ 7.41 $ 7.80
Income from investment operations:
Net investment income.................. 0.57 0.58 0.58 0.60 0.60 0.61 0.65
Net gains or losses on securities (both
realized and unrealized)............. 0.09 1.00 (1.22) 0.61 (0.03) 0.66 (0.39)
-------- -------- -------- -------- -------- -------- --------
Total from investment operations....... 0.66 1.58 (0.64) 1.21 0.57 1.27 0.26
-------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income... (0.59) (0.61) (0.49) (0.60) (0.61) (0.61) (0.65)
Distributions from net realized capital
gains................................ -- -- (0.01) (0.19) -- -- --
Returns of capital..................... -- -- (0.11) -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total distributions.................... (0.59) (0.61) (0.61) (0.79) (0.61) (0.61) (0.65)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 8.24 $ 8.17 $ 7.20 $ 8.45 $ 8.03 $ 8.07 $ 7.41
======== ======== ======== ======== ======== ======== ========
Total return(a)......................... 8.58% 22.77% (7.65)% 15.38% 7.42% 18.00% 3.65%
======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)....................... $286,183 $251,280 $201,677 $244,168 $218,848 $231,798 $215,987
======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets............................... 0.98%(b)(c) 0.98% 0.98% 0.98% 0.99%(d) 1.00%(d) 1.00%
======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets................... 7.13%(b) 7.52% 7.53% 7.01% 7.54%(d) 7.97%(d) 8.73%
======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate................ 80% 227% 185% 99% 82% 67% 106%
======== ======== ======== ======== ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1989 1988 1987
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.... $ 7.53 $ 7.55 $ 8.20
Income from investment operations:
Net investment income.................. 0.66 0.68 0.67
Net gains or losses on securities (both
realized and unrealized)............. 0.32 (0.02) (0.63)
-------- -------- --------
Total from investment operations....... 0.98 0.66 0.04
-------- -------- --------
Less distributions:
Dividends from net investment income... (0.71) (0.68) (0.69)
Distributions from net realized capital
gains................................ -- -- --
Returns of capital..................... -- -- --
-------- -------- --------
Total distributions.................... (0.71) (0.68) (0.69)
-------- -------- --------
Net asset value, end of period.......... $ 7.80 $ 7.53 $ 7.55
======== ======== ========
Total return(a)......................... 13.56% 9.01% 0.56%
======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)....................... $229,222 $218,946 $237,466
======== ======== ========
Ratio of expenses to average net
assets............................... 0.96% 0.95% 0.84%
======== ======== ========
Ratio of net investment income to
average net assets................... 8.56% 8.81% 8.64%
======== ======== ========
Portfolio turnover rate................ 222% 361% 195%
======== ======== ========
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges.
(b) Ratios are based on average net assets of $262,501,383.
(c) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average daily net assets would have been 0.97%.
(d) After waiver of advisory fees and expense reimbursements. Ratios of expenses
to average net assets prior to waiver of advisory fees and expense
reimbursements were 1.00% and 1.03% for 1992 and 1991, respectively. Ratios
of net investment income to average net assets prior to waiver of advisory
fees and expense reimbursements were 7.53% and 7.94% for 1992 and 1991,
respectively.
9
<PAGE> 131
AIM INTERMEDIATE GOVERNMENT FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................... $ 9.70 $ 8.99 $ 10.05 $ 10.19 $ 10.34 $ 9.95
Income from investment operations:
Net investment income................ 0.63 0.69 0.68 0.74 0.77 0.82
Net gains or losses on securities
(both realized and unrealized)..... (0.42) 0.73 (1.02) (0.04) (0.15) 0.41
-------- -------- -------- -------- -------- --------
Total from investment operations..... 0.21 1.42 (0.34) 0.70 0.62 1.23
-------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income............................. (0.59) (0.67) (0.58) (0.70) (0.74) (0.84)
Distributions from net realized
capital gains...................... -- -- (0.04) (0.14) (0.03) --
Returns of capital................... (0.04) (0.04) (0.10) -- -- --
-------- -------- -------- -------- -------- --------
Total distributions.................. (0.63) (0.71) (0.72) (0.84) (0.77) (0.84)
-------- -------- -------- -------- -------- --------
Net asset value, end of period........ $ 9.28 $ 9.70 $ 8.99 $ 10.05 $ 10.19 $ 10.34
======== ======== ======== ======== ======== ========
Total return(a)....................... 2.35% 16.28% (3.44)% 7.07% 6.26% 12.98%
======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)..................... $174,344 $176,318 $158,341 $139,586 $123,484 $101,409
======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets (exclusive of interest
expense)(b)........................ 1.00%(c)(d) 1.08% 1.04% 1.00% 0.98% 1.00%
======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets(e).............. 6.76%(c) 7.36% 7.34% 7.08% 7.53% 8.15%
======== ======== ======== ======== ======== ========
Portfolio turnover rate.............. 134% 140% 109% 110% 42% 26%
======== ======== ======== ======== ======== ========
<CAPTION>
APRIL 28,
1987*
YEAR ENDED DECEMBER 31, TO
---------------------------- DECEMBER 31,
1990 1989 1988 1987
-------- ------- ------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period............................... $ 9.91 $ 9.70 $ 9.92 $ 10.00
Income from investment operations:
Net investment income................ 0.87 0.90 0.89 0.55
Net gains or losses on securities
(both realized and unrealized)..... 0.01 0.15 (0.27) (0.14)
-------- ------- ------- -------
Total from investment operations..... 0.88 1.05 0.62 0.41
-------- ------- ------- -------
Less distributions:
Dividends from net investment
income............................. (0.84) (0.84) (0.84) (0.49)
Distributions from net realized
capital gains...................... -- -- -- --
Returns of capital................... -- -- -- --
-------- ------- ------- -------
Total distributions.................. (0.84) (0.84) (0.84) (0.49)
-------- ------- ------- -------
Net asset value, end of period........ $ 9.95 $ 9.91 $ 9.70 $ 9.92
======== ======= ======= =======
Total return(a)....................... 9.39% 11.28% 6.43% 4.18%
======== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period
(000s omitted)..................... $ 61,463 $57,077 $48,372 $28,052
======== ======= ======= =======
Ratio of expenses to average net
assets (exclusive of interest
expense)(b)........................ 1.00% 1.00% 1.00% 1.20%(f)
======== ======= ======= =======
Ratio of net investment income to
average net assets(e).............. 8.85% 9.10% 9.11% 8.64%(f)
======== ======= ======= =======
Portfolio turnover rate.............. 16% 15% 15% 35%
======== ======= ======= =======
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges and are not annualized for periods
of less than one year.
(b) Ratios of expenses to average net assets prior to reduction of advisory fee
and expense reimbursement were 1.05%, 1.04%, 1.04%, 1.10%, 1.13%, 1.08% and
1.08% for 1994-1988, respectively.
(c) Ratios are based on average net assets of $175,038,605.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(e) Ratios of net investment income to average net assets prior to reduction of
advisory fee and expense reimbursement were 7.32%, 7.04%, 7.48%, 8.05%,
8.72%, 9.03% and 9.03% for 1994-1988, respectively.
(f) Annualized.
AIM MUNICIPAL BOND FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 8.31 $ 7.78 $ 8.61 $ 8.27 $ 8.13 $ 7.66 $ 7.81
Income from investment operations:
Net investment income.................. 0.43 0.43 0.46 0.48 0.51 0.52 0.53
Net gains or losses on securities (both
realized and unrealized)............. (0.12) 0.56 (0.78) 0.46 0.21 0.46 (0.14)
-------- -------- -------- -------- -------- -------- --------
Total from investment operations....... 0.31 0.99 (0.32) 0.94 0.72 0.98 0.39
-------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income... (0.43) (0.43) (0.45) (0.48) (0.51) (0.51) (0.53)
Distributions from net realized capital
gains................................ -- -- (0.03) (0.11) (0.07) -- --
Returns of capital..................... -- (0.03) (0.03) (0.01) -- -- (0.01)
-------- -------- -------- -------- -------- -------- --------
Total distributions.................... (0.43) (0.46) (0.51) (0.60) (0.58) (0.51) (0.54)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period.......... $ 8.19 $ 8.31 $ 7.78 $ 8.61 $ 8.27 $ 8.13 $ 7.66
======== ======== ======== ======== ======== ======== ========
Total return(a)......................... 3.90% 13.05% (3.79)% 11.66% 9.10% 13.30% 5.27%
======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................. $278,812 $284,803 $257,456 $294,209 $271,205 $273,037 $258,194
======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets............................... 0.80%(b)(c) 0.88% 0.89% 0.91% 0.90% 0.94% 0.91%
======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets................... 5.29%(b) 5.26% 5.61% 5.65% 6.15% 6.58% 6.91%
======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate................ 26% 36% 43% 24% 160% 289% 230%
======== ======== ======== ======== ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1989 1988 1987
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.... $ 7.64 $ 7.32 $ 8.41
Income from investment operations:
Net investment income.................. 0.54 0.53 0.51
Net gains or losses on securities (both
realized and unrealized)............. 0.18 0.34 (0.65)
-------- -------- --------
Total from investment operations....... 0.72 0.87 (0.14)
-------- -------- --------
Less distributions:
Dividends from net investment income... (0.55) (0.55) (0.49)
Distributions from net realized capital
gains................................ -- -- (0.46)
Returns of capital..................... -- -- --
-------- -------- --------
Total distributions.................... (0.55) (0.55) (0.95)
-------- -------- --------
Net asset value, end of period.......... $ 7.81 $ 7.64 $ 7.32
======== ======== ========
Total return(a)......................... 9.70% 12.33% (1.88)%
======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................. $262,997 $243,480 $237,225
======== ======== ========
Ratio of expenses to average net
assets............................... 0.89% 0.87% 0.80%
======== ======== ========
Ratio of net investment income to
average net assets................... 6.97% 7.11% 6.71%
======== ======== ========
Portfolio turnover rate................ 305% 381% 392%
======== ======== ========
</TABLE>
- ---------------
(a) Total returns do not deduct sales charges.
(b) Ratios are based on average net assets of $276,724,764.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
10
<PAGE> 132
AIM VALUE FUND -- CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990
---------- ---------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 26.81 $ 21.14 $ 20.82 $ 18.24 $ 17.55 $ 13.75 $ 14.53
Income from investment operations:
Net investment income.................. 0.43(a) 0.14 0.16 0.04 0.12 0.13 0.26
Net gains on securities
(both realized and
unrealized).......................... 3.42 7.21 0.52 3.34 2.68 5.73 0.01
---------- ---------- ---------- -------- -------- -------- --------
Total from investment operations....... 3.85 7.35 0.68 3.38 2.80 5.86 0.27
---------- ---------- ---------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income... (0.41) (0.09) (0.16) (0.03) (0.12) (0.14) (0.26)
Distributions from net realized capital
gains................................ (1.10) (1.59) (0.20) (0.77) (1.99) (1.92) (0.79)
---------- ---------- ---------- -------- -------- -------- --------
Total distributions.................... (1.51) (1.68) (0.36) (0.80) (2.11) (2.06) (1.05)
---------- ---------- ---------- -------- -------- -------- --------
Net asset value, end
of period.............................. $ 29.15 $ 26.81 $ 21.14 $ 20.82 $ 18.24 $ 17.55 $ 13.75
========== ========== ========== ======== ======== ======== ========
Total return(b)......................... 14.52% 34.85% 3.28% 18.71% 16.39% 43.45% 1.88%
========== ========== ========== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)....................... $5,100,061 $3,408,952 $1,358,725 $765,305 $239,663 $152,149 $ 86,565
========== ========== ========== ======== ======== ======== ========
Ratio of expenses to average net
assets(c)............................ 1.11%(d)(e) 1.12% 0.98% 1.09% 1.16% 1.22% 1.21%
========== ========== ========== ======== ======== ======== ========
Ratio of net investment income to
average net assets(f)................ 1.65%(d) 0.74% 0.92% 0.30% 0.75% 0.89% 1.87%
========== ========== ========== ======== ======== ======== ========
Portfolio turnover rate................ 126% 151% 127% 177% 170% 135% 131%
========== ========== ========== ======== ======== ======== ========
Average broker commission rate(g)...... $ 0.0436 N/A N/A N/A N/A N/A N/A
========== ========== ========== ======== ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1989 1988 1987
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period.... $ 12.79 $ 11.47 $ 12.26
Income from investment operations:
Net investment income.................. 0.40 0.26 0.25
Net gains on securities
(both realized and
unrealized).......................... 3.58 2.07 0.53
-------- -------- --------
Total from investment operations....... 3.98 2.33 0.78
-------- -------- --------
Less distributions:
Dividends from net investment income... (0.43) (0.26) (0.39)
Distributions from net realized capital
gains................................ (1.81) (0.75) (1.18)
-------- -------- --------
Total distributions.................... (2.24) (1.01) (1.57)
-------- -------- --------
Net asset value, end
of period.............................. $ 14.53 $ 12.79 $ 11.47
======== ======== ========
Total return(b)......................... 31.54% 20.61% 5.96%
======== ======== ========
Ratios/supplemental data:
Net assets, end of period
(000s omitted)....................... $ 76,444 $ 60,076 $ 55,527
======== ======== ========
Ratio of expenses to average net
assets(c)............................ 1.00% 1.00% 1.00%
======== ======== ========
Ratio of net investment income to
average net assets(f)................ 2.65% 1.98% 1.91%
======== ======== ========
Portfolio turnover rate................ 152% 124% 219%
======== ======== ========
Average broker commission rate(g)...... N/A N/A N/A
======== ======== ========
</TABLE>
- ---------------
(a) Calculated using average shares outstanding.
(b) Total returns do not deduct sales charges.
(c) Ratios of expenses to average net assets prior to reduction of advisory fees
were 1.13%, 1.13%, 1.23%, 1.09% and 1.08% for 1996, 1995, 1990-1988,
respectively.
(d) Ratios are based on average net assets of $4,296,112,779.
(e) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(f) Ratios of net investment income to average net assets prior to reduction of
advisory fees were 1.63%, 0.73%, 1.85%, 2.56% and 1.90% for 1996, 1995,
1990-1988, respectively.
(g) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
+ Each of the Funds is a separate series of shares of AIM Funds Group, a
Delaware business trust established May 5, 1993 (the "Trust"). The
shareholders of the applicable Funds separately approved a plan of
reorganization pursuant to which, effective October 15, 1993, each of the
predecessor funds to AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND, AIM HIGH
YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM
MUNICIPAL BOND FUND and AIM VALUE FUND, organized as separate series
portfolios of AIM Funds Group, a Massachusetts business trust ("AFG(MA)"),
and to AIM BALANCED FUND, organized as AIM Convertible Securities, Inc., a
Maryland corporation, was reorganized as a separate series portfolio of the
Trust. AIM Convertible Securities, Inc. had investment objectives and
policies that differed from those of AIM BALANCED FUND. Certain information
reported in these statements pertains to such Funds as separate series
portfolios of AFG(MA) and as a corporation, as applicable, rather than
separate series of the Trust.
* Commencement of operations.
11
<PAGE> 133
The following per share data, ratios and supplemental data for the Class B
shares of AIM BALANCED FUND, AIM GLOBAL UTILITIES FUND, AIM GROWTH FUND, AIM
HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM
MUNICIPAL BOND FUND and AIM VALUE FUND for the periods indicated have been
audited by KPMG Peat Marwick LLP, independent auditors, whose reports thereon
were unqualified. This information should be read in conjunction with the Funds'
financial statements included in the Statement of Additional Information.
AIM BALANCED FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, OCTOBER 18, 1993*
------------------------------------ TO
1996 1995 1994 DECEMBER 31, 1993
-------- ------- ------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.......... $ 19.22 $ 14.62 $ 16.11 $16.69
Income from investment operations:
Net investment income....................... 0.48 0.31 0.31 0.04
Net gains (losses) on securities (both
realized and unrealized)................. 2.99 4.61 (1.31) (0.58)
-------- ------- ------- -------
Total from investment operations............ 3.47 4.92 (1.00) (0.54)
-------- ------- ------- -------
Less distributions:
Dividends from net investment income........ (0.38) (0.32) (0.27) (0.04)
Distributions from net realized capital
gains.................................... (0.48) -- (0.22) --
-------- ------- ------- -------
Total distributions......................... (0.86) (0.32) (0.49) (0.04)
-------- ------- ------- -------
Net asset value, end of period................ $ 21.83 $ 19.22 $ 14.62 $16.11
======== ======= ======= =======
Total return(a)............................... 18.28% 33.93% (6.23)% (3.23)%
======== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted).... $237,082 $72,634 $20,245 $2,754
======== ======= ======= =======
Ratio of expenses to average net assets..... 1.97%(b)(c) 2.21%(d) 1.98%(e) 2.83%(f)
======== ======= ======= =======
Ratio of net investment income to average
net assets............................... 2.15%(b) 2.03%(d) 2.34%(e) 1.15%(f)
======== ======= ======= =======
Portfolio turnover rate..................... 72% 77% 76% 233%
======== ======= ======= =======
Average broker commission rate(g)........... $ 0.0558 N/A N/A N/A
======== ======= ======= =======
</TABLE>
- ---------------
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(b) Ratios are based on average net assets of $149,660,567.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(d) After waiver of advisory fees. Ratios of expenses and net investment income
to average net assets prior to waiver of advisory fees are 2.23% and 2.01%,
respectively.
(e) After waiver of advisory fees. Ratios of expenses and net investment income
to average net assets prior to waiver of advisory fees are 2.45% and 1.87%,
respectively.
(f) Annualized.
(g) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
12
<PAGE> 134
AIM GLOBAL UTILITIES FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
SEPTEMBER 1,
1993*
YEAR ENDED DECEMBER 31, TO
--------------------------------- DECEMBER 31,
1996 1995 1994 1993
------- ------- ------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 14.60 $ 11.84 $ 14.08 $ 15.30
Income from investment operations:
Net investment income........................ 0.42 0.44 0.47 0.17
Net gains (losses) on securities (both
realized and unrealized).................. 1.44 2.73 (2.19) (0.98)
------- ------- ------- -------
Total from investment operations............. 1.86 3.17 (1.72) (0.81)
------- ------- ------- -------
Less distributions:
Dividends from net investment income......... (0.45) (0.41) (0.49) (0.17)
Distributions from net realized capital
gains..................................... -- -- -- (0.24)
Returns of capital........................... -- -- (0.03) --
------- ------- ------- -------
Total distributions.......................... (0.45) (0.41) (0.52) (0.41)
------- ------- ------- -------
Net asset value, end of period................. $ 16.01 $ 14.60 $ 11.84 $ 14.08
======= ======= ======= =======
Total return(a)................................ 12.98% 27.16% (12.35)% (5.32)%
======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted)..... $79,530 $70,693 $42,568 $23,892
======= ======= ======= =======
Ratio of expenses to average net assets...... 1.96%(b)(c) 1.97% 2.07% 1.99%(d)
======= ======= ======= =======
Ratio of net investment income to average net
assets.................................... 2.83%(b) 3.44% 3.78% 3.38%(d)
======= ======= ======= =======
Portfolio turnover rate...................... 48% 88% 101% 76%
======= ======= ======= =======
Average broker commission rate(e)............ $0.0460 N/A N/A N/A
======= ======= ======= =======
</TABLE>
- ---------------
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(b) Ratios are based on average net assets of $75,949,144.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(d) Annualized.
(e) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
13
<PAGE> 135
AIM GROWTH FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SEPTEMBER 1, 1993*
--------------------------------------- TO
1996 1995 1994 DECEMBER 31, 1993
-------- -------- ------- ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 12.77 $ 10.21 $ 11.31 $ 12.83
Income from investment operations:
Net investment income (loss).......... (0.05) (0.08)(a) (0.06) (0.01)
Net gains (losses) on securities (both
realized and unrealized)........... 2.28 3.43 (a) (0.61) (0.14)
-------- -------- ------- --------
Total from investment operations...... 2.23 3.35 (0.67) (0.15)
-------- -------- ------- --------
Less distributions:
Distributions from net realized
capital gains...................... (0.68) (0.79) (0.43) (1.37)
-------- -------- ------- --------
Total distributions................... (0.68) (0.79) (0.43) (1.37)
-------- -------- ------- --------
Net asset value, end of period.......... $ 14.32 $ 12.77 $ 10.21 $ 11.31
======== ======== ======= ========
Total return(b)......................... 17.60% 33.00% (5.88)% (0.92)%
======== ======== ======= ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)........................... $280,807 $138,034 $38,448 $11,053
======== ======== ======= ========
Ratio of expenses to average net
assets............................. 2.03%(c)(d) 2.13% 2.18% 1.91% (e)
======== ======== ======= ========
Ratio of net investment income (loss)
to average net assets.............. (0.39)%(c) (0.65)% (0.94)% (0.72)%(e)
======== ======== ======= ========
Portfolio turnover rate............... 97% 87% 201% 192%
======== ======== ======= ========
Average broker commission rate(f)..... $ 0.0621 N/A N/A N/A
======== ======== ======= ========
</TABLE>
- ---------------
(a) Calculated using average shares outstanding.
(b) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(c) Ratios are based on average net assets of $213,327,146.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(e) Annualized.
(f) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
AIM HIGH YIELD FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SEPTEMBER 1, 1993*
------------------------------------------ TO
1996 1995 1994 DECEMBER 31, 1993
---------- -------- -------- ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 9.42 $ 8.92 $ 10.04 $ 9.96
Income from investment operations:
Net investment income................. 0.85 0.85 0.87 0.32
Net gains (losses) on securities (both
realized and unrealized)........... 0.47 0.52 (1.10) 0.07
---------- -------- -------- --------
Total from investment operations...... 1.32 1.37 (0.23) 0.39
---------- -------- -------- --------
Less distributions:
Dividends from net investment
income............................. (0.86) (0.87) (0.89) (0.31)
---------- -------- -------- --------
Net asset value, end of period.......... $ 9.88 $ 9.42 $ 8.92 $ 10.04
========== ======== ======== ========
Total return(a)......................... 14.68% 15.91% (2.48)% 4.00%
========== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)........................... $1,068,060 $557,926 $191,338 $31,264
========== ======== ======== ========
Ratio of expenses to average net
assets............................. 1.68%(b)(c) 1.73% 1.80% 1.93%(d)
========== ======== ======== ========
Ratio of net investment income to
average net assets................. 8.95%(b) 9.18% 9.27% 8.99%(d)
========== ======== ======== ========
Portfolio turnover rate............... 77% 61% 53% 53%
========== ======== ======== ========
</TABLE>
- ---------------
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(b) Ratios are based on average net assets of $808,336,751.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(d) Annualized.
14
<PAGE> 136
AIM INCOME FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SEPTEMBER 7, 1993*
--------------------------------- TO
1996 1995 1994 DECEMBER 31, 1993
------- ------- ------- ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period........... $ 8.15 $ 7.18 $ 8.43 $ 8.95
Income from investment operations:
Net investment income........................ 0.50 0.53 0.52 0.19
Net gains (losses) on securities (both
realized and unrealized).................. 0.11 0.98 (1.23) (0.34)
------- ------- ------- --------
Total from investment operations............. 0.61 1.51 (0.71) (0.15)
------- ------- ------- --------
Less distributions:
Dividends from net investment income......... (0.53) (0.54) (0.42) (0.18)
Distributions from net realized capital
gains..................................... -- -- (0.01) (0.19)
Returns of capital........................... -- -- (0.11) --
------- ------- ------- --------
Total distributions.......................... (0.53) (0.54) (0.54) (0.37)
------- ------- ------- --------
Net asset value, end of period................. $ 8.23 $ 8.15 $ 7.18 $ 8.43
======= ======= ======= ========
Total return(a)................................ 7.87% 21.72% (8.46)% (0.75)%
======= ======= ======= ========
Ratios/supplemental data:
Net assets, end of period (000s omitted)..... $85,343 $44,304 $12,321 $ 3,602
======= ======= ======= ========
Ratio of expenses to average net assets...... 1.80%(b)(c) 1.79% 1.83%(d) 1.75%(d)(e)
======= ======= ======= ========
Ratio of net investment income to average net
assets.................................... 6.30%(b) 6.71% 6.69%(d) 6.24%(d)(e)
======= ======= ======= ========
Portfolio turnover rate...................... 80% 227% 185% 99%
======= ======= ======= ========
</TABLE>
- ---------------
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(b) Ratios are based on average net assets of $65,062,096.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(d) After expense reimbursements. Ratios of expenses and net investment income
to average net assets prior to expense reimbursements were 2.04% and 2.50%
(annualized) and 6.48% and 5.49% (annualized) for 1994 and 1993,
respectively.
(e) Annualized.
AIM INTERMEDIATE GOVERNMENT FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SEPTEMBER 7, 1993*
--------------------------------- TO
1996 1995 1994 DECEMBER 31, 1993
------- ------- ------- ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.......... $ 9.69 $ 8.99 $ 10.04 $ 10.44
Income from investment operations:
Net investment income....................... 0.55 0.63 0.61 0.21
Net gains (losses) on securities (both
realized and unrealized)................. (0.41) 0.70 (1.02) (0.27)
------- ------- ------- --------
Total from investment operations............ 0.14 1.33 (0.41) (0.06)
------- ------- ------- --------
Less distributions:
Dividends from net investment income........ (0.51) (0.59) (0.50) (0.20)
Distributions from net realized capital
gains.................................... -- -- (0.04) (0.14)
Returns of capital.......................... (0.04) (0.04) (0.10) --
------- ------- ------- --------
Total distributions......................... (0.55) (0.63) (0.64) (0.34)
------- ------- ------- --------
Net asset value, end of period................ $ 9.28 $ 9.69 $ 8.99 $ 10.04
======= ======= ======= ========
Total return(a)............................... 1.61% 15.22% (4.13)% (0.52)%
======= ======= ======= ========
Ratios/supplemental data:
Net assets, end of period (000s omitted).... $79,443 $61,300 $23,415 $ 6,160
======= ======= ======= ========
Ratio of expenses to average net assets
(exclusive of interest expense)(b)....... 1.76%(c)(d) 1.86% 1.82% 1.71%(f)
======= ======= ======= ========
Ratio of net investment income to average
net assets(e)............................ 6.00%(c) 6.58% 6.56% 6.37%(f)
======= ======= ======= ========
Portfolio turnover rate..................... 134% 140% 109% 110%
======= ======= ======= ========
</TABLE>
- ---------------
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(b) Ratio of expenses to average net assets prior to reduction of advisory fee
and expense reimbursement for 1994 and 1993 were 1.87% and 2.18%
(annualized), respectively.
(c) Ratios are based on average net assets of $71,976,395.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(e) Ratio of net investment income to average net assets prior to reduction of
advisory fee and expense reimbursement for 1994 and 1993 were 6.50% and
5.90% (annualized), respectively.
(f) Annualized.
15
<PAGE> 137
AIM MUNICIPAL BOND FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SEPTEMBER 1, 1993*
-------------------------------- TO
1996 1995 1994 DECEMBER 31, 1993
------- ------- ------ ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 8.31 $ 7.78 $ 8.61 $ 8.71
Income from investment operations:
Net investment income................. 0.37 0.39 0.39 0.14
Net gains (losses) on securities (both
realized and unrealized)........... (0.13) 0.54 (0.78) 0.01
------- ------- ------ --------
Total from investment operations...... 0.24 0.93 (0.39) 0.15
------- ------- ------ --------
Less distributions:
Dividends from net investment
income............................. (0.36) (0.37) (0.38) (0.13)
Distributions from net realized
capital gains...................... -- -- (0.03) (0.11)
Returns of capital.................... -- (0.03) (0.03) (0.01)
------- ------- ------ --------
Total distributions................... (0.36) (0.40) (0.44) (0.25)
------- ------- ------ --------
Net asset value, end of period.......... $ 8.19 $ 8.31 $ 7.78 $ 8.61
======= ======= ====== ========
Total return(a)......................... 2.99% 12.14% (4.57)% 1.95%
======= ======= ====== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)........................... $33,770 $21,478 $9,175 $ 2,319
======= ======= ====== ========
Ratio of expenses to average net
assets(b).......................... 1.61%(c)(d) 1.68% 1.67% 1.65%(e)
======= ======= ====== ========
Ratio of net investment income to
average net assets(b).............. 4.49%(c) 4.46% 4.83% 4.91%(e)
======= ======= ====== ========
Portfolio turnover rate............... 26% 36% 43% 24%
======= ======= ====== ========
</TABLE>
- ---------------
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(b) Ratios of expenses and net investment income to average daily net assets
prior to expense reimbursements are 1.77%, 1.84% and 3.08% (annualized) and
4.37%, 4.66% and 3.48% (annualized) for 1995-1993, respectively.
(c) Ratios are based on average net assets of $27,530,145.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(e) Annualized.
16
<PAGE> 138
AIM VALUE FUND -- CLASS B SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, OCTOBER 18, 1993*
---------------------------------------- TO
1996 1995 1994 DECEMBER 31, 1993
---------- ---------- -------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 26.65 $ 21.13 $ 20.82 $ 21.80
Income from investment operations:
Net investment income................. 0.20(a) (0.01) -- 0.02
Net gains (losses) on securities (both
realized and unrealized)........... 3.38 7.12 0.51 (0.21)
---------- ---------- -------- --------
Total from investment operations...... 3.58 7.11 0.51 (0.19)
---------- ---------- -------- --------
Less distributions:
Dividends from net investment
income............................. (0.21) -- -- (0.02)
Distributions from net realized
capital gains...................... (1.10) (1.59) (0.20) (0.77)
---------- ---------- -------- --------
Total distributions................... (1.31) (1.59) (0.20) (0.79)
---------- ---------- -------- --------
Net asset value, end of period.......... $ 28.92 $ 26.65 $ 21.13 $ 20.82
========== ========== ======== ========
Total return(b)......................... 13.57% 33.73% 2.46% (0.74)%
========== ========== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)........................... $4,875,933 $2,860,531 $680,119 $63,215
========== ========== ======== ========
Ratio of expenses to average net
assets(c).......................... 1.94%(d)(e) 1.94% 1.90% 1.85%(f)
========== ========== ======== ========
Ratio of net investment income (loss)
to average net assets(c)........... 0.82%(d) (0.08)% 0.00% (0.46)%(f)
========== ========== ======== ========
Portfolio turnover rate............... 126% 151% 127% 177%
========== ========== ======== ========
Average broker commission rate(g)..... $ 0.0436 N/A N/A N/A
========== ========== ======== ========
</TABLE>
- ---------------
(a) Calculated using average shares outstanding.
(b) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods of less than one year.
(c) The ratios of expenses to average net assets prior to waiver of advisory
fees were 1.96% and 1.96%, for 1996 and 1995, respectively. The ratio of net
investment income (loss) to average net assets prior to waiver of advisory
fees were 0.81% and (0.09%), for 1996 and 1995, respectively.
(d) Ratios are based on average net assets of $3,953,324,717.
(e) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(f) Annualized.
(g) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
* Date sales commenced.
17
<PAGE> 139
The following per share data, ratios and supplemental data for the Class A
shares, Class B shares and AIM Cash Reserve Shares of AIM MONEY MARKET FUND for
the years ended December 31, 1996, 1995 and 1994 and the period October 16, 1993
(date operations commenced) through December 31, 1993 have been audited by KPMG
Peat Marwick LLP, independent auditors, whose report thereon was unqualified.
This information should be read in conjunction with the financial statements of
AIM MONEY MARKET FUND included in the Statement of Additional Information.
AIM MONEY MARKET FUND -- CLASS A, CLASS B AND AIM CASH RESERVE SHARES
<TABLE>
<CAPTION>
CLASS A SHARES
---------------------------------------------------
OCTOBER 16,
YEAR ENDED DECEMBER 31, 1993 TO
----------------------------------- DECEMBER 31,
1996 1995 1994 1993
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income................. 0.0433 0.0495 0.0337 0.0048
-------- -------- -------- --------
Less distributions:
Dividends from net investment income.. (0.0433) (0.0495) (0.0337) (0.0048)
-------- -------- -------- --------
Net asset value, end of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total return(a)......................... 4.42% 5.06% 3.43% 2.27%(e)
======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................ $287,905 $221,487 $148,886 $ 81,460
======== ======== ======== ========
Ratio of expenses to average net
assets.............................. 1.07%(b)(c) 1.03% 0.97%(d) 1.00%(d)(e)
======== ======== ======== ========
Ratio of net investment income to
average net assets.................. 4.34%(b) 4.91% 3.53%(d) 2.27%(d)(e)
======== ======== ======== ========
<CAPTION>
CLASS B SHARES
---------------------------------------------------------
OCTOBER 16,
YEAR ENDED DECEMBER 31, 1993 TO
----------------------------------------- DECEMBER 31,
1996 1995 1994 1993
-------------- -------- -------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income................. 0.0360 0.0419 0.0259 0.0032
-------------- -------- -------- --------
Less distributions:
Dividends from net investment income.. (0.0360) (0.0419) (0.0259) (0.0032)
-------------- -------- -------- --------
Net asset value, end of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ======== ======== ========
Total return(a)......................... 3.66% 4.27% 2.62% 1.51%(e)
============== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................ $ 91,148 $ 69,857 $ 33,999 $ 1,289
============== ======== ======== ========
Ratio of expenses to average net
assets.............................. 1.81%(b)(c) 1.78% 1.78%(f) 1.75%(e)(f)
============== ======== ======== ========
Ratio of net investment income to
average net assets.................. 3.60%(b) 4.14% 3.14%(f) 1.54%(e)(f)
============== ======== ======== ========
<CAPTION>
AIM CASH RESERVE SHARES
--------------------------------------------------------
OCTOBER 16,
YEAR ENDED DECEMBER 31, 1993 TO
---------------------------------------- DECEMBER 31,
1996 1995 1994 1993
------------- -------- -------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations:
Net investment income................. 0.0433 0.0493 0.0337 0.0048
------------- -------- -------- --------
Less distributions:
Dividends from net investment income.. (0.0433) (0.0493) (0.0337) (0.0048)
------------- -------- -------- --------
Net asset value, end of period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00
============= ======== ======== ========
Total return(a)......................... 4.41% 5.04% 3.42% 2.27%(e)
============= ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)............................ $ 315,470 $293,450 $359,952 $241,778
============= ======== ======== ========
Ratio of expenses to average net
assets.............................. 1.08%(b)(c) 1.04% 0.99%(g) 1.00%(e)(g)
============= ======== ======== ========
Ratio of net investment income to
average net assets.................. 4.32%(b) 4.92% 3.49%(g) 2.27%(e)(g)
============= ======== ======== ========
</TABLE>
- ---------------
(a) Does not deduct sales charges or contingent deferred sales charges, where
applicable.
(b) Ratios are based on average daily net assets as follows: Class A
Shares - $266,627,474, Class B Shares - $99,033,713 and AIM Cash Reserve
Shares - $385,881,111.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been the same.
(d) Ratios of expenses and net investment income to average daily net assets
prior to waiver of advisory fees are 1.06% and 3.44% for 1994 and 1.20%
(annualized) and 2.07% (annualized) for 1993.
(e) Annualized.
(f) Ratios of expenses and net investment income to average daily net assets
prior to waiver of advisory fees are 1.87% and 3.05% for 1994 and 1.95%
(annualized) and 1.34% (annualized) for 1993.
(g) Ratios of expenses and net investment income to average daily net assets
prior to waiver of advisory fees are 1.08% and 3.40% for 1994 and 1.20%
(annualized) and 2.07% (annualized) for 1993.
18
<PAGE> 140
- --------------------------------------------------------------------------------
PERFORMANCE
All advertisements of the Funds will disclose the maximum sales charge
(including deferred sales charges) to which investments in a Fund's shares may
be subject. If any advertised performance data does not reflect the maximum
sales charge (if any), such advertisement will disclose that the sales charge
has not been deducted in computing the performance data, and that, if reflected,
the maximum sales charge would reduce the performance quoted. See the Statement
of Additional Information for further details concerning performance comparisons
used in advertisements by the Funds. Further information regarding each Fund's
performance is contained in that Fund's annual report to shareholders, which is
available upon request and without charge.
Each Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return. Standardized total return
for Class A shares reflects the deduction of a Fund's maximum initial sales
charge at the time of purchase. Standardized total return for Class B shares
reflects the deduction of the maximum applicable contingent deferred sales
charge on a redemption of shares held for the period. Standardized total return
for Class C shares reflects the deduction of a 1% contingent deferred sales
charge, if applicable, on a redemption of shares held for one year.
A Fund's total return shows its overall change in value, including changes in
share price and assuming all the Fund's dividends and capital gain distributions
are reinvested. A cumulative total return reflects the Fund's performance over a
stated period of time. An average annual total return reflects the hypothetical
compounded annual rate of return that would have produced the same cumulative
total return if the Fund's performance had been constant over the entire period.
BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT VARIATIONS IN THE FUND'S RETURN,
INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS ARE NOT THE SAME AS ACTUAL YEAR-
BY-YEAR RESULTS. To illustrate the components of overall performance, a Fund may
separate its cumulative and average annual returns into income results and
capital gains or losses.
Yield is computed in accordance with standardized formulas described in the
Statement of Additional Information and can be expected to fluctuate from time
to time and is not necessarily indicative of future results. Accordingly, the
yield information may not provide a basis for comparison with investments which
pay a fixed rate of interest for a stated period of time. Yield reflects
investment income net of expenses over the relevant period attributable to a
Fund share, expressed as an annualized percentage of the maximum offering price
per share for Class A shares and net asset value per share for Class B shares,
Class C shares and AIM Cash Reserve Shares of AIM MONEY MARKET FUND.
Yield is a function of the type and quality of a Fund's investments, the
maturity of the securities held in a Fund's portfolio and the operating expense
ratio of the Fund. A shareholder's investment in a Fund is not insured or
guaranteed. These factors should be carefully considered by the investor before
making an investment in a Fund. A tax-equivalent yield is calculated in the same
manner as the standard yield with an adjustment for a stated, assumed tax rate.
AIM MUNICIPAL BOND FUND may also demonstrate the effect of such tax-equivalent
adjustments generally by comparing various yield levels with their corresponding
tax-equivalent yields, given a stated tax rate.
From time to time and in its discretion, AIM may waive all or a portion of its
advisory fees and/or assume certain expenses of any Fund. Such practices will
have the effect of increasing that Fund's yield and total return. The
performance of each Fund will vary from time to time and past results are not
necessarily representative of future results. A Fund's performance is a function
of its portfolio management in selecting the type and quality of portfolio
securities and is affected by operating expenses of the Fund as well as by
general market conditions.
- --------------------------------------------------------------------------------
ABOUT THE FUNDS
The Funds are separate series of shares of the Trust, a Delaware business
trust established on May 5, 1993 and registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end management investment
company (see "Organization of the Trust"). Each Fund has its own investment
objective(s) and policies designed to meet specific investment goals, operates
as a diversified portfolio and intends to be treated as a regulated investment
company for federal income tax purposes.
Each Fund invests in securities of different issuers and industry
classifications (with the exception of AIM GLOBAL UTILITIES FUND which
concentrates its investments in the utilities industry) in an attempt to spread
and reduce the risks inherent in all investing. Each Fund continuously offers
new shares for sale to the public, and stands ready to redeem its outstanding
shares for cash at net asset value (subject, in certain circumstances, to a
contingent deferred sales charge). See "How to Redeem Shares." AIM, the
investment advisor for each Fund, continuously reviews and, from time to time,
changes the portfolio holdings of each of the Funds in pursuit of each Fund's
objective(s).
19
<PAGE> 141
- --------------------------------------------------------------------------------
INVESTMENT PROGRAMS
The investment objective(s) of each Fund, except AIM HIGH YIELD FUND, are
deemed to be fundamental policies which may not be changed without the approval
of a majority of the Fund's outstanding shares (within the meaning of the 1940
Act). The Board of Trustees on behalf of AIM HIGH YIELD FUND is permitted to
change the investment objective of that Fund without shareholder approval.
Further information is available in the Statement of Additional Information.
Individuals considering the purchase of shares of any Fund should recognize that
there are risks in the ownership of any security and that no assurance can be
given that any particular Fund will attain its investment objective(s).
AIM BALANCED FUND. The Fund's objective is to achieve as high a total return
to investors as possible, consistent with preservation of capital, by investing
in a broadly diversified portfolio of high-yielding securities, including common
stocks, preferred stocks, convertible securities and bonds. Although equity
securities will be purchased primarily for capital appreciation and fixed income
securities will be purchased primarily for income purposes, income and capital
appreciation potential will be considered in connection with all investments.
The Fund normally will have a minimum of 30% and a maximum of 70% of its total
assets invested in equity securities and a minimum of 30% and a maximum of 70%
of its total assets invested in (non-convertible) fixed income securities. Most
of such fixed income securities will be rated Baa or better by Moody's Investors
Service, Inc. ("Moody's") or BBB or better by Standard & Poor's Ratings Services
("S&P") or, if unrated, deemed to be of comparable quality by AIM, although the
Fund may invest to a limited extent in lower-rated securities. The fixed income
securities in which the Fund invests may include U.S. Government obligations,
mortgage-backed securities, asset-backed securities, bank obligations, corporate
debt obligations and unrated obligations, including those of foreign issuers.
The Fund may, in pursuit of its objective, invest up to 10% of its total assets
in debt securities rated lower than Baa by Moody's or BBB by S&P, which are
commonly known as "junk bonds." During 1996, the Fund invested less than 5% of
its net assets in below investment grade debt securities. See "Certain
Investment Strategies and Policies -- Risk Factors Regarding Non-Investment
Grade Debt Securities" for more information concerning the risk factors
associated with investing in such securities.
The Fund may also invest up to 25% of its total assets in convertible
securities. Compliance with all of the above percentage requirements may limit
the ability of the Fund to maximize total return. The actual percentage of the
assets invested in equity and fixed income securities will vary from time to
time, depending on the judgment of AIM as to general market and economic
conditions and trends, yields and interest rates and changes in fiscal and
monetary policies.
AIM GLOBAL UTILITIES FUND. The Fund's objective is to achieve a high level of
current income, and as a secondary objective the Fund seeks to achieve capital
appreciation, by investing primarily in the common and preferred stocks of
public utility companies. Under normal circumstances, at least 65% of the Fund's
total assets will be invested in securities of public utility companies (either
domestic or foreign). Public utility companies include companies that provide
electricity, natural gas or water and other sanitary services to the public, and
telephone or telegraph companies, and other companies providing public
communications services. The Fund may also invest in developing utility
technology companies and in holding companies which derive a substantial portion
of their revenues from utility-related activities. Generally, a holding company
will be considered to derive a substantial portion of its revenues from
utility-related activities if such activities account for at least 40% of its
revenues. The Fund may invest up to 25% of its total assets in convertible
securities. When AIM deems it appropriate, the Fund may purchase bonds issued by
the above types of companies, although investments in non-convertible bonds will
not exceed 25% of the Fund's total assets. The Fund may invest up to 10% of its
total assets in bonds rated lower than Baa by Moody's or BBB by S&P (or
comparable ratings by other nationally recognized statistical rating
organizations "NRSROs") or unrated bonds which AIM determines to be of
comparable quality. During 1996, the Fund invested less than 5% of its net
assets in below investment grade debt securities. See "Certain Investment
Strategies and Policies -- Risk Factors Regarding Non-Investment Grade Debt
Securities" for more information concerning the risk factors associated with
investing in such securities.
The Fund may invest up to 80% of its total assets in foreign securities,
including investments in American Depositary Receipts, European Depositary
Receipts and other securities representing underlying securities of foreign
issuers. Under normal market conditions, the Fund will be invested in securities
of issuers located in at least four countries, one of which will be the United
States, although for temporary defensive purposes it may invest 100% of its
total assets in securities of United States issuers. In some foreign countries,
utility companies are partially owned by government agencies. In some cases,
foreign government agencies may have significant investments in businesses other
than utility companies. Also, investments in securities of foreign issuers may
involve other risks which are not ordinarily associated with investments in
domestic issuers (see "Certain Investment Strategies and Policies -- Investments
in Foreign Securities").
In addition, investors should also be aware that the Fund may invest in
companies located within emerging or developing countries. An "emerging or
developing country" is a country in the initial stages of its industrial cycle.
Investments in emerging or developing countries involve exposure to economic
structures that are generally less diverse and mature and to political systems
which can be expected to have less stability than those of more developed
countries. Such countries may have relatively unstable governments,
20
<PAGE> 142
economies based on only a few industries, and securities markets which trade
only a small number of securities. Historical experience indicates that markets
of emerging or developing countries have been more volatile than the markets of
more mature economies; such markets have also from time to time provided higher
rates of return and greater risks to investors. AIM believes that these
characteristics of emerging or developing countries can be expected to continue
in the future.
A portfolio of utility company securities is subject to a different degree of
volatility than a more broadly diversified portfolio. Economic, operational or
regulatory changes that affect utility companies will have a material impact
upon the value of the securities that the Fund owns. Events that have no direct
connection with companies whose securities are owned by the Fund may affect the
prices of those securities, such as emergencies involving nuclear power plants.
Moreover, a portfolio of utilities industry securities is subject to the risks
unique to that industry, such as inflationary or other cost increases in fuel
and operating expenses, possible increases in the interest costs of loans needed
for capital construction programs, compliance with environmental regulations,
possible adverse changes in the regulatory climate and availability of fuel
sources. A description of the utilities industry is contained in the Statement
of Additional Information.
AIM GROWTH FUND. The Fund's objective is to achieve long-term growth of
capital by investing primarily in the common stocks of established medium- to
large-size companies with prospects for above-average, long-term earnings
growth. Realization of current income is an incidental consideration.
It is anticipated that common stocks will be the principal form of investment
by the Fund. The Fund's portfolio is primarily comprised of securities of two
basic categories of companies: (1) "core" companies, which the Fund's management
considers to have experienced above-average and consistent long-term growth in
earnings and to have excellent prospects for outstanding future growth, and (2)
"earnings acceleration" companies, which the Fund's management believes are
currently enjoying a dramatic increase in profits.
AIM HIGH YIELD FUND. The Fund's objective is to achieve a high level of
current income by investing primarily in publicly traded non-investment grade
debt securities. The Fund will also consider the possibility of capital growth
when it purchases and sells securities. Debt securities of less than investment
grade are considered "high risk" securities (commonly referred to as junk
bonds).
The Fund seeks high income principally by purchasing securities that are rated
Baa, Ba or B by Moody's or BBB, BB or B by S&P, or securities of comparable
quality in the opinion of AIM that are either unrated or rated by other NRSROs.
The Fund may also hold, from time to time, securities rated Caa by Moody's or
CCC by S&P, or, if unrated or rated by other NRSROs, securities of comparable
quality as determined by AIM. It should be noted, however, that achieving the
Fund's investment objective may be more dependent on the credit analysis of AIM,
and less on that of credit rating agencies, than may be the case for funds that
invest in more highly rated bonds. At least 80% of the value of the Fund's total
assets will be invested in debt securities, including convertible debt
securities, and/or cash and cash equivalents. At least 65% of the value of the
Fund's assets will be invested in high yield debt securities. The Fund may also
invest in preferred stocks.
For a breakdown of the quality ratings of the Fund's investments as of
December 31, 1996, see the chart on page 24.
While the securities held by the Fund are expected to provide greater income
and, possibly, opportunity for greater gain than investments in more highly
rated securities, they may be subject to greater risk of loss of income and
principal and are more speculative in nature. The Fund's yield and the net asset
value of its shares may be expected to fluctuate over time. Therefore, an
investment in the Fund may not be appropriate for some investors and should not
constitute a complete investment program for others. See "Certain Investment
Strategies and Policies -- Risk Factors Regarding Non-Investment Grade Debt
Securities."
The Fund may invest in both illiquid securities and securities which are
subject to restrictions on resale because they have not been registered under
the Securities Act of 1933. See "Certain Investment Strategies and
Policies -- Illiquid Securities" for further information regarding such
investments.
AIM INCOME FUND. The Fund's objective is to achieve a high level of current
income consistent with reasonable concern for safety of principal, by investing
primarily in fixed rate corporate debt, U.S. Government obligations and U.S.
Government Agency Mortgage-Backed Securities. The Fund may also invest in
preferred stock issues and convertible corporate debt. In selecting portfolio
securities the Fund will, in accordance with its concern for safety of
principal, consider individual credit risks, but shareholders should recognize
that the market value of even high quality long-term fixed rate securities will
fluctuate with changes in interest rate levels. The percent of the Fund's assets
in various types of securities will vary in light of the Fund's investment
objective and existing market conditions.
The Fund may invest up to 40% of its total assets in securities issued by
foreign entities. Purchases of foreign securities which are payable in foreign
currencies will be affected either favorably or unfavorably by changes in the
value of the foreign currencies against the U.S. dollar. Investing in foreign
securities payable in foreign currencies carries increased risk to the Fund (see
"Certain Investment Strategies and Policies -- Investments in Foreign
Securities" and " -- Foreign Exchange Transactions"). The Fund will maintain
less than 35% of its net assets in debt securities rated below Baa/BBB, which
are commonly known as "junk bonds." See "Certain Investment Strategies and
Policies -- Risk Factors Regarding Non-Investment Grade Debt Securities."
For a breakdown of the quality ratings of the Fund's investments as of
December 31, 1996, see the chart on page 24.
21
<PAGE> 143
Ordinarily, the Fund does not purchase securities with the intention of
engaging in short-term trading. However, any particular security will be sold,
and the proceeds reinvested, whenever such action is deemed prudent in light of
the Fund's investment objectives, regardless of the holding period of that
security. The Fund will not necessarily dispose of a security because of a
reduction in rating. A higher rate of portfolio turnover may result in higher
transaction costs, including brokerage commissions. Also, to the extent that
higher portfolio turnover results in a higher rate of net realized capital gains
to a Fund, the portion of the Fund's distributions constituting taxable capital
gains may increase. See "Dividends, Distributions and Tax Matters."
AIM INTERMEDIATE GOVERNMENT FUND. The Fund's objective is to achieve a high
level of current income consistent with reasonable concern for safety of
principal by investing, under normal circumstances, at least 65% of its total
assets in debt securities issued, guaranteed or otherwise backed by the United
States Government. The Government securities which may be purchased by the Fund
include but are not limited to (1) U.S. Treasury obligations such as Treasury
Bills (maturities of one year or less), Treasury Notes (maturities of one to ten
years) and Treasury Bonds (generally maturities of greater than ten years) and
(2) obligations issued or guaranteed by U.S. Government agencies and
instrumentalities ("Agency Securities") which are supported by any of the
following: (a) the full faith and credit of the U.S. Treasury, such as
obligations of the Government National Mortgage Association ("GNMA"), (b) the
right of the issuer to borrow an amount limited to a specific line of credit
from the U.S. Treasury, such as obligations of the Federal National Mortgage
Association ("FNMA"), the Federal Home Loan Bank and the U.S. Postal Service, or
(c) the credit of the agency or instrumentality, such as obligations of the
Federal Home Loan Mortgage Corporation ("FHLMC") and Federal Farm Credit System.
Although their close relationship with the U.S. Government is believed to make
them high-quality securities with minimal credit risks, the U.S. Government is
not obligated by law to support either FNMA or FHLMC. Accordingly, such
securities may involve risk of loss of principal and interest; however,
historically there have not been any defaults of such issues. For a listing of
some of the types of Agency Securities in which the Fund may invest, see
Appendix B to this Prospectus. The Fund may also invest in U.S. Government
Agency Mortgage-Backed Securities. Mortgage-backed securities consist of
interests in underlying mortgages with maturities of up to thirty years.
The Fund purchases primarily fixed-rate securities, including but not limited
to high coupon U.S. Government Agency Mortgage-Backed Securities, which provide
a higher coupon at the time of purchase than the then prevailing market rate
yield. The prices of high coupon U.S. Government Agency Mortgage-Backed
Securities do not tend to rise as rapidly as those of traditional fixed-rate
securities at times when interest rates are decreasing, and tend to decline more
slowly at times when interest rates are increasing. The Fund may purchase such
securities at a premium, which means that a faster principal prepayment rate
than expected will reduce the market value of and income from such securities,
while a slower prepayment rate will tend to increase the market value of and
income from such securities.
The composition and weighted average maturity of the Fund's portfolio will
vary from time to time, based upon AIM's determination of how best to achieve
the Fund's investment objective. The Fund may invest in Government securities of
all maturities, short-term, intermediate-term and long-term. The Fund will
maintain a dollar-weighted average portfolio maturity of between three and ten
years. This policy regarding portfolio maturity is a non-fundamental policy of
the Fund.
AIM MONEY MARKET FUND. The Fund's objective is to provide as high a level of
current income as is consistent with the preservation of capital and liquidity.
The Fund intends to invest in money market instruments such as bankers'
acceptances, certificates of deposit, repurchase agreements, master notes, time
deposits, taxable municipal securities and commercial paper, all of which will
be denominated in U.S. dollars (referred to collectively as "Money Market
Instruments") and U.S. Government direct obligations and U.S. Government
agencies' securities. Bankers' acceptances, certificates of deposit and time
deposits may be purchased from U.S. or foreign banks. Certain types of Money
Market Instruments are briefly described in Appendix A to this Prospectus and
are described more fully in the Statement of Additional Information.
The Fund may invest in other types of Money Market Instruments not prohibited
by its investment restrictions, if approved by the trustees. The Fund will not
invest in instruments maturing more than 397 days from the date of investment,
and will maintain a dollar-weighted average portfolio maturity of 90 days or
less.
The Fund will limit investments in Money Market Instruments to those which at
the date of purchase are "First Tier" securities as defined in Rule 2a-7 under
the 1940 Act, as such Rule may be amended from time to time. Generally, "First
Tier" securities are securities that are rated in the highest rating category by
two NRSROs, or, if only rated by one NRSRO, are rated in the highest rating
category by that NRSRO, or, if unrated, are determined by AIM (under the
supervision of and pursuant to guidelines established by the Board of Trustees)
to be of comparable quality to a rated security that meets the foregoing quality
standards. For a complete definition of a "First Tier" security, see the
definition set forth in the Statement of Additional Information.
The Fund must also comply with the requirements of Rule 2a-7 under the 1940
Act, which govern the operations of money market funds and may be more
restrictive than the Fund's restrictions. If any of the Fund's policies and
restrictions are more restrictive than Rule 2a-7, such policies and restrictions
will be followed.
22
<PAGE> 144
The Fund will normally hold portfolio securities to maturity but may dispose
of such securities prior to maturity if AIM believes such disposition advisable.
Investing in Money Market Instruments of short maturity and/or actively managing
its portfolio will result in a large number of transactions, but since the costs
of these transactions are small, they are not expected to have a significant
effect on net asset value or yield.
AIM MUNICIPAL BOND FUND. The Fund's objective is to achieve a high level of
current income exempt from federal income taxes consistent with the preservation
of principal by investing in a diversified portfolio of municipal bonds. These
investments may include obligations issued by or on behalf of states,
territories and possessions of the United States and the District of Columbia
and their political subdivisions, agencies, authorities and instrumentalities,
the interest from which, in the opinion of bond counsel, is exempt from federal
income tax.
Municipal bonds include debt obligations of varying maturities issued to
obtain funds for various public purposes, including the construction of a wide
range of public facilities, the refunding of outstanding obligations, the
obtaining of funds for general operating expenses and the lending of such funds
to other public institutions and facilities. In addition, certain types of
industrial development bonds are issued by or on behalf of public authorities to
obtain funds to provide for the construction, equipment, repair or improvement
of privately operated facilities ("private activity bonds"). Such obligations
are considered to be municipal bonds appropriate for investment by the Fund,
provided that the interest paid thereon, in the opinion of bond counsel, is
exempt from federal income taxes. As used in this Prospectus and the Statement
of Additional Information, interest which is "tax-exempt" or "exempt from
federal income taxes" means interest on municipal bonds which is excluded from
gross income for federal income tax purposes, but which may give rise to federal
alternative minimum tax liability. The principal and interest payments on
private activity bonds (such as industrial development or pollution control
bonds) are the responsibility of the industrial user and, therefore, are not
backed by the taxing power of the issuing municipality. Such obligations are
included within the term municipal bonds if the interest paid thereon qualifies
for exemption from federal income tax, but the interest on private activity
bonds will be considered to be an item of preference for purposes of alternative
minimum tax liability under the Internal Revenue Code of 1986, as amended (the
"Code"). See "Tax Matters" in the Statement of Additional Information. The Fund
will invest at least 80% of its total invested assets in securities that do not
pay interest subject to federal income taxes and that do not constitute an item
of preference for purposes of the alternative minimum tax.
In addition, the Fund will invest at least 80% of its total invested assets in
municipal bonds. At least 80% of the municipal securities purchased by the Fund
will be rated within the four highest ratings, or will be obligations of issuers
having an issue of outstanding municipal bonds rated within the four highest
ratings of Moody's, S&P or any other NRSRO. However, up to 20% of the Fund's
total assets may be invested in unrated municipal bonds if in the judgment of
AIM, after considering available information regarding the creditworthiness of
the issuer, such bonds are similar in quality to those bonds rated within the
four highest ratings mentioned above. The Fund will maintain less than 20% of
its total assets in securities rated below Baa/BBB (or a comparable rating of
any other NRSRO). For purposes of the foregoing percentage limitations,
municipal securities (i) which have been collateralized with U.S. Government
securities held in escrow until the municipal securities' refunding date or
final maturity, but (ii) which have not been re-rated by a NRSRO, will be
treated by the Fund as the equivalent of Aaa/AAA rated securities. During 1996,
the Fund invested less than 5% of its net assets in below investment grade debt
securities. See "Certain Investment Strategies and Policies -- Risk Factors
Regarding Non-Investment Grade Debt Securities" for more information concerning
the risk factors associated with investing in such securities.
Since the Fund invests primarily in municipal obligations, the marketability
and market value of these obligations may be affected by certain constitutional
amendments, legislative measures, executive orders, administrative regulations
and voter initiatives as well as regional economies. The ability of the Fund to
achieve its objective is affected by the ability of municipal issuers to meet
their payment obligations. Problems which may arise in the foregoing areas and
which are not resolved could adversely affect the various municipal issuers'
abilities to meet their financial obligations.
The Fund may invest in short-term obligations, including taxable investments,
to establish a defensive position in anticipation of a market decline with a
corresponding rise in interest rates. Such short-term obligations include notes
issued by or on behalf of municipal issuers, obligations of the U.S. Government,
its agencies or instrumentalities, instruments of domestic banks, domestic
commercial paper and other cash equivalent investments. Interest income from
certain short-term holdings may be taxable to shareholders as ordinary income.
AIM VALUE FUND. The Fund's objective is to achieve long-term growth of capital
by investing primarily in equity securities judged by the Fund's investment
advisor to be undervalued relative to the investment advisor's appraisal of the
current or projected earnings of the companies issuing the securities, or
relative to current market values of assets owned by the companies issuing the
securities or relative to the equity market generally. Income is a secondary
objective and would be satisfied principally from the income (interest and
dividends) generated by the common stocks, convertible bonds and convertible
preferred stocks that make up the Fund's portfolio. The Fund should not be
purchased by those who seek income as their primary investment objective.
23
<PAGE> 145
In addition to the securities described above, the Fund may also acquire
preferred stocks and debt instruments having prospects for growth of capital.
Although these different types of securities can be expected to generate amounts
of income to satisfy the Fund's secondary objective, they will be purchased for
their potential for growth of capital.
The primary emphasis of AIM's search for undervalued equity securities is in
four categories: (1) out-of-favor cyclical growth companies; (2) established
growth companies that are undervalued compared to historical relative valuation
parameters; (3) companies where there is early but tangible evidence of
improving prospects which are not yet reflected in the price of the company's
equity securities; and (4) companies whose equity securities are selling at
prices that do not reflect the current market value of their assets and where
there is reason to expect realization of this potential in the form of increased
equity values.
Because AIM VALUE FUND invests in equity securities judged by the Fund's
investment advisor to be undervalued relative to the investment advisor's
appraisal of the current or projected earnings of the companies issuing such
securities, investors should carefully assess the risks associated with an
investment in the Fund.
PORTFOLIO RATINGS. During 1996, the percentage of average annual assets of AIM
HIGH YIELD FUND and AIM INCOME FUND, calculated on a dollar weighted basis,
which was invested in securities within the various rating categories (based on
the higher of Standard and Poor's Corporation and Moody's Investors Service,
Inc. ratings as described in Appendix C), and in unrated securities determined
to be of comparable quality, was as follows:
<TABLE>
<CAPTION>
AIM HIGH AIM INCOME
YIELD FUND FUND
---------- ----------
<S> <C> <C>
AAA/Aaa..................................................... 0% 17.77%
AA/Aa....................................................... 0.35% 13.55%
A/A......................................................... 0.40% 15.03%
BBB/Baa..................................................... 0.21% 22.04%
BB/Ba....................................................... 10.30% 11.15%
B/B......................................................... 75.01% 18.66%
CCC/Caa..................................................... 6.21% 0.92%
CC/Ca....................................................... 0% 0%
C/C......................................................... 0% 0%
Unrated..................................................... 7.52% 0.88%
------ ------
Total Average Annual Assets............................ 100% 100%
</TABLE>
- --------------------------------------------------------------------------------
CERTAIN INVESTMENT STRATEGIES AND POLICIES
In pursuit of its objectives and policies, one or more of the Funds may employ
one or more of the following strategies in order to enhance investment results:
CASH MANAGEMENT AND TEMPORARY DEFENSIVE INVESTMENTS. A portion of each Fund's
assets may be held from time to time in cash, repurchase agreements, commercial
paper, taxable municipal securities or other Money Market Instruments when such
positions are deemed advisable in light of economic conditions or for daily cash
management purposes. In addition, each of the Funds may invest for temporary
defensive purposes all or a substantial portion of its assets in the foregoing
types of investments, although AIM MONEY MARKET FUND invests exclusively in
Money Market Instruments. None of the Funds (except AIM MONEY MARKET FUND) is
limited to investing in Money Market Instruments which are "First Tier"
securities as defined in Rule 2a-7 under the 1940 Act. To the extent that a Fund
(other than AIM MONEY MARKET FUND) invests in the foregoing types of
investments, its ability to achieve its investment objective may be adversely
affected.
SECURITIES ISSUED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS. (All Funds).
Each Fund may purchase securities on a "when-issued" basis, that is, delivery of
and payment for the securities is not fixed at the date of purchase, but is set
after the securities are issued (normally within forty-five days after the date
of the transaction). Each Fund also may purchase or sell securities on a delayed
delivery basis. The payment obligation and the interest rate that will be
received on the delayed delivery securities are fixed at the time the buyer
enters into the commitment. A Fund will only make commitments to purchase
when-issued or delayed delivery securities with the intention of actually
acquiring such securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable.
Investment in securities on a when-issued or delayed delivery basis may
increase a Fund's exposure to market fluctuation and may increase the
possibility that the Fund will incur short-term gains subject to federal
taxation or short-term losses if the Fund must engage in portfolio transactions
in order to honor a when-issued or delayed delivery commitment. In a delayed
delivery transaction, the Fund relies on the other party to complete the
transaction. If the transaction is not completed, the Fund may miss a price or
yield considered to be advantageous. A Fund will employ techniques designed to
reduce such risks. If a Fund purchases a when-issued secur-
24
<PAGE> 146
ity, the Fund's custodian bank will segregate cash or other high grade
securities (including temporary investments and Municipal Securities) in an
amount equal to the when-issued commitment. If the market value of such
securities declines, additional cash or securities will be segregated on a daily
basis so that the market value of the segregated assets will equal the amount of
the Fund's when-issued commitments. To the extent cash and securities are
segregated, they will not be available for new investments or to meet
redemptions. Securities purchased on a delayed delivery basis may require a
similar segregation of cash or other high grade securities. For a more complete
description of when-issued securities and delayed delivery transactions see the
Statement of Additional Information.
DOLLAR ROLL TRANSACTIONS. AIM INCOME FUND and AIM INTERMEDIATE GOVERNMENT FUND
only. In order to enhance portfolio returns and manage prepayment risks, AIM
INCOME FUND and AIM INTERMEDIATE GOVERNMENT FUND may engage in dollar roll
transactions with respect to mortgage securities issued by GNMA, FNMA and FHLMC.
In a dollar roll transaction, a Fund sells a mortgage security held in the
portfolio to a financial institution such as a bank or broker-dealer, and
simultaneously agrees to repurchase a substantially similar security (same type,
coupon and maturity) from the institution at a later date at an agreed upon
price. The mortgage securities that are repurchased will bear the same interest
rate as those sold, but generally will be collateralized by different pools of
mortgages with different prepayment histories. During the period between the
sale and repurchase, a Fund will not be entitled to receive interest and
principal payments on the securities sold. Proceeds of the sale will be invested
in short-term instruments, and the income from these investments, together with
any additional fee income received on the sale, could generate income for a Fund
exceeding the yield on the sold security.
Dollar roll transactions involve the risk that the market value of the
securities retained by a Fund may decline below the price of the securities that
the Fund has sold but is obligated to repurchase under the agreement. In the
event the buyer of securities in a dollar roll transaction files for bankruptcy
or becomes insolvent, the Fund's use of the proceeds from the sale of the
securities may be restricted pending a determination by the other party, or its
trustee or receiver, whether to enforce the Fund's obligation to repurchase the
securities. AIM INCOME FUND and AIM INTERMEDIATE GOVERNMENT FUND will limit
their respective borrowings from banks, reverse repurchase agreements and dollar
roll transactions to an aggregate of 33 1/3% of their respective total assets at
the time of investment. A Fund will not purchase additional securities when any
borrowings from banks exceed 5% of the Fund's total assets. For further
information regarding reverse repurchase agreements see the Statement of
Additional Information.
INVESTMENT IN OTHER INVESTMENT COMPANIES. Each of the Funds is permitted to
invest in other investment companies to the extent permitted by the 1940 Act,
and rules and regulations thereunder, and, if applicable, exemptive orders
granted by the SEC.
STOCK INDEX FUTURES CONTRACTS AND RELATED OPTIONS. (AIM BALANCED FUND, AIM
GLOBAL UTILITIES FUND, AIM GROWTH FUND and AIM VALUE FUND ("Equity Funds")).
INTEREST RATE FUTURES CONTRACTS AND RELATED OPTIONS. (AIM BALANCED FUND, AIM
GLOBAL UTILITIES FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND and AIM MUNICIPAL BOND FUND ("Debt Funds")). Each of the Equity
Funds may purchase and sell stock index futures contracts or purchase and sell
options thereon in order to hedge the value of their respective portfolios
against changes in market conditions. Similarly, each of the Debt Funds may
purchase and sell interest rate futures contracts or purchase and sell options
thereon in order to hedge the value of their respective portfolios against
changes in market conditions. A stock index futures contract is an agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar or other currency amount times the difference
between the stock index value at the close of the last trading day of the
contract and the price at which the futures contract is originally struck. No
physical delivery of the underlying stocks in the index is made. An interest
rate futures contract is an agreement between two parties to buy and sell a debt
security for a set price on a future date. Generally, a Fund may elect to close
a position in a futures contract by taking an opposite position which will
operate to terminate the Fund's position in the futures contract.
There are risks associated with investments in stock index futures contracts,
interest rate futures contracts, and options on such contracts. During certain
market conditions, purchases and sales of futures contracts may not completely
offset a decline or rise in the value of a Fund's portfolio. In the futures
markets, it may not always be possible to execute a buy or sell order at the
desired price, or to close out an open position due to market conditions, limits
on open positions and/or daily price fluctuations. Changes in the market value
of a Fund's portfolio may differ substantially from the changes anticipated by
the Fund when hedged positions were established and unanticipated price
movements in a futures contract may result in a loss substantially greater than
a Fund's initial investment in such contract. Successful use of futures
contracts and related options is dependent upon AIM's ability to predict
correctly movements in the direction of the applicable markets. No assurance can
be given that AIM's judgment in this respect will be correct.
No Fund may purchase or sell futures contracts or purchase or sell related
options if, immediately thereafter, the sum of the amount of margin deposits and
premiums on open positions with respect to futures contracts and related options
would exceed 5% of the market value of a Fund's total assets. See the Statement
of Additional Information for a description of a Fund's investments in futures
contracts and options on futures contracts, including certain additional risks.
ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net assets (10% of
the net assets of AIM MONEY MARKET FUND) in securities that are illiquid.
Illiquid securities include securities that have no readily available market
quotations and cannot be disposed of promptly (within seven days) in the normal
course of business at a price at which they are valued. Illiquid securities may
25
<PAGE> 147
include securities that are subject to restrictions on resale because they have
not been registered under the Securities Act of 1933. Restricted securities may,
in certain circumstances, be resold pursuant to Rule 144A, and thus may or may
not constitute illiquid securities. Limitations on the resale of restricted
securities may have an adverse effect on their marketability, which may prevent
the Fund from disposing of them promptly at reasonable prices. The Fund may have
to bear the expense of registering such securities for resale, and the risk of
substantial delays in effecting such registrations. The Trust's Board of
Trustees is responsible for developing and establishing guidelines and
procedures for determining the liquidity of Rule 144A restricted securities on
behalf of the Funds and monitoring AIM's implementation of the guidelines and
procedures.
RISK FACTORS REGARDING NON-INVESTMENT GRADE DEBT SECURITIES. AIM HIGH YIELD
FUND, and to a lesser extent AIM BALANCED FUND, AIM GLOBAL UTILITIES FUND, AIM
INCOME FUND and AIM MUNICIPAL BOND FUND, seek to meet their respective
investment objectives by investing in non-investment grade debt securities,
commonly known as "junk bonds." While generally providing greater income and
opportunity for gain, non-investment grade debt securities may be subject to
greater risks than higher-rated securities. Economic downturns tend to disrupt
the market for junk bonds and adversely affect their values. Such economic
downturns may be expected to result in increased price volatility for junk bonds
and of the value of shares of the above-named Funds, and increased issuer
defaults on junk bonds.
In addition, many issuers of junk bonds are substantially leveraged, which may
impair their ability to meet their obligations. In some cases, junk bonds are
subordinated to the prior payment of senior indebtedness, which potentially
limits a Fund's ability to fully recover principal or to receive payments when
senior securities are subject to a default.
The credit rating of a junk bond does not necessarily address its market value
risk, and ratings may from time to time change to reflect developments regarding
the issuer's financial condition. Junk bonds have speculative characteristics
which are likely to increase in number and significance with each successive
lower rating category.
When the secondary market for junk bonds becomes more illiquid, or in the
absence of readily available market quotations for such securities, the relative
lack of reliable objective data makes it more difficult for the trustees to
value a Fund's securities, and judgment plays a more important role in
determining such valuations. Increased illiquidity in the junk bond market also
may affect a Fund's ability to dispose of such securities at desirable prices.
In the event a Fund experiences an unexpected level of net redemptions, the
Fund could be forced to sell its junk bonds without regard to their investment
merits, thereby decreasing the asset base upon which the Fund's expenses can be
spread and possibly reducing the Fund's rate of return. Prices of junk bonds
have been found to be less sensitive to fluctuations in interest rates, and more
sensitive to adverse economic changes and individual corporate developments than
those of higher-rated debt securities.
INVESTMENTS IN FOREIGN SECURITIES. (All Funds except AIM INTERMEDIATE
GOVERNMENT FUND and AIM MUNICIPAL BOND FUND). Each Fund may invest up to 25% of
its total assets (up to 20% for AIM BALANCED FUND, 40% for AIM INCOME FUND, 50%
for AIM MONEY MARKET FUND and 80% for AIM GLOBAL UTILITIES FUND) in foreign
securities, although AIM MONEY MARKET FUND may only invest in foreign securities
denominated in U.S. dollars. To the extent it invests in securities denominated
in foreign currencies, each Fund bears the risks of changes in the exchange
rates between U.S. currency and the foreign currency, as well as the
availability and status of foreign securities markets. Each Fund (other than AIM
MONEY MARKET FUND) may invest in securities of foreign issuers which are in the
form of American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs"), or other securities representing underlying securities of foreign
issuers, and such investments are treated as foreign securities for purposes of
percentage limitations on investments in foreign securities. For a discussion of
the risks pertaining to investments in foreign securities. See "Risk Factors
Regarding Foreign Securities" below.
FOREIGN EXCHANGE TRANSACTIONS. (All Funds except AIM INTERMEDIATE GOVERNMENT
FUND, AIM MONEY MARKET FUND and AIM MUNICIPAL BOND FUND). Each Fund has
authority to deal in foreign exchange between currencies of the different
countries in which it will invest as a hedge against possible variations in the
foreign exchange rates between those countries. This may be accomplished through
direct purchases or sales of foreign currency, purchases of options on futures
contracts with respect to foreign currency, and contractual agreements to
purchase or sell a specified currency at a specified future date (up to one
year) at a price set at the time of the contract. Such contractual commitments
may be forward contracts entered into directly with another party or exchange
traded futures contracts.
The Funds may purchase and sell options on futures contracts, forward
contracts or futures contracts which are denominated in a particular foreign
currency to hedge the risk of fluctuations in the value of another currency.
Each Fund's dealings in foreign exchange will be limited to hedging involving
either specific transactions or portfolio positions. Transaction hedging is the
purchase or sale of foreign currency with respect to specific receivables or
payables of the Fund accruing in connection with the purchase or sale of its
portfolio securities, the sale and redemption of shares of the Fund, or the
payment of dividends and distributions by the Fund. Position hedging is the
purchase or sale of foreign currency with respect to portfolio security
positions denominated or quoted in a foreign currency. The Funds will not
speculate in foreign exchange. No Fund will commit a larger percentage of its
total assets to foreign ex-
26
<PAGE> 148
change hedges than the percentage of its total assets which it could invest in
foreign securities. Further information concerning futures contracts and related
options is set forth above.
RISK FACTORS REGARDING FOREIGN SECURITIES. Investments by a Fund in foreign
securities, whether denominated in U.S. dollars or foreign currencies, may
entail all of the risks set forth below. Investments by a Fund in ADRs, EDRs or
similar securities also may entail some or all of the risks described below.
Currency Risk. The value of the Funds' foreign investments will be affected by
changes in currency exchange rates. The U.S. dollar value of a foreign security
decreases when the value of the U.S. dollar rises against the foreign currency
in which the security is denominated, and increases when the value of the U.S.
dollar falls against such currency.
Political and Economic Risk. The economies of many of the countries in which
the Funds may invest may not be as developed as the United States' economy and
may be subject to significantly different forces. Political or social
instability, expropriation or confiscatory taxation, and limitations on the
removal of funds or other assets could also adversely affect the value of the
Funds' investments.
Regulatory Risk. Foreign companies are not registered with the Securities and
Exchange Commission and are generally not subject to the regulatory controls
imposed on United States issuers and, as a consequence, there is generally less
publicly available information about foreign securities than is available about
domestic securities. Foreign companies are not subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic companies. Income from foreign
securities owned by the Funds may be reduced by a withholding tax at the source,
which tax would reduce dividend income payable to the Fund's shareholders.
Market Risk. The securities markets in many of the countries in which the
Funds invest will have substantially less trading volume than the major United
States markets. As a result, the securities of some foreign companies may be
less liquid and experience more price volatility than comparable domestic
securities. Increased custodian costs as well as administrative costs (such as
the need to use foreign custodians) may be associated with the maintenance of
assets in foreign jurisdictions. There is generally less government regulation
and supervision of foreign stock exchanges, brokers and issuers which may make
it difficult to enforce contractual obligations. In addition, transaction costs
in foreign securities markets are likely to be higher, since brokerage
commission rates in foreign countries are likely to be higher than in the United
States.
PORTFOLIO TURNOVER. (All Funds except AIM MONEY MARKET FUND). Any particular
security will be sold, and the proceeds reinvested, whenever such action is
deemed prudent from the viewpoint of a Fund's investment objectives, regardless
of the holding period of that security. Each Fund's historical portfolio
turnover rates are included in the Financial Highlights tables above. A higher
rate of portfolio turnover may result in higher transaction costs, including
brokerage commissions. Also, to the extent that higher portfolio turnover
results in a higher rate of net realized capital gains to a Fund, the portion of
the Fund's distributions constituting taxable capital gains may increase. See
"Dividends, Distributions and Tax Matters."
- --------------------------------------------------------------------------------
MANAGEMENT
The overall management of the business and affairs of the Funds is vested in
the Trust's Board of Trustees. The Board of Trustees approves all significant
agreements between the Trust, on behalf of one or more of the Funds, and persons
or companies furnishing services to the Funds, including the investment advisory
agreement and administrative services agreement with AIM, the agreements with
AIM Distributors regarding distribution of each Fund's shares, the agreements
with State Street Bank and Trust Company and The Bank of New York as the
custodians and the transfer agency agreement with A I M Fund Services, Inc., a
wholly owned subsidiary of AIM. The day-to-day operations of each Fund are
delegated to the officers of the Trust and to AIM, subject always to the
objective and policies of the applicable Fund and to the general supervision of
the Board of Trustees. Certain trustees and officers of the Trust are affiliated
with AIM and A I M Management Group Inc. ("AIM Management"), the parent
corporation of AIM. AIM Management is a holding company engaged in the financial
services business and is an indirect wholly owned subsidiary of AMVESCAP plc.
AMVESCAP plc and its subsidiaries are an independent investment management group
engaged in institutional investment management and retail mutual fund businesses
in the United States, Europe and the Pacific Region. Information concerning the
Board of Trustees may be found in the Statement of Additional Information.
INVESTMENT ADVISOR. A I M Advisors, Inc. ("AIM"), 11 Greenway Plaza, Suite
100, Houston, Texas 77046, serves as the investment advisor to each Fund
pursuant to a master investment advisory agreement, dated as of February 28,
1997 (the "Advisory Agreement"). AIM was organized in 1976 and, together with
its subsidiaries, manages or advises 53 investment company portfolios. As of
July 15, 1997, the total assets of such investment company portfolios were
approximately $76.0 billion.
Under the terms of the Advisory Agreement, AIM supervises all aspects of each
Fund's operations and provides investment advisory services to the Funds. AIM
obtains and evaluates economic, statistical and financial information to
formulate and implement investment programs for the Funds. The Advisory
Agreement also provides that, upon the request of the Board of Trustees, AIM may
per-
27
<PAGE> 149
form or arrange for certain accounting and other administrative services for the
Funds which are not required to be performed by AIM under the Advisory
Agreement. The Board of Trustees has made such a request. As a result, AIM and
the Trust have entered into a master administrative services agreement
("Administrative Services Agreement"), dated as of February 28, 1997, pursuant
to which AIM is entitled to receive from each Fund reimbursement of its costs or
such reasonable compensation as may be approved by the Board of Trustees.
Currently, AIM is reimbursed for the services of the Funds' principal financial
officer and his staff, and any expenses related to fund accounting services. In
addition, pursuant to the terms of a Transfer Agency and Service Agreement,
A I M Fund Services, Inc. ("AFS"), a wholly owned subsidiary of AIM and
registered transfer agent, receives a fee for its provision of transfer agency,
dividend distribution and disbursement and shareholder services to the Funds.
AFS' principal address is P.O. Box 4739, Houston, Texas 77210-4739.
For a discussion of AIM's brokerage allocation policies and practices, see
"Portfolio Transactions and Brokerage" in the Statement of Additional
Information. In accordance with policies established by the Board of Trustees,
AIM may take into account sales of shares of the Funds and other funds advised
by AIM in selecting broker-dealers to effect portfolio transactions on behalf of
the Funds.
PORTFOLIO MANAGEMENT. AIM uses a team approach and disciplined investment
strategy in providing investment advisory services to all its accounts,
including the Funds. AIM's investment staff consists of approximately 125
individuals. While individual members of AIM's investment staff are assigned
primary responsibility for the day-to-day management of each of AIM's accounts,
all accounts are reviewed on a regular basis by AIM's Investment Policy
Committee to ensure that they are being invested in accordance with the
accounts' and AIM's investment policies. The individuals on the investment team
who are primarily responsible for the day-to-day management of each of the Funds
(other than AIM MONEY MARKET FUND) and their titles, if any, with AIM or its
subsidiaries and the Trust, the length of time they have been responsible for
the management of the Funds, their years of investment experience and prior
experience (if they have been with AIM for less than five years) are described
below:
AIM Balanced Fund. Claude C. Cody IV is Vice President of A I M Capital
Management, Inc. ("AIM Capital"), a wholly owned subsidiary of AIM; and has been
responsible for the Fund since its investment objective and policies were
changed to that of a balanced fund in 1993. Mr. Cody has been associated with
AIM and/or its subsidiaries since 1992 and has a total of 21 years of experience
as an investment professional. Robert G. Alley is Senior Vice President of AIM
Capital; Vice President of AIM and of the Trust; and also has been responsible
for the Fund since 1993. Mr. Alley has been associated with AIM and/or its
subsidiaries since 1992 and has a total of 25 years of experience as an
investment professional. Craig A. Smith is Vice President of AIM Capital and
also has been responsible for the Fund since 1996. Mr. Smith has been associated
with AIM since 1989 and has a total of eight years of experience as an
investment professional.
AIM Global Utilities Fund. Claude C. Cody IV and Robert G. Alley have been
responsible for the management of the Fund since 1992. Craig A. Smith has been
responsible for the management of the Fund since 1996. Background information
for Mr. Cody, Mr. Alley and Mr. Smith is discussed above with respect to the
management of AIM BALANCED FUND.
AIM Growth Fund. Jonathan C. Schoolar is Senior Vice President and Director of
AIM Capital, Vice President of AIM and the Trust, and has been responsible for
the Fund since 1994. He has been associated with AIM and/or its subsidiaries
since 1986 and has 14 years of experience as an investment professional. Robert
M. Kippes is Vice President of AIM Capital and has been responsible for the Fund
since 1994. Mr. Kippes has been associated with AIM and/or its subsidiaries
since 1989 and has a total of eight years of experience as an investment
professional. David P. Barnard is Vice President of AIM Capital and has been
responsible for the Fund since 1992. Mr. Barnard has been associated with AIM
and/or its subsidiaries since 1982 and has 23 years of experience as an
investment professional.
AIM High Yield Fund. John L. Pessarra is Vice President of AIM Capital and has
been responsible for the Fund since 1992. Mr. Pessarra has been associated with
AIM since 1990 and has a total of 13 years of experience as an investment
professional. Kevin E. Rogers is Vice President of AIM Capital and has been
responsible for the Fund since 1995. Mr. Rogers has been associated with AIM
and/or its subsidiaries since 1991 and has over 11 years of experience as an
investment professional.
AIM Income Fund. Robert G. Alley and John L. Pessarra have been responsible
for the management of the Fund since 1992. Mr. Alley's background is discussed
above with respect to the management of AIM BALANCED FUND, and Mr. Pessarra's
background is discussed above with respect to the management of AIM HIGH YIELD
FUND. Carolyn L. Gibbs is Vice President of AIM Capital and has been responsible
for the Fund since 1995. Ms. Gibbs has been associated with AIM since 1992 and
has over 14 years of experience as an investment professional.
AIM Intermediate Government Fund. Karen Dunn Kelley is Senior Vice President
of AIM Capital, Vice President of AIM and of the Trust and has been responsible
for the Fund since 1992. Ms. Kelley has been associated with AIM and/or its
subsidiaries since 1989 and has a total of 15 years of experience as an
investment professional. Meggan Walsh is Vice President of AIM Capital and has
been responsible for the Fund since 1992. Ms. Walsh has been associated with AIM
and/or its subsidiaries since 1991 and has 10 years of experience as an
investment professional. Paula A. Permenter has been responsible for the Fund
since 1996. Ms. Permenter has been
28
<PAGE> 150
associated with AIM and/or its subsidiaries since 1996 and has 11 years of
experience as an investment professional. Prior to joining AIM, she was an
Associate Trader and Investment Assistant with Van Kampen American Capital Asset
Management, Inc.
AIM Municipal Bond Fund. Richard A. Berry is Vice President of AIM Capital and
has been responsible for the Fund since 1992. Mr. Berry has been associated with
AIM and/or its subsidiaries since 1987 and has a total of 29 years of experience
as an investment professional. Stephen D. Turman is Vice President of AIM
Capital and has been responsible for the Fund since 1992. Mr. Turman has been
associated with AIM since 1985 and has a total of 14 years of experience as an
investment professional.
AIM Value Fund. Joel E. Dobberpuhl is Vice President of AIM Capital and has
been responsible for the Fund since 1992. Mr. Dobberpuhl has been associated
with AIM and/or its subsidiaries since 1990 and has a total of eight years of
experience as an investment professional. Robert A. Shelton is Investment
Officer of AIM Capital and has been responsible for the Fund since 1997. Mr.
Shelton has been associated with AIM and/or its subsidiaries since 1995 and has
a total of six years of experience as an investment professional.
FEES AND EXPENSES. For the fiscal year ended December 31, 1996, each Fund
(other than AIM MONEY MARKET FUND) paid the following compensation to AIM for
its advisory services, and the total expenses of each such Fund's class were,
stated as a percentage of that class' average daily net assets, as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
COMPENSATION EXPENSE EXPENSE
TO AIM RATIO RATIO
------------ ------- -------
<S> <C> <C> <C>
AIM Balanced Fund............................ 0.61% 1.15% 1.97%
AIM Global Utilities Fund.................... 0.58% 1.17% 1.96%
AIM Growth Fund.............................. 0.69% 1.18% 2.03%
AIM High Yield Fund.......................... 0.50% 0.97% 1.68%
AIM Income Fund.............................. 0.46% 0.98% 1.80%
AIM Intermediate Government Fund............. 0.48% 1.00% 1.76%
AIM Municipal Bond Fund...................... 0.47% 0.80% 1.61%
AIM Value Fund............................... 0.61%* 1.11% 1.94%
</TABLE>
- ---------------
* Net of advisory fee waivers. Without such waivers, the amount would have been
0.63%
For the year ended December 31, 1996, AIM MONEY MARKET FUND paid 0.55% of its
average daily net assets to AIM as compensation for its advisory services, and
the Class A shares', Class B shares' and AIM Cash Reserve Shares' total expenses
for such period were 1.07%, 1.81% and 1.08% of each Class' average daily net
assets, respectively.
For the fiscal year ended December 31, 1996, each Fund reimbursed AIM for
administrative services in the following amounts, stated as a percentage of the
Funds' average daily net assets:
<TABLE>
<CAPTION>
REIMBURSEMENT
PAYMENTS
-------------
<S> <C>
AIM Balanced Fund........................................... .02%
AIM Global Utilities Fund................................... .03%
AIM Growth Fund............................................. .02%
AIM High Yield Fund......................................... .01%
AIM Income Fund............................................. .02%
AIM Intermediate Government Fund............................ .03%
AIM Money Market Fund....................................... .01%
AIM Municipal Bond Fund..................................... .02%
AIM Value Fund.............................................. .002%
</TABLE>
FEE WAIVERS. In order to increase the return to investors, AIM may from time
to time voluntarily waive or reduce its fee, while retaining its ability to be
reimbursed for such fee prior to the end of each fiscal year. AIM is currently
voluntarily waiving a portion of its advisory fees payable by AIM VALUE FUND as
follows: 0.80% of the first $150 million of the Fund's average daily net assets,
plus 0.625% of the Fund's average daily net assets in excess of $150 million to
and including $2 billion, plus 0.60% of the Fund's average daily net assets in
excess of $2 billion. Fee waivers or reductions, other than those set forth in
the Advisory Agreement, may be rescinded at any time and without notice to
investors. During the year ended December 31, 1996, AIM VALUE FUND waived 0.02%
in advisory fees.
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<PAGE> 151
DISTRIBUTOR. The Trust has entered into master distribution agreements
relating to the Funds (the "Distribution Agreements"), dated February 28, 1997,
with A I M Distributors, Inc. ("AIM Distributors"), a registered broker-dealer
and a wholly owned subsidiary of AIM, pursuant to which AIM Distributors acts as
the distributor of Class A, Class B and Class C shares of the Funds and AIM Cash
Reserve Shares of AIM MONEY MARKET FUND. The address of AIM Distributors is P.O.
Box 4739, Houston, Texas 77210-4739. Certain trustees and officers of the Trust
are affiliated with AIM Distributors.
The Distribution Agreements provide AIM Distributors with the exclusive right
to distribute shares of the Funds directly and through institutions with whom
AIM Distributors has entered into selected dealer agreements. Under the
Distribution Agreement for the Class B shares, AIM Distributors sells Class B
shares at net asset value subject to a contingent deferred sales charge
established by AIM Distributors. AIM Distributors is authorized to advance to
institutions through whom Class B shares are sold a sales commission under
schedules established by AIM Distributors. The Distribution Agreement for the
Class B shares provides that AIM Distributors (or its assignee or transferee)
will receive 0.75% (of the total 1.00% payable under the distribution plan
applicable to Class B shares) of each Fund's average daily net assets
attributable to Class B shares attributable to the sales efforts of AIM
Distributors. In the event the Class B shares Distribution Agreement is
terminated, AIM Distributors would continue to receive payments of asset-based
sales charges in respect of the outstanding Class B shares attributable to the
distribution efforts of AIM Distributors; provided, however, that a complete
termination of the Class B shares master distribution plan (as defined in the
plan) would terminate all payments to AIM Distributors. Termination of the Class
B shares distribution plan or Distribution Agreement does not affect the
obligation of Class B shareholders to pay contingent deferred sales charges.
DISTRIBUTION PLANS. Class A and C Plan. The Trust has adopted a Master
Distribution Plan applicable to Class A and Class C shares of the Funds (the
"Class A and C Plan") pursuant to Rule 12b-1 under the 1940 Act, to compensate
AIM Distributors for the purpose of financing any activity that is intended to
result in the sale of Class A and Class C shares of the Funds.
Under the Class A and C Plan, the Trust may compensate AIM Distributors an
aggregate amount of 0.25% of the average daily net assets of Class A shares of
each Fund on an annualized basis and an aggregate amount of 1.00% of the average
daily net assets of Class C shares of each Fund on an annualized basis.
The Class A and C Plan is designed to compensate AIM Distributors, on a
quarterly basis, for certain promotional and other sales-related costs, and to
implement a dealer incentive program which provides for periodic payments to
selected dealers who furnish continuing personal shareholder services to their
customers who purchase and own Class A or Class C shares of a Fund. Payments can
also be directed by AIM Distributors to selected institutions who have entered
into service agreements with respect to Class A and Class C shares of the Funds
and who provide continuing personal services to their customers who own Class A
and Class C shares of a Fund. The service fees payable to selected institutions
are calculated at the annual rate of 0.25% of the average daily net asset value
of those Fund shares that are held in such institution's customers' accounts
which were purchased on or after a prescribed date set forth in the Plan.
Of the aggregate amount payable under the Class A and C Plan, payments to
dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of a Fund,
in amounts of up to 0.25% of the average net assets of such Fund attributable to
the customers of such dealers or financial institutions are characterized as a
service fee, and that payments to dealers and other financial institutions in
excess of such amount and payments to AIM Distributors would be characterized as
an asset-based sales charge pursuant to the Class A and C Plan. The Class A and
C Plan also imposes a cap on the total amount of sales charges, including
asset-based sales charges, that may be paid by the Trust with respect to a Fund.
The Class A and C Plan does not obligate the Funds to reimburse AIM Distributors
for the actual expenses AIM Distributors may incur in fulfilling its obligations
under the Class A and C Plan on behalf of the Funds. Thus, under the Class A and
C Plan, even if AIM Distributors' actual expenses exceed the fee payable to AIM
Distributors thereunder at any given time, the Funds will not be obligated to
pay more than that fee. If AIM Distributors' expenses are less than the fee it
receives, AIM Distributors will retain the full amount of the fee. Payments
pursuant to the Plans are subject to any applicable limitations imposed by rules
of the National Association of Securities Dealers, Inc.
Class B Plan. The Trust has also adopted a Master Distribution Plan applicable
to Class B shares of the Funds (the "Class B Plan"). Under the Class B Plan,
each Fund pays distribution expenses at an annual rate of 1.00% of the average
daily net assets attributable to such Fund's Class B shares. Of such amount, the
Fund pays a service fee of 0.25% of the average daily net assets attributable to
such Fund's Class B shares to selected dealers and financial institutions who
furnish continuing personal shareholder services to their customers who purchase
and own Class B shares of the Fund. Any amounts not paid as a service fee would
constitute an asset-based sales charge. Amounts paid in accordance with the
Class B Plan with respect to any Fund may be used to finance any activity
primarily intended to result in the sale of Class B shares of such Fund.
Both Plans. Activities that may be financed under the Class A and C Plan and
the Class B Plan (collectively, the "Plans") include, but are not limited to:
printing of prospectuses and statements of additional information and reports
for other than existing shareholders, overhead, preparation and distribution of
advertising material and sales literature, supplemental payments to dealers and
other institutions such as asset-based sales charges or as payments of service
fees under shareholder service arrangements, and the cost of administering the
Plans. These amounts payable by a Fund under the Plans need not be directly
related to the expenses actually
30
<PAGE> 152
incurred by AIM Distributors on behalf of each Fund. Thus, even if AIM
Distributors' actual expenses exceed the fee payable to AIM Distributors
thereunder at any given time, the Trust will not be obligated to pay more than
that fee, and if AIM Distributors' expenses are less than the fee it receives,
AIM Distributors will retain the full amount of the fee. Payments pursuant to
the Plans are subject to any applicable limitations imposed by the rules of the
National Association of Securities Dealers, Inc.
Each of the Plans may be terminated at any time by a vote of the majority of
those trustees who are not "interested persons" of the Trust or by a vote of the
holders of the majority of the outstanding shares of the applicable class.
Under the Plans, AIM Distributors may in its discretion from time to time
agree to waive voluntarily all or any portion of its fee that has not been
assigned or transferred, while retaining its ability to be reimbursed for such
fee prior to the end of each fiscal year.
Under the Plans, certain financial institutions which have entered into
service agreements and which sell shares of the Funds on an agency basis, may
receive payments from the Funds pursuant to the respective Plans. AIM
Distributors does not act as principal, but rather as agent, for the Funds in
making such payments. The Funds will obtain a representation from such financial
institutions that they will either be licensed as dealers as required under
applicable state law, or that they will not engage in activities which would
constitute acting as a "dealer" as defined under applicable state law. Financial
intermediaries and any other person entitled to receive compensation for selling
Fund shares may receive different compensation for selling shares of one class
over another.
For additional information concerning the operation of the Plans see the
Statement of Additional Information.
- --------------------------------------------------------------------------------
ORGANIZATION OF THE TRUST
The Trust is organized as a Delaware business trust pursuant to an Agreement
and Declaration of Trust dated May 5, 1993, as amended (the "Trust Agreement").
The Trust is an open-end series management investment company, and may consist
of one or more series portfolios as authorized from time to time by the Board of
Trustees. The Trust currently consists of nine separate series, and each of the
Funds represents one series.
Class A shares, Class B shares, Class C shares and, in the case of AIM MONEY
MARKET FUND, AIM Cash Reserve Shares, of the same Fund represent interests in
that Fund's assets and have identical voting, dividend, liquidation and other
rights on the same terms and conditions, except that each class of shares bears
differing class-specific expenses, is subject to differing sales loads,
conversion features and exchange privileges, and has exclusive voting rights on
matters pertaining to that class' distribution plan (although shareholders of
Class A and Class C shares and AIM Cash Reserve Shares (of AIM MONEY MARKET
FUND) and Class B shareholders of a given portfolio must approve any material
increase in fees payable with respect to such portfolio under the Class A and C
Plan).
The Trust is not required to hold annual or regular meetings of shareholders.
Meetings of shareholders of a Fund will be held from time to time to consider
matters requiring a vote of such shareholders in accordance with the
requirements of the 1940 Act, state law or the provisions of the Trust
Agreement. It is not expected that shareholder meetings will be held annually.
Except as specifically noted above, shareholders of each Fund are entitled to
one vote per share (with proportionate voting for fractional shares),
irrespective of the relative net asset value of the shares of a Fund. However,
on matters affecting an individual Fund or class of shares, a separate vote of
shareholders of that Fund or class is required. Shareholders of a Fund or class
are not entitled to vote on any matter which does not affect that Fund or class
but which requires a separate vote of another Fund or class. An example of a
matter which would be voted on separately by shareholders of each Fund is the
approval of the Advisory Agreement, and an example of a matter which would be
voted on separately by shareholders of each class of shares is approval of the
distribution plans. When issued, shares of each Fund are fully paid and
nonassessable, have no preemptive or subscription rights, and are fully
transferable. Other than the automatic conversion of Class B shares to Class A
shares, there are no conversion rights. Shares do not have cumulative voting
rights, which means that in situations in which shareholders elect trustees,
holders of more than 50% of the shares voting for the election of trustees can
elect all of the trustees of the Trust, and the holders of less than 50% of the
shares voting for the election of trustees will not be able to elect any
trustees.
The Trust Agreement provides that the trustees of the Trust shall hold office
during the existence of the Trust, except as follows: (a) any trustee may resign
or retire; (b) any trustee may be removed by a vote of the majority of the
outstanding shares of the Trust, or at any time by written instrument signed by
at least two-thirds of the trustees and specifying when such removal becomes
effective; or (c) any trustee who has died or become incapacitated and is unable
to serve may be removed by a written instrument signed by a majority of the
trustees.
Under Delaware law, the shareholders of the Trust enjoy the same limitations
of liability extended to shareholders of private, for-profit corporations. There
is a remote possibility, however, that under certain circumstances shareholders
of the Trust may be held personally liable for the Trust's obligations. However,
the Trust Agreement disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or a
trustee. The Trust Agreement provides for indemnification from the Trust
property for all losses and expenses of any shareholder held personally liable
for the Trust's obligations. Thus, the risk of a shareholder incurring financial
loss on account of such liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations and where the other party was
held not to be bound by the disclaimer.
31
<PAGE> 153
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION AND SHAREHOLDER
ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 6:00 P.M. CENTRAL TIME).
INVESTOR'S GUIDE
TO THE AIM FAMILY OF FUNDS--Registered Trademark--
- --------------------------------------------------------------------------------
INTRODUCTION TO THE AIM FAMILY OF FUNDS
THE AIM FAMILY OF FUNDS consists of the following mutual funds:
<TABLE>
<S> <C>
AIM ADVISOR CASH MANAGEMENT FUND(1),(2) AIM GLOBAL INCOME FUND
AIM ADVISOR FLEX FUND AIM GLOBAL UTILITIES FUND
AIM ADVISOR INCOME FUND(2) AIM GROWTH FUND
AIM ADVISOR INTERNATIONAL VALUE FUND AIM HIGH YIELD FUND
AIM ADVISOR LARGE CAP VALUE FUND AIM INCOME FUND
AIM ADVISOR MULTIFLEX FUND AIM INTERMEDIATE GOVERNMENT FUND
AIM ADVISOR REAL ESTATE FUND AIM INTERNATIONAL EQUITY FUND
AIM AGGRESSIVE GROWTH FUND AIM LIMITED MATURITY TREASURY SHARES
AIM BALANCED FUND AIM MONEY MARKET FUND(1)
AIM BLUE CHIP FUND AIM MUNICIPAL BOND FUND
AIM CAPITAL DEVELOPMENT FUND AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM CHARTER FUND AIM TAX-EXEMPT CASH FUND(1)
AIM CONSTELLATION FUND AIM TAX-FREE INTERMEDIATE SHARES
AIM GLOBAL AGGRESSIVE GROWTH FUND AIM VALUE FUND
AIM GLOBAL GROWTH FUND AIM WEINGARTEN FUND
</TABLE>
(1) Class A shares of AIM TAX-EXEMPT CASH FUND, AIM Cash Reserve Shares of AIM
MONEY MARKET FUND, and Class A and Class C shares of AIM ADVISOR CASH
MANAGEMENT FUND, are offered to investors at net asset value, without
payment of a sales charge, as described below. Other funds, including the
Class A, Class B and Class C shares of AIM MONEY MARKET FUND, are sold with
an initial sales charge or subject to a contingent deferred sales charge
upon redemption, as described below.
(2)Fund closed to new investments on August 4, 1997. However, until October 3,
1997 the Fund will continue to accept investments (i) from shareholders of
record on August 4, 1997 of AIM ADVISOR CASH MANAGEMENT FUND, AIM ADVISOR
FLEX FUND, AIM ADVISOR INCOME FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM
ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND and AIM ADVISOR REAL
ESTATE FUND or (ii) on behalf of clients of selling group members who were
INVESCO Advisor Funds, Inc. selling group members on August 1, 1997. Please
refer to "Exchange Privilege" herein and the Fund's prospectus dated August
4, 1997.
IT IS IMPORTANT FOR SHAREHOLDERS CONSIDERING AN EXCHANGE TO CAREFULLY REVIEW
THE PROSPECTUS OF THE FUND WHOSE SHARES WILL BE ACQUIRED IN AN EXCHANGE. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SHARES OF ANY FUND OTHER THAN
THE FUND(S) NAMED ON THE COVER PAGE OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
HOW TO OPEN AN ACCOUNT. In order to purchase shares of any of The AIM Family
of Funds ("AIM Funds"), an investor must submit a fully completed new Account
Application form directly to A I M Fund Services, Inc. ("AFS" or the "Transfer
Agent") or through any dealer authorized by A I M Distributors, Inc. ("AIM
Distributors") to sell shares of the AIM Funds.
Accounts submitted without a correct, certified taxpayer identification number
or, alternatively, a completed IRS Form W-8 (for non-resident aliens) or Form
W-9 (certifying exempt status) accompanying the registration information will be
subject to backup withholding. See the Account Application for applicable
Internal Revenue Service penalties. The minimum initial investment is $500,
except for accounts initially established through an Automatic Investment Plan,
which requires a special authorization form (see "Special Plans") and for
certain retirement accounts. The minimum initial investment for accounts
established with an Automatic Investment Plan is $50. The minimum initial
investment for an Individual Retirement Arrangement ("IRA") is $250. There are
no minimum initial investment requirements applicable to
money-purchase/profit-sharing plans, 401(k) plans, IRA/Simplified Employee
Pension ("SEP") accounts, 403(b) plans or 457 (state deferred compensation)
plans (except that the minimum initial investment for salary deferrals for such
plans is $25), or for investment of dividends and distributions of any of the
AIM Funds into any existing AIM Funds account. A Salary Reduction SEP ("SARSEP")
may not be established after December 31, 1996; however existing SARSEP accounts
can remain in effect.
AFS' mailing address is:
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
MCF-A 07/97
A-1
<PAGE> 154
For additional information or assistance, investors should call the Client
Services Department of AFS at:
(800) 959-4246
Shares of any AIM Funds not named on the cover of this Prospectus are offered
pursuant to separate prospectuses. Copies of other prospectuses may be obtained
by calling (800) 347-4246.
HOW TO PURCHASE ADDITIONAL SHARES. The minimum investment for subsequent
purchases is $50. The minimum employee salary deferral investment for
participants in money-purchase/profit sharing plans, 401(k), IRA/SEP, 403(b) or
457 plans is $25. There are no such minimum investment requirements for
investment of dividends and distributions of any of the AIM Funds into any other
existing AIM Funds account.
Additional shares may be purchased directly through AIM Distributors or
through any dealer who has entered into an agreement with AIM Distributors.
Direct investments may be made by mail or by wiring payment to AFS as follows:
SUBSEQUENT PURCHASES BY MAIL: Investors must indicate their account number and
the name of the Fund being purchased. The remittance slip from a confirmation
statement should be used for this purpose, and sent to AFS.
PURCHASES BY WIRE: To insure prompt credit to his account, an investor or his
dealer should call AFS' Client Services Department at (800) 959-4246 prior to
sending a wire to receive a reference number for the wire. The following wire
instructions should be used:
<TABLE>
<S> <C>
Beneficiary Bank ABA/Routing #: 113000609
Beneficiary Account Number: 00100366807
Beneficiary Account Name: A I M Fund Services, Inc.
RFB: Fund name, Reference Number (16 character limit)
OBI: Shareholder Name, Shareholder Account Number
(70 character limit)
</TABLE>
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF PURCHASE OF THE AIM FUNDS
Shares of the AIM Funds, including Class A shares (the "Class A shares") of
AIM ADVISOR CASH MANAGEMENT FUND, AIM ADVISOR FLEX FUND, AIM ADVISOR INCOME
FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE CAP VALUE FUND,
AIM ADVISOR MULTIFLEX FUND, AIM ADVISOR REAL ESTATE FUND, AIM AGGRESSIVE GROWTH
FUND, AIM BALANCED FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM
CHARTER FUND, AIM CONSTELLATION FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND, AIM GLOBAL UTILITIES FUND, AIM
GROWTH FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT
FUND, AIM INTERNATIONAL EQUITY FUND, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND
FUND, AIM VALUE FUND and AIM WEINGARTEN FUND, collectively (other than AIM
AGGRESSIVE GROWTH FUND), the "Multiple Class Funds," may be purchased at their
respective net asset value plus a sales charge as indicated below, except that
Class A shares of AIM TAX-EXEMPT CASH FUND, Class A shares of AIM ADVISOR CASH
MANAGEMENT FUND, and AIM Cash Reserve Shares of AIM MONEY MARKET FUND are sold
without a sales charge and Class B shares (the "Class B shares") and Class C
shares ("Class C shares") of the Multiple Class Funds (except Class C shares of
AIM ADVISOR CASH MANAGEMENT FUND) are sold at net asset value subject to a
contingent deferred sales charge payable upon certain redemptions. These
contingent deferred sales charges are described under the caption "How to Redeem
Shares -- Multiple Distribution System." Securities dealers and other persons
entitled to receive compensation for selling or servicing shares of a Multiple
Class Fund may receive different compensation for selling or servicing one
particular class of shares over another class in the same Multiple Class Fund.
Factors an investor should consider prior to purchasing Class A, Class B or
Class C shares (or, if applicable, AIM Cash Reserve Shares) of a Multiple Class
Fund are described below under "Special Information Relating to Multiple Class
Funds." For information on purchasing any of the AIM Funds and to receive a
prospectus, please call (800) 347-4246. As described below, the sales charge
otherwise applicable to a purchase of shares of a fund may be reduced if certain
conditions are met. In order to take advantage of a reduced sales charge, the
prospective investor or his dealer must advise AIM Distributors that the
conditions for obtaining a reduced sales charge have been met. Net asset value
is determined in the manner described under the caption "Determination of Net
Asset Value." The following tables show the sales charge and dealer concession
at various investment levels for the AIM Funds.
MCF-A 07/97
A-2
<PAGE> 155
SALES CHARGES AND DEALER CONCESSIONS
GROUP I. Certain AIM Funds are currently sold with a sales charge ranging from
5.50% to 2.00% of the offering price on purchases of less than $1,000,000. These
AIM Funds include Class A shares of each of AIM ADVISOR FLEX FUND, AIM ADVISOR
INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR
MULTIFLEX FUND, AIM AGGRESSIVE GROWTH FUND, AIM BLUE CHIP FUND, AIM CAPITAL
DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM GLOBAL UTILITIES
FUND, AIM GROWTH FUND, AIM INTERNATIONAL EQUITY FUND, AIM MONEY MARKET FUND, AIM
VALUE FUND and AIM WEINGARTEN FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.00
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions. See "All Groups of AIM Funds." PURCHASES OF $1,000,000 OR MORE ARE
AT NET ASSET VALUE, SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE OF 1% IF
SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE DATE SUCH SHARES WERE PURCHASED,
AS DESCRIBED UNDER THE CAPTION "HOW TO REDEEM SHARES -- CONTINGENT DEFERRED
SALES CHARGE PROGRAM FOR LARGE PURCHASES."
GROUP II. Certain AIM Funds are currently sold with a sales charge ranging
from 4.75% to 2.00% of the offering price on purchases of less than $1,000,000.
These AIM Funds are: the Class A shares of each of AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT, AIM ADVISOR INCOME FUND, AIM ADVISOR REAL ESTATE FUND, AIM BALANCED
FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL
INCOME FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT
FUND and AIM MUNICIPAL BOND FUND.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/ or advance a service fee on such
transactions. See "All Groups of AIM Funds." PURCHASES OF $1,000,000 OR MORE ARE
AT NET ASSET VALUE, SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE OF 1% IF
SHARES ARE REDEEMED PRIOR TO 18 MONTHS FROM THE DATE SUCH SHARES WERE PURCHASED,
AS DESCRIBED UNDER THE CAPTION "HOW TO REDEEM SHARES -- CONTINGENT DEFERRED
SALES CHARGE PROGRAM FOR LARGE PURCHASES."
MCF-A 07/97
A-3
<PAGE> 156
GROUP III. Certain AIM Funds are currently sold with a sales charge ranging
from 1.00% to 0.50% of the offering price on purchases of less than $1,000,000.
These AIM Funds are AIM LIMITED MATURITY TREASURY SHARES and the Class A shares
of AIM TAX-FREE INTERMEDIATE SHARES.
<TABLE>
<CAPTION>
DEALER
CONCESSION
INVESTOR'S SALES CHARGE ----------
-------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
----------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/or advance a service fee on such
transactions.
ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the entire
initial sales charge to dealers for all sales with respect to which orders are
placed with AIM Distributors during a particular period. Dealers to whom
substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the
initial sales charge paid by investors, AIM Distributors may, from time to time,
at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. In some instances, these incentives may
be offered only to certain dealers who have sold or may sell significant amounts
of shares. At the option of the dealer, such incentives may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and their families to
places within or outside the United States. The total amount of such additional
bonus payments or other consideration shall not exceed 0.25% of the public
offering price of the shares sold. Any such bonus or incentive programs will not
change the price paid by investors for the purchase of the applicable AIM Fund's
shares or the amount that any particular AIM Fund will receive as proceeds from
such sales. Dealers may not use sales of the AIM Funds' shares to qualify for
any incentives to the extent that such incentives may be prohibited by the laws
of any state.
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial sales charges), which are sold at net asset
value and are subject to a contingent deferred sales charge, for all AIM Funds
other than AIM LIMITED MATURITY TREASURY SHARES and AIM TAX-FREE INTERMEDIATE
SHARES as follows: 1% of the first $2 million of such purchases, plus 0.80% of
the next $1 million of such purchases, plus 0.50% of the next $17 million of
such purchases, plus 0.25% of amounts in excess of $20 million of such
purchases. See "Contingent Deferred Sales Charge Program for Large Purchases."
AIM Distributors may make payments to dealers and institutions who are dealers
of record for purchases of $1 million or more of Class A shares (or shares which
normally involve payment of initial sales charges), and which are sold at net
asset value and are not subject to a contingent deferred sales charge, in an
amount up to 0.10% of such purchases of shares of AIM LIMITED MATURITY TREASURY
SHARES, and in an amount up to 0.25% of such purchases of shares of AIM TAX-FREE
INTERMEDIATE SHARES.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class B shares of the AIM Funds at the time of such sales. Payments with
respect to Class B shares will equal 4.00% of the purchase price of the Class B
shares sold by the dealer or institution, and will consist of a sales commission
equal to 3.75% of the purchase price of the Class B shares sold plus an advance
of the first year service fee of 0.25% with respect to such shares. The portion
of the payments to AIM Distributors under the Class B Plan which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of such sales commissions plus financing costs.
AIM Distributors may pay sales commissions to dealers and institutions who
sell Class C shares of the AIM Funds at the time of such sales. Payments with
respect to Class C shares will equal 1.00% of the purchase price (0.60% of the
purchase price of the AIM ADVISOR INCOME FUND) of the Class C shares sold by the
dealer or institution, and will consist of a sales commission of 0.75% of the
purchase price (0.35% of the purchase price of the AIM ADVISOR INCOME FUND) of
the Class C shares sold plus an advance of the first year service fee of 0.25%
with respect to such shares. After the first full year, AIM Distributors will
make such payments quarterly to dealers and institutions based on the average
net asset value of Class C shares which are attributable to shareholders for
whom the dealers and institutions are designated as dealers of record. The
portion of the payments to AIM Distributors under the Class C Plan attributable
to Class C shares which constitutes an asset-based sales charge (0.75%) (0.35%
for AIM ADVISOR INCOME FUND) is intended in part to permit AIM Distributors to
recoup a portion of such on-going sales commission plus financing costs, if any.
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TIMING OF PURCHASE ORDERS. Orders for the purchase of shares of an AIM Fund
(other than AIM MONEY MARKET FUND, as described below) received prior to the
close of the New York Stock Exchange ("NYSE"), which is generally 4:00 p.m.
Eastern Time (and which is hereinafter referred to as "NYSE Close") on any
business day of an AIM Fund will be confirmed at the price next determined.
Orders received after NYSE Close will be confirmed at the price determined on
the next business day of the AIM Fund. It is the responsibility of the dealer to
ensure that all orders are transmitted on a timely basis to the Transfer Agent.
Any loss resulting from the dealer's failure to submit an order within the
prescribed time frame will be borne by that dealer. Please see "How to Purchase
Shares -- Purchases by Wire" for information on obtaining a reference number for
wire orders, which will facilitate the handling of such orders and ensure prompt
credit to an investor's account. A "business day" of an AIM Fund is any day on
which the NYSE is open for business. It is expected that the NYSE will be closed
during the next twelve months on Saturdays and Sundays and on the days on which
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day
are observed by the NYSE.
An investor who uses a check to purchase shares will be credited with the full
number of shares purchased at the time of receipt of the purchase order, as
previously described. However, in the event of a redemption or exchange of such
shares, the investor may be required to wait up to ten business days before the
redemption proceeds are sent. This delay is necessary in order to ensure that
the check has cleared. If the check does not clear, or if any investment order
must be cancelled due to nonpayment, the investor will be responsible for any
resulting loss to an AIM Fund or to AIM Distributors.
SPECIAL INFORMATION RELATING TO MULTIPLE CLASS FUNDS. The Multiple Class Funds
currently offer two or more classes of shares through separate distribution
systems (the "Multiple Distribution System"). Although each class of shares of a
particular Multiple Class Fund represents an interest in the same portfolio of
investments, each class is subject to a different distribution structure and, as
a result, differing expenses. This Multiple Distribution System allows investors
to select the class that is best suited to the investor's needs and objectives.
In considering the options afforded by the Multiple Distribution System,
investors should consider both the applicable initial sales charge or contingent
deferred sales charge, as well as the ongoing expenses borne by each class of
shares and other relevant factors, such as whether his or her investment goals
are long-term or short-term.
CLASS A SHARES (except Class A shares of AIM ADVISOR CASH MANAGEMENT FUND)
are sold subject to the initial sales charges described above and are
subject to the other fees and expenses described herein. Class A shares of
AIM MONEY MARKET FUND are designed to meet the needs of an investor who
wishes to establish a dollar cost averaging program, pursuant to which
Class A shares an investor owns may be exchanged at net asset value for
Class A shares of another Multiple Class Fund or shares of another AIM Fund
which is not a Multiple Class Fund, subject to the terms and conditions
described under the caption "Exchange Privilege -- Terms and Conditions of
Exchanges."
CLASS B SHARES are sold without an initial sales charge. Thus, the entire
purchase price of Class B shares is immediately invested in Class B shares.
Class B shares are subject, however, to Rule 12b-1 Plan payments of 1.00%
per annum on the average daily net assets of a Multiple Class Fund
attributable to Class B shares. See the discussion under the caption
"Management -- Distribution Plans." In addition, Class B shares redeemed
within six years from the date such shares were purchased are subject to a
contingent deferred sales charge ranging from 5% for redemptions made
within the first year to 1% for redemptions made within the sixth year. No
contingent deferred sales charge will be imposed if Class B shares are
redeemed after six years from the date such shares were purchased.
Redemptions of Class B shares and associated charges are further described
under the caption "How to Redeem Shares -- Multiple Distribution System."
Class B shares will automatically convert into Class A shares of the same
Multiple Class Fund (together with a pro rata portion of all Class B shares
acquired through the reinvestment of dividends and distributions) eight
years from the end of the calendar month in which the purchase of Class B
shares was made. Following such conversion of their Class B shares,
investors will be relieved of the higher Rule 12b-1 Plan payments
associated with Class B shares. See "Management -- Distribution Plans."
CLASS C SHARES are sold without an initial sales charge. Thus the entire
purchase price of Class C shares is immediately invested in Class C shares.
Class C shares (except Class C shares of AIM ADVISOR CASH MANAGEMENT FUND)
are subject, however, to Rule 12b-1 Plan payments of 1.00% per annum on the
average daily net assets of a Multiple Class Fund attributable to Class C
shares. See the discussion under the caption "Management -- Distribution
Plans." In addition, Class C shares (except Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND) redeemed within one year from the date such shares
were purchased are subject to a 1.00% contingent deferred sales charge. No
contingent deferred sales charge will be imposed if Class C shares are
redeemed after one year from the date such shares were purchased.
Redemptions of Class C shares and associated charges are further described
under the caption "How to Redeem Shares -- Multiple Distribution System."
Class A and Class C shares of AIM ADVISOR CASH MANAGEMENT FUND and AIM Cash
Reserve Shares of AIM MONEY MARKET FUND are sold without an initial sales
charge and are not subject to a contingent deferred sales charge. (A
contingent deferred sales charge may be imposed upon redemptions of Class A
and Class C shares of AIM ADVISOR CASH MANAGEMENT FUND when such shares
were purchased in an exchange. See "How to Redeem Shares -- Multiple
Distribution System -- Class C Shares" and "How to Redeem
Shares -- Contingent Deferred Sales Charge Program for Large Purchases").
AIM Cash Reserve Shares of AIM MONEY MARKET FUND are, however, subject to
the other fees and expenses described in the prospectus for AIM MONEY
MARKET FUND.
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TIMING OF PURCHASE, EXCHANGE AND REDEMPTION ORDERS (AIM MONEY MARKET FUND
ONLY). Orders for purchases, exchanges and redemptions of shares of AIM MONEY
MARKET FUND received prior to 12:00 noon Eastern Time or NYSE Close on any
business day of the Fund will be confirmed at the price next determined. Net
asset value is normally determined at 12:00 noon Eastern Time and NYSE Close on
each business day of AIM MONEY MARKET FUND.
SPECIAL INFORMATION RELATING TO AIM ADVISOR CASH MANAGEMENT FUND, AIM MONEY
MARKET FUND, AND AIM TAX-EXEMPT CASH FUND (THE "MONEY MARKET FUNDS"). Because
each Money Market Fund uses the amortized cost method of valuing the securities
it holds and rounds its per share net asset value to the nearest whole cent, it
is anticipated that the net asset value of the shares of such funds will remain
constant at $1.00 per share. However, there is no assurance that each Money
Market Fund can maintain a $1.00 net asset value per share. In order to earn
dividends with respect to AIM MONEY MARKET FUND on the same day that a purchase
is made, purchase payments in the form of federal funds must be received by the
Transfer Agent before 12:00 noon Eastern Time on that day. Purchases made by
payments in any other form, or payments in the form of federal funds received
after such time but prior to NYSE Close, will begin to earn dividends on the
next business day following the date of purchase. The Money Market Funds
generally will not issue share certificates but will record investor holdings in
noncertificate form and regularly advise the shareholder of his ownership
position.
SHARE CERTIFICATES. Share certificates for all AIM Funds will be issued upon
written request by a shareholder to AIM Distributors or the Transfer Agent.
Otherwise, such shares will be held on the shareholder's behalf by the
applicable AIM Fund(s) and be recorded on the books of such fund(s). See
"Exchange Privilege -- Exchanges by Telephone" and "How to Redeem
Shares -- Redemptions by Telephone" for restrictions applicable to shares issued
in certificate form. Please note that certificates will not be issued for shares
held in prototype retirement plans.
MINIMUM ACCOUNT BALANCE. If (1) an account opened in a fund has been in effect
for at least one year and the shareholder has not made an additional purchase in
that account within the preceding six calendar months and (2) the value of such
account drops below $500 for three consecutive months as a result of redemptions
or exchanges, the fund has the right to redeem the account, after giving the
shareholder 60 days' prior written notice, unless the shareholder makes
additional investments within the notice period to bring the account value up to
$500. If a fund determines that a shareholder has provided incorrect information
in opening an account with a fund or in the course of conducting subsequent
transactions with the fund related to such account, the fund may, in its
discretion, redeem the account and distribute the proceeds of such redemption to
the shareholder.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of shares of the AIM Funds that are
otherwise subject to an initial sales charge, provided that such purchases are
made by a "purchaser" as hereinafter defined. Purchases of Class A shares of AIM
TAX-EXEMPT CASH FUND, Class A and Class C shares of AIM ADVISOR CASH MANAGEMENT
FUND, AIM Cash Reserve Shares of AIM MONEY MARKET FUND and Class B and Class C
shares of the Multiple Class Funds will not be taken into account in determining
whether a purchase qualifies for a reduction in initial sales charges.
The term "purchaser" means:
- an individual and his or her spouse and children, including any trust
established exclusively for the benefit of any such person; or a pension,
profit-sharing, or other benefit plan established exclusively for the
benefit of any such person, such as an IRA, a single-participant
money-purchase/profit-sharing plan or an individual participant in a 403(b)
Plan (unless such 403(b) plan qualifies as the purchaser as defined below);
- a 403(b) plan, the employer/sponsor of which is an organization described
under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), provided that:
a. the employer/sponsor must submit contributions for all participating
employees in a single contribution transmittal (i.e., the funds will
not accept contributions submitted with respect to individual
participants);
b. each transmittal must be accompanied by a single check or wire
transfer; and
c. all new participants must be added to the 403(b) plan by submitting
an application on behalf of each new participant with the
contribution transmittal;
- a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code) and 457 plans, although more than one beneficiary or participant is
involved;
- a Simplified Employee Pension ("SEP"), Salary Reduction and other Elective
Simplified Employee Pension account ("SARSEP") where the employer has
notified AIM Distributors in writing that all of its related employee SEP or
SARSEP accounts should be linked;
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- any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company; or
- the discretionary advised accounts of A I M Advisors, Inc. ("AIM") or A I M
Capital Management, Inc. ("AIM Capital").
Investors or dealers seeking to qualify orders for a reduced initial sales
charge must identify such orders and, if necessary, support their qualification
for the reduced charge. AIM Distributors reserves the right to determine whether
any purchaser is entitled, by virtue of the foregoing definition, to the reduced
sales charge. No person or entity may distribute shares of the AIM Funds without
payment of the applicable sales charge other than to persons or entities who
qualify for a reduction in the sales charge as provided herein.
(1) LETTERS OF INTENT. A purchaser, as previously defined, may pay reduced
initial sales charges by completing the appropriate section of the account
application and by fulfilling a Letter of Intent ("LOI"). The LOI privilege is
also available to holders of the Connecticut General Guaranteed Account,
established for tax qualified group annuities, for contracts purchased on or
before June 30, 1992. The LOI confirms such purchaser's intention as to the
total investment to be made in shares of the AIM Funds (except for
(i) Class A shares of AIM TAX-EXEMPT CASH FUND, Class A and Class C shares of
AIM ADVISOR CASH MANAGEMENT FUND, and AIM Cash Reserve Shares of AIM MONEY
MARKET FUND and (ii) Class B and Class C shares of the Multiple Class Funds)
within the following 13 consecutive months. By marking the LOI section on the
account application and by signing the account application, the purchaser
indicates that he understands and agrees to the terms of the LOI and is bound by
the provisions described below.
Each purchase of fund shares normally subject to an initial sales charge made
during the 13-month period will be made at the public offering price applicable
to a single transaction of the total dollar amount indicated by the LOI, as
described under "Sales Charges and Dealer Concessions." It is the purchaser's
responsibility at the time of purchase to specify the account numbers that
should be considered in determining the appropriate sales charge. The offering
price may be further reduced as described under "Rights of Accumulation" if the
Transfer Agent is advised of all other accounts at the time of the investment.
Shares acquired through reinvestment of dividends and capital gains
distributions will not be applied to the LOI. At any time during the 13-month
period after meeting the original obligation, a purchaser may revise his
intended investment amount upward by submitting a written and signed request.
Such a revision will not change the original expiration date. By signing an LOI,
a purchaser is not making a binding commitment to purchase additional shares,
but if purchases made within the 13-month period do not total the amount
specified, the investor will pay the increased amount of sales charge as
described below. Purchases made within 90 days before signing an LOI will be
applied toward completion of the LOI. The LOI effective date will be the date of
the first purchase within the 90-day period. The Transfer Agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases made more than 90 days before signing an LOI will be applied toward
completion of the LOI based on the value of the shares purchased calculated at
the public offering price on the effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the initial
purchase (or subsequent purchases if necessary) the Transfer Agent will escrow
in the form of shares an appropriate dollar amount (computed to the nearest full
share). All dividends and any capital gain distributions on the escrowed shares
will be credited to the purchaser. All shares purchased, including those
escrowed, will be registered in the purchaser's name. If the total investment
specified under this LOI is completed within the 13-month period, the escrowed
shares will be promptly released. If the intended investment is not completed,
the purchaser will pay the Transfer Agent the difference between the sales
charge on the specified amount and the amount actually purchased. If the
purchaser does not pay such difference within 20 days of the expiration date, he
irrevocably constitutes and appoints the Transfer Agent as his attorney to
surrender for redemption any or all shares, to make up such difference within 60
days of the expiration date.
If at any time before completing the LOI Program, the purchaser wishes to
cancel the agreement, he must give written notice to AIM Distributors. If at any
time before completing the LOI Program the purchaser requests the Transfer Agent
to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
(2) RIGHTS OF ACCUMULATION. A "purchaser," as previously defined, may also
qualify for reduced initial sales charges based upon such purchaser's existing
investment in shares of any of the AIM Funds (except for (i) Class A shares of
AIM TAX-EXEMPT CASH FUND, Class A and Class C shares of AIM ADVISOR CASH
MANAGEMENT FUND, and AIM Cash Reserve Shares of AIM MONEY MARKET FUND and (ii)
Class B and Class C shares of the Multiple Class Funds) at the time of the
proposed purchase. Rights of Accumulation are also available to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992. To determine
whether or not a reduced initial sales charge applies to a proposed purchase,
AIM Distributors takes into account not only the money which is invested upon
such proposed purchase, but also the value of all shares of the AIM Funds
(except for (i) Class A shares of AIM TAX-EXEMPT CASH FUND, Class A and Class C
shares of AIM ADVISOR CASH MANAGEMENT FUND, and AIM Cash Reserve Shares of AIM
MONEY MARKET FUND and (ii) Class B and Class C shares of the Multiple Class
Funds) owned by such purchaser, calculated at their then current public offering
price. If a purchaser so qualifies for a reduced sales charge, the reduced sales
charge applies to the total amount of money then being invested by such
purchaser and not just to the portion that exceeds the breakpoint above which a
reduced sales charge applies. For example, if a purchaser already owns
qualifying shares of any AIM Fund with a value of $20,000 and wishes to invest
an additional $20,000 in a fund with a maximum
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initial sales charge of 5.50%, the reduced initial sales charge of 5.25% will
apply to the full $20,000 purchase and not just to the $15,000 in excess of the
$25,000 breakpoint. To qualify for obtaining the discount applicable to a
particular purchase, the purchaser or his dealer must furnish AFS with a list of
the account numbers and the names in which such accounts of the purchaser are
registered at the time the purchase is made.
PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the AIM Funds at
net asset value (without payment of an initial sales charge) may be made in
connection with: (a) the reinvestment of dividends and distributions from a fund
(see "Dividends, Distributions and Tax Matters"); (b) exchanges of shares of
certain other funds (see "Exchange Privilege"); (c) use of the reinstatement
privilege (see "How to Redeem Shares"); or (d) a merger, consolidation or
acquisition of assets of a fund.
Shareholders of record of Class A shares of AIM WEINGARTEN FUND and AIM
CONSTELLATION FUND on September 8, 1986, and shareholders of record of Class A
shares of AIM CHARTER FUND on November 17, 1986, may purchase additional Class A
shares of the particular AIM Fund(s) whose shares they owned on such date, at
net asset value (without payment of a sales charge) for as long as they
continuously own Class A shares of such AIM Fund(s) having a market value of at
least $500. In addition, discretionary advised clients of any investment
advisors whose clients held Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND on September 8, 1986, or who held Class A shares of AIM
CHARTER FUND on November 17, 1986, and have held such Class A shares at all
times subsequent to such date, may purchase Class A shares of the applicable AIM
Fund(s) at the net asset value of such shares.
The following persons may purchase shares of the AIM Funds through AIM
Distributors without payment of an initial sales charge: (a) A I M Management
Group Inc. ("AIM Management") and its affiliated companies; (b) any current or
retired officer, director, trustee or employee, or any member of the immediate
family (including spouse, children, parents and parents of spouse) of any such
person, of AIM Management or its affiliates or of certain mutual funds which are
advised or managed by AIM, or any trust established exclusively for the benefit
of such persons; (c) any employee benefit plan established for employees of AIM
Management or its affiliates; (d) any current or retired officer, director,
trustee or employee, or any member of the immediate family (including spouse,
children, parents and parents of spouse) of any such person, or of CIGNA
Corporation or of any of its affiliated companies, or of First Data Investor
Services Group (formerly The Shareholders Services Group, Inc.); (e) any
investment company sponsored by CIGNA Investments, Inc. or any of its affiliated
companies for the benefit of its directors' deferred compensation plans; (f)
discretionary advised clients of AIM or AIM Capital; (g) registered
representatives and employees of dealers who have entered into agreements with
AIM Distributors (or financial institutions that have arrangements with such
dealers with respect to the sale of shares of the AIM Funds) and any member of
the immediate family (including spouse, children, parents and parents of spouse)
of any such person, provided that purchases at net asset value are permitted by
the policies of such person's employer; and (h) certain broker-dealers,
investment advisers or bank trust departments that provide asset allocation,
similar specialized investment services or investment company transaction
services for their customers, that charge a minimum annual fee for such
services, and that have entered into an agreement with AIM Distributors with
respect to their use of the AIM Funds in connection with such services.
In addition, shares of any AIM Fund may be purchased at net asset value,
without payment of a sales charge, by pension, profit-sharing or other employee
benefit plans created pursuant to a plan qualified under Section 401 of the Code
or plans under Section 457 of the Code, or employee benefit plans created
pursuant to Section 403(b) of the Code and sponsored by nonprofit organizations
defined under Section 501(c)(3) of the Code. Such plans will qualify for
purchases at net asset value provided that (1) the total amount invested in the
plan is at least $1,000,000, (2) the sponsor signs a $1,000,000 LOI, (3) such
shares are purchased by an employer-sponsored plan with at least 100 eligible
employees, or (4) all of the plan's transactions are executed through a single
financial institution or service organization who has entered into an agreement
with AIM Distributors with respect to their use of the AIM Funds in connection
with such accounts. Section 403(b) plans sponsored by public educational
institutions will not be eligible for net asset value purchases based on the
aggregate investment made by the plan or the number of eligible employees.
Participants in such plans will be eligible for reduced sales charges based
solely on the aggregate value of their individual investments in the applicable
AIM Fund. PLEASE NOTE THAT TAX-EXEMPT FUNDS ARE NOT APPROPRIATE INVESTMENTS FOR
SUCH PLANS. AIM Distributors may pay investment dealers or other financial
service firms for share purchases of the Load Funds (as defined on page A-10
herein) sold at net asset value to an employee benefit plan in accordance with
this paragraph as follows: 1% of the first $2 million of such purchases, plus
0.80% of the next $1 million of such purchases, plus 0.50% of the next $17
million of such purchases, plus 0.25% of amounts in excess of $20 million of
such purchases and up to 0.10% of the net asset value of any AIM Limited
Maturity Treasury Shares sold at net asset value to an employee benefit plan in
accordance with this paragraph.
Class A shares of AIM WEINGARTEN FUND and AIM CONSTELLATION FUND may be
deposited at net asset value, without payment of a sales charge, in G/SET series
unit investment trusts, whose portfolios consist exclusively of Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND and stripped United States
Treasury issued notes or bonds bearing no current interest ("Treasury
Obligations"). Class A shares of such funds may also be purchased at net asset
value by other unit investment trusts approved by the Board of Directors of AIM
Equity Funds, Inc. Unit holders of such trusts may elect to invest cash
distributions from such trusts in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND at net asset value, including: (a) distributions of any
dividend income or other income received by such trusts; (b) distributions of
any net capital gains received in respect of Class A shares of AIM WEINGARTEN
FUND or AIM CONSTELLATION FUND and proceeds of the sale of Class A shares of AIM
WEINGARTEN FUND or AIM CONSTELLATION FUND used to redeem units of such trusts;
and (c) proceeds from the maturity of the Treasury Obligations at the
termination dates of such trusts. Prior to the termination dates of such trusts,
a unit holder may invest the proceeds from the redemption or repurchase of his
units in Class A shares of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND at net
asset value, provided:
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(a) that the investment in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND is effected within 30 days of such redemption or repurchase;
and (b) that the unit holder or his dealer provides AIM Distributors with a
letter which: (i) identifies the name, address and telephone number of the
dealer who sold to the unit holder the units to be redeemed or repurchased; and
(ii) states that the investment in Class A shares of AIM WEINGARTEN FUND or AIM
CONSTELLATION FUND is being funded exclusively by the proceeds from the
redemption or repurchase of units of such trusts.
FOR ANY FUND NAMED ON THE COVER PAGE OF THIS PROSPECTUS, AIM DISTRIBUTORS AND
ITS AGENTS RESERVE THE RIGHT AT ANY TIME (1) TO WITHDRAW ALL OR ANY PART OF THE
OFFERING MADE BY THIS PROSPECTUS; (2) TO REJECT ANY PURCHASE OR EXCHANGE ORDER
OR TO CANCEL ANY PURCHASE DUE TO NONPAYMENT OF THE PURCHASE PRICE; (3) TO
INCREASE, WAIVE OR LOWER THE MINIMUM INVESTMENT REQUIREMENTS; OR (4) TO MODIFY
ANY OF THE TERMS OR CONDITIONS OF PURCHASE OF SHARES OF SUCH FUND. For any fund
named on the cover page, AIM Distributors and its agents will use their best
efforts to provide notice of any such actions through correspondence with
broker-dealers and existing shareholders, supplements to the AIM Funds'
prospectuses, or other appropriate means, and will provide sixty (60) days'
notice in the case of termination or material modification to the exchange
privilege discussed under the caption "Exchange Privilege."
- --------------------------------------------------------------------------------
SPECIAL PLANS
Except as noted below, each AIM Fund provides the special plans described
below for the convenience of its shareholders. Once established, there is no
obligation to continue to invest through a plan, and a shareholder may terminate
a plan at any time.
Special plan applications and further information, including details of any
fees which are charged to a shareholder investing through a plan, may be
obtained by written request, directed to AFS at the address provided under "How
to Purchase Shares," or by calling the Client Services Department of AFS at
(800) 959-4246. IT IS RECOMMENDED THAT A SHAREHOLDER CONSIDERING ANY OF THE
PLANS DESCRIBED HEREIN CONSULT A TAX ADVISOR BEFORE COMMENCING PARTICIPATION IN
SUCH A PLAN.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, a shareholder
who owns shares which are not subject to a contingent deferred sales charge, can
arrange for monthly, quarterly or annual checks in any amount (but not less than
$50) to be drawn against the balance of his account in the designated AIM Fund.
Shareholders who own shares subject to a contingent deferred sales charge, can
only arrange for monthly or quarterly withdrawals under a Systematic Withdrawal
Plan. Payment of this amount can be made on any day of the month the shareholder
specifies, except the thirtieth or thirty-first day of each month in which a
payment is to be made. A minimum account balance of $5,000 is required to
establish a Systematic Withdrawal Plan, but there is no requirement thereafter
to maintain any minimum investment. With respect to shares subject to a
contingent deferred sales charge (all classes) no contingent deferred sales
charge will be imposed on withdrawals made under a Systematic Withdrawal Plan,
provided that the amounts withdrawn under such a plan do not exceed on an annual
basis 12% of the account value at the time the shareholder elects to participate
in the Systematic Withdrawal Plan. Systematic Withdrawal Plans with respect to
shares subject to a contingent deferred sales charge that exceed on an annual
basis 12% of such account will be subject to a contingent deferred sales charge
on the amounts exceeding 12% of the account value at the time the shareholder
elects to participate in the Systematic Withdrawal Plan.
Under a Systematic Withdrawal Plan, all shares are to be held by the Transfer
Agent and all dividends and distributions are reinvested in shares of the
applicable AIM Fund by the Transfer Agent. To provide funds for payments made
under the Systematic Withdrawal Plan, the Transfer Agent redeems sufficient full
and fractional shares at their net asset value in effect at the time of each
such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events. Since
such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B or Class C Shares of the Multiple Class Funds, AIM Cash
Reserve Shares of AIM MONEY MARKET FUND and Class A shares of AIM ADVISOR CASH
MANAGEMENT FUND), it is disadvantageous to effect such purchases while a
Systematic Withdrawal Plan is in effect.
The Systematic Withdrawal Plan may be terminated at any time upon 10 days'
prior notice to AFS. Each AIM Fund bears its share of the cost of operating the
Systematic Withdrawal Plan. Each AIM Fund reserves the right to initiate a fee
for each withdrawal (not to exceed its cost), but there is no present intent to
do so.
AUTOMATIC INVESTMENT PLAN. Shareholders who wish to make monthly or quarterly
investments may establish an Automatic Investment Plan. Under this plan, on or
about the tenth and/or twenty-fifth day of the applicable month, a draft is
drawn on the shareholder's bank account in the amount specified by the
shareholder (minimum $50 per investment, per account). The proceeds of the draft
are invested in shares of the designated AIM Fund at the applicable offering
price determined on the date of the draft. An Automatic Investment Plan may be
discontinued upon 10 days' prior notice to the Transfer Agent or AIM
Distributors.
AUTOMATIC DIVIDEND INVESTMENT PLAN. Shareholders may elect to have all
dividends and distributions declared by an AIM Fund paid in cash or invested at
net asset value, without payment of an initial sales charge, either in shares of
the same AIM Fund or invested in shares of another AIM Fund. For each of the
Multiple Class Funds, dividends and distributions attributable to Class A shares
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may be reinvested in Class A shares of the same fund, in Class A shares of
another Multiple Class Fund or in shares of another AIM Fund which is not a
Multiple Class Fund; dividends and distributions attributable to Class B shares
may be reinvested in Class B shares of the same fund or in Class B shares of
another Multiple Class Fund; dividends and distributions attributable to Class C
shares may be reinvested in Class C shares of the same fund or in Class C shares
of another Multiple Class Fund; and dividends and distributions attributable to
AIM Cash Reserve Shares of AIM MONEY MARKET FUND may be reinvested in additional
shares of such fund, in Class A shares of another Multiple Class Fund or in
shares of another AIM Fund which is not a Multiple Class Fund. See "Dividends,
Distributions and Tax Matters -- Dividends and Distributions" for a description
of payment dates for these options. In order to qualify to have dividends and
distributions of one AIM Fund invested in shares of another AIM Fund, the
following conditions must be satisfied: (a) the shareholder must have an account
balance in the dividend paying fund of at least $5,000; (b) the account must be
held in the name of the shareholder (i.e., the account may not be held in
nominee name); and (c) the shareholder must have requested and completed an
authorization relating to the reinvestment of dividends into another AIM Fund.
An authorization may be given on the account application or on an authorization
form available from AIM Distributors. An AIM Fund will waive the $5,000 minimum
account value requirement if the shareholder has an account in the fund selected
to receive the dividends and distributions with a value of at least $500.
DOLLAR COST AVERAGING. Shareholders may elect to have a specified amount
automatically exchanged, either monthly or quarterly (on or about the 10th or
25th day of the applicable month), from one of their accounts into one or more
AIM Funds, subject to the terms and conditions described under the caption
"Exchange Privilege -- Terms and Conditions of Exchanges." The account from
which exchanges are to be made must have a value of at least $5,000 when a
shareholder elects to begin this program, and the exchange minimum is $50 per
transaction. All of the accounts that are part of this program must have
identical registrations. The net asset value of shares purchased under this
program may vary, and may be more or less advantageous than if shares were not
exchanged automatically. There is no charge for entering the Dollar Cost
Averaging program. Sales charges may apply, as described under the caption
"Exchange Privilege."
PROTOTYPE RETIREMENT PLANS. The AIM Funds (except for AIM TAX-FREE
INTERMEDIATE SHARES, AIM TAX-EXEMPT CASH FUND, AIM MUNICIPAL BOND FUND and AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT) have made the following prototype
retirement plans available to corporations, individuals and employees of
non-profit organizations and public schools: combination money-
purchase/profit-sharing plans; 403(b) plans; IRA plans; SARSEP plans; and SEP
plans (collectively, "retirement accounts"). Information concerning these plans,
including the custodian's fees and the forms necessary to adopt such plans, can
be obtained by calling or writing the AIM Funds or AIM Distributors. Shares of
the AIM Funds are also available for investment through existing 401(k) plans
(for both individuals and employers) adopted under the Code. The plan custodian
currently imposes an annual $10 maintenance fee with respect to each retirement
account for which it serves as the custodian. This fee is generally charged in
December. Each AIM Fund and/or the custodian reserve the right to change this
maintenance fee and to initiate an establishment fee (not to exceed its cost).
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- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
TERMS AND CONDITIONS OF EXCHANGES. Shareholders of the AIM Funds may
participate in an exchange privilege as described below. The exchange privilege
is also available to holders of the Connecticut General Guaranteed Account,
established for tax-qualified group annuities, for contracts purchased on or
before June 30, 1992. AIM Distributors acts as distributor for the AIM Funds,
which represent a range of different investment objectives and policies. As set
forth under the caption "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions," shares of certain of the AIM
Funds, including the Class A shares of the Multiple Class Funds (except AIM
ADVISOR CASH MANAGEMENT FUND), listed below and referred to herein as the "Load
Funds," are sold at a public offering price that includes a maximum sales charge
of 5.50% or 4.75% of the public offering price of such shares; Class A shares
(or shares which normally involve the payment of initial sales charges) of
certain of the AIM Funds, listed below and referred to herein as the "Lower Load
Funds," are sold at a public offering price that includes a maximum sales charge
of 1.00% of the public offering price of such shares; and Class A shares or
shares of certain other funds, listed below and referred to herein as the "No
Load Funds," are sold at net asset value, without payment of a sales charge.
<TABLE>
<S> <C> <C>
LOAD FUNDS: LOWER LOAD FUNDS:
AIM ADVISOR FLEX FUND -- AIM GLOBAL GROWTH AIM LIMITED MATURITY TREASURY SHARE
CLASS A FUND -- CLASS A AIM TAX-FREE INTERMEDIATE
AIM ADVISOR INCOME FUND -- AIM GLOBAL INCOME SHARES -- CLASS A
CLASS A FUND -- CLASS A
AIM ADVISOR INTERNATIONAL AIM GLOBAL UTILITIES NO LOAD FUNDS:
VALUE FUND -- CLASS A FUND -- CLASS A AIM ADVISOR CASH MANAGEMENT FUND
AIM ADVISOR LARGE CAP AIM GROWTH FUND -- CLASS A -- CLASS A
VALUE FUND -- CLASS A AIM HIGH YIELD FUND -- CLASS A AIM MONEY MARKET FUND
AIM ADVISOR MULTIFLEX AIM INCOME FUND -- CLASS A -- AIM CASH RESERVE SHARES
FUND -- CLASS A AIM INTERMEDIATE GOVERNMENT AIM TAX-EXEMPT CASH FUND -- CLASS A
AIM ADVISOR REAL ESTATE FUND -- CLASS A
FUND -- CLASS A AIM INTERNATIONAL EQUITY
AIM AGGRESSIVE GROWTH FUND -- CLASS A
FUND -- CLASS A AIM MONEY MARKET
AIM BALANCED FUND -- CLASS A FUND -- CLASS A
AIM BLUE CHIP FUND -- CLASS A AIM MUNICIPAL BOND
AIM CAPITAL DEVELOPMENT FUND -- CLASS A
FUND -- CLASS A AIM TAX-EXEMPT BOND FUND
AIM CHARTER FUND -- CLASS A OF CONNECTICUT -- CLASS A
AIM CONSTELLATION AIM VALUE FUND -- CLASS A
FUND -- CLASS A AIM WEINGARTEN FUND -- CLASS A
AIM GLOBAL AGGRESSIVE GROWTH
FUND -- CLASS A
</TABLE>
Shares of any AIM Fund may be exchanged for shares of any other AIM Fund on
the terms described on the chart below, except that (i) effective August 4, 1997
(except with respect to shares of AIM ADVISOR CASH MANAGEMENT FUND, AIM ADVISOR
FLEX FUND, AIM ADVISOR INCOME FUND, AIM ADVISOR INTERNATIONAL VALUE FUND, AIM
ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR MULTIFLEX FUND and AIM ADVISOR REAL
ESTATE FUND), no shares of any Load Fund, Class C of a Multiple Class Fund,
Lower Load Fund or No Load Fund may be exchanged for shares of AIM ADVISOR CASH
MANAGEMENT FUND or AIM ADVISOR INCOME FUND; (ii) effective October 3, 1997 no
share of any Load Fund, Class C of a Multiple Class Fund, Lower Load Fund or No
Load Fund may be exchanged for shares of AIM ADVISOR CASH MANAGEMENT FUND or AIM
ADVISOR INCOME FUND; (iii) Load Fund share purchases of $1,000,000 or more which
are subject to a contingent deferred sales charge may not be exchanged for Lower
Load Funds or for AIM TAX-EXEMPT CASH FUND; (iv) LOWER LOAD FUND SHARE PURCHASES
OF $1,000,000 OR MORE AND AIM Cash Reserve Shares of AIM MONEY MARKET FUND and
AIM TAX-EXEMPT CASH FUND PURCHASES MAY BE EXCHANGED FOR LOAD FUND SHARES IN
AMOUNTS OF $1,000,000 OR MORE WHICH WILL THEN BE SUBJECT TO A CONTINGENT
DEFERRED SALES CHARGE; HOWEVER, FOR PURPOSES OF CALCULATING THE CONTINGENT
DEFERRED SALES CHARGE ON THE LOAD FUND SHARES ACQUIRED, THE 18-MONTH PERIOD
SHALL BE COMPUTED FROM THE DATE OF SUCH EXCHANGE; (v) Class A shares and AIM
LIMITED MATURITY TREASURY SHARES may be exchanged for Class A shares or AIM
LIMITED MATURITY TREASURY SHARES, (vi) Class B shares may be exchanged only for
Class B shares; (vii) Class C shares may only be exchanged for Class C shares;
(viii) Class A shares of AIM ADVISOR CASH MANAGEMENT FUND may be exchanged for
Class A shares of any Load Fund, Lower Load Fund or No-Load Fund at net asset
value; (ix) Class C shares of AIM ADVISOR CASH MANAGEMENT FUND may be exchanged
for Class C shares of any Multiple Class Fund at net asset value; and (x) AIM
Cash Reserve Shares of AIM MONEY MARKET FUND may not be exchanged for Class A
shares of AIM MONEY MARKET FUND or for Class B or Class C shares.
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Broker-dealers and institutions of record for Class A or Class C shares
purchased pursuant to an exchange from Class A or Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND will be compensated according to the sales commission or
concession that would apply if these Class A or Class C share purchases had been
purchased in a manner other than pursuant to an exchange.
DEPENDING UPON THE FUND FROM WHICH AND INTO WHICH AN EXCHANGE IS BEING MADE,
SHARES BEING ACQUIRED IN AN EXCHANGE MAY BE ACQUIRED AT THEIR OFFERING PRICE OR
AT THEIR NET ASSET VALUE (WITHOUT PAYMENT OF A SALES CHARGE) AS SET FORTH IN THE
TABLE BELOW FOR SHARES INITIALLY PURCHASED PRIOR TO MAY 1, 1994:
<TABLE>
<CAPTION>
MULTIPLE CLASS FUNDS:
LOWER LOAD NO LOAD ------------------------------
FROM: TO: LOAD FUNDS FUNDS FUNDS CLASS B CLASS C
----- -------------- ----------------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Load Funds....... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Lower Load
Funds.......... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
No Load Funds.... Offering Price if No Load shares Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund or any Fund or any Lower Load
Lower Load Fund. Fund; otherwise,
Offering Price.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
FOR SHARES INITIALLY PURCHASED ON OR AFTER MAY 1, 1994, THE FOREGOING TABLE IS REVISED AS FOLLOWS:
Load Funds....... Net Asset Value Net Asset Value Net Asset Value Not Applicable Not Applicable
Lower Load
Funds.......... Net Asset Value if shares were Net Asset Value Net Asset Value Not Applicable Not Applicable
acquired upon exchange of any
Load Fund. Otherwise, difference
in sales charge will apply.
No Load Funds.... Offering Price if No Load shares Net Asset Value if No Net Asset Value Not Applicable Not Applicable
were directly purchased. Net Load shares were
Asset Value if No Load shares acquired upon exchange
were acquired upon exchange of of shares of any Load
shares of any Load Fund. Fund or any Lower Load
Difference in sales charge will Fund; otherwise, Of-
apply if No Load shares were fering Price.
acquired upon exchange of Lower
Load Fund shares.
Multiple Class
Funds:
Class B........ Not Applicable Not Applicable Not Applicable Net Asset Value Not Applicable
Class C........ Not Applicable Not Applicable Not Applicable Not Applicable Net Asset Value
</TABLE>
An exchange is permitted only in the following circumstances: (a) if the funds
offer more than one class of shares, the exchange must be between the same class
of shares (e.g., Class A, Class B and Class C shares of a Multiple Class Fund
cannot be exchanged for each other), except that AIM Cash Reserve Shares of AIM
MONEY MARKET FUND may be exchanged for Class A shares of another Multiple Class
Fund; (b) the dollar amount of the exchange must be at least equal to the
minimum investment applicable to the shares of the fund acquired through such
exchange; (c) the shares of the fund acquired through exchange must be qualified
for sale in the state in which the shareholder resides; (d) the exchange must be
made between accounts having identical registrations and addresses; (e) the full
amount of the purchase price for the shares being exchanged must have already
been received by the fund; (f) the account from which shares have been exchanged
must be coded as having a certified taxpayer identification number on file or,
in the alternative, an appropriate Internal Revenue Service ("IRS") Form W-8
(certificate of foreign status) or Form W-9 (certifying exempt status) must have
been received by the fund; (g) newly acquired shares (through either an initial
or subsequent investment) are held in an account for at least ten business days,
and all other shares are held in an account for at least one day, prior to the
exchange; and (h) certificates representing shares must be returned before
shares can be exchanged. There is no fee for exchanges among the AIM Funds.
THE CURRENT PROSPECTUS OF EACH OF THE AIM FUNDS AND CURRENT INFORMATION
CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE THROUGH AIM
DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE AGREEMENT WITH
AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD REVIEW THE
PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH EXCHANGE.
EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE INCOME TAX
PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
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THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any AIM Fund (other than AIM MONEY MARKET FUND) to be exchanged are
redeemed at their net asset value as determined at NYSE Close on the day that an
exchange request in proper form (described below) is received. Exchange requests
received after NYSE Close will result in the redemption of shares at their net
asset value at NYSE Close on the next business day. See "Terms and Conditions of
Purchase of the AIM Funds -- Timing of Purchase, Exchange and Redemption Orders
(AIM MONEY MARKET FUND only)" for information regarding the timing of exchange
orders for AIM MONEY MARKET FUND. Normally, shares of an AIM Fund to be acquired
by exchange are purchased at their net asset value or applicable offering price,
as the case may be, determined on the date that such request is received, but
under unusual market conditions such purchases may be delayed for up to five
business days if it is determined that a fund would be materially disadvantaged
by an immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into a fund paying daily dividends (See "Dividends, Distributions and
Tax Matters -- Dividends and Distributions," below), and the release of the
exchange proceeds is delayed for the foregoing five-day period, such shareholder
will not begin to accrue dividends until the sixth business day after the
exchange. Shares purchased by check may not be exchanged until it is determined
that the check has cleared, which may take up to ten business days from the date
that the check is received. See "Terms and Conditions of Purchase of the AIM
Funds -- Timing of Purchase Orders."
In the event of unusual market conditions, AIM Distributors reserves the right
to reject any exchange request, if, in the judgment of AIM Distributors, the
number of requests or the total value of the shares that are the subject of the
exchange places a material burden on a fund. For example, the number of
exchanges by investment managers making market timing exchanges may be limited.
EXCHANGES BY MAIL. Investors exchanging their shares by mail should send a
written request to AFS. The request should contain the account registration and
account number, the dollar amount or number of shares to be exchanged, and the
names of the funds from which and into which the exchange is to be made. The
request should comply with all of the requirements for redemption by mail,
except those required for redemption of IRAs. See "How to Redeem Shares."
EXCHANGES BY TELEPHONE. Shareholders or their agents may request an exchange
by telephone. If a shareholder does not wish to allow telephone exchanges by any
person in his account, he should decline that option on the account application.
AIM Distributors has made arrangements with certain dealers and investment
advisory firms to accept telephone instructions to exchange shares between any
of the AIM Funds. AIM Distributors reserves the right to impose conditions on
dealers or investment advisors who make telephone exchanges of shares of the
funds, including the condition that any such dealer or investment advisor enter
into an agreement (which contains additional conditions with respect to
exchanges of shares) with AIM Distributors. To exchange shares by telephone, a
shareholder, dealer or investment advisor who has satisfied the foregoing
conditions must call AFS at (800) 959-4246. If a shareholder is unable to reach
AFS by telephone, he may also request exchanges by telegraph or use overnight
courier services to expedite exchanges by mail, which will be effective on the
business day received by the Transfer Agent as long as such request is received
prior to NYSE Close. The Transfer Agent and AIM Distributors will not be liable
for any loss, expense or cost arising out of any telephone exchange request that
they reasonably believe to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions if they do not follow
reasonable procedures for verification of telephone transactions. Such
reasonable procedures may include recordings of telephone transactions
(maintained for six months), requests for confirmation of the shareholder's
Social Security Number and current address, and mailings of confirmations
promptly after the transaction.
EXCHANGES OF CLASS B AND CLASS C SHARES. A contingent deferred sales charge
will not be imposed in connection with exchanges among Class B shares or among
Class C shares. For purposes of determining a shareholder's holding period of
Class B or Class C shares in the calculation of the applicable contingent
deferred sales charge, the period of time during which Class B or Class C shares
were held prior to an exchange will be added to the holding period of the
applicable Class B or Class C shares (except for Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND) acquired in an exchange.
- --------------------------------------------------------------------------------
HOW TO REDEEM SHARES
Shares of the AIM Funds may be redeemed directly through AIM Distributors or
through any dealer who has entered into an agreement with AIM Distributors. In
addition to the obligation of the fund(s) named on the cover page to redeem
shares, AIM Distributors also repurchases shares. Although a contingent deferred
sales charge may be applicable to certain redemptions, as described below, there
is no redemption fee imposed when shares are redeemed or repurchased; however,
dealers may charge service fees for handling repurchase transactions.
MULTIPLE DISTRIBUTION SYSTEM. Class B shares. Class B shares purchased under
the Multiple Distribution System may be redeemed on any business day of a
Multiple Class Fund at the net asset value per share next determined following
receipt of the redemption order, as described under the caption "Timing and
Pricing of Redemption Orders," less the applicable contingent deferred sales
charge shown in the table below. No deferred sales charge will be imposed (i) on
redemptions of Class B shares following six years from the date such shares were
purchased, (ii) on Class B shares acquired through reinvestments of dividends
and distributions attrib-
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utable to Class B shares or (iii) on amounts that represent capital appreciation
in the shareholder's account above the purchase price of the Class B shares.
<TABLE>
<CAPTION>
YEAR CONTINGENT DEFERRED
SINCE SALES CHARGE AS
PURCHASE % OF DOLLAR AMOUNT
MADE SUBJECT TO CHARGE
-------- -------------------
<S> <C>
First...................................................... 5%
Second..................................................... 4%
Third...................................................... 3%
Fourth..................................................... 3%
Fifth...................................................... 2%
Sixth...................................................... 1%
Seventh and Following...................................... None
</TABLE>
In determining whether a contingent deferred sales charge is applicable, it
will be assumed that a redemption is made first, of any shares held in the
shareholder's account that are not subject to such charge; second, of shares
derived from reinvestment of dividends and distributions; third, of shares held
for more than six years from the date such shares were purchased; and fourth, of
shares held less than six years from the date such shares were purchased. The
applicable sales charge will be applied against the lesser of the current market
value of shares redeemed or their original cost.
Class C Shares. Class C shares purchased under the Multiple Distribution
System may be redeemed on any business day of a Multiple Class Fund at the net
asset value per share next determined following receipt of the redemption order,
as described under the caption "Timing and Pricing of Redemption Orders," less a
1% contingent deferred sales charge. No deferred sales charge will be imposed
(i) on redemptions of Class C shares following one year from the date such
shares were purchased; (ii) on Class C shares acquired through reinvestment of
dividends and distributions attributable to Class C shares; (iii) on amounts
that represent capital appreciation in the shareholder's account above the
purchase price of the Class C shares; (iv) on redemptions of additional
purchases of shares of AIM ADVISOR FLEX FUND, AIM ADVISOR INCOME FUND, AIM
ADVISOR INTERNATIONAL VALUE FUND, AIM ADVISOR LARGE CAP VALUE FUND, AIM ADVISOR
MULTIFLEX FUND, and AIM ADVISOR REAL ESTATE FUND, by shareholders of record on
April 30, 1995 of these funds. Shareholders whose broker/dealers maintain a
single omnibus account with the Transfer Agent on behalf of those shareholders,
perform sub-accounting functions with respect to those shareholders, and are
unable to segregate shareholders of record prior to April 30, 1995 from
shareholders whose accounts were opened after that date will be subject to a
CDSC on all purchases made after March 1, 1996; or (v) on Class C shares of AIM
ADVISOR CASH MANAGEMENT FUND except in certain cases when the shares were
purchased in an exchange. Redemptions of shares of AIM ADVISOR CASH MANAGEMENT
FUND are generally not subject to a contingent deferred sales charge; however, a
contingent deferred sales charge may be applicable to redemptions of shares of
AIM ADVISOR CASH MANAGEMENT FUND if the redeemed shares were exchanged from
another Class C share fund and the one year holding period in such fund has not
been completed.
Contingent deferred sales charges on Class B and Class C shares will be waived
on redemptions (1) following the death or post-purchase disability, as defined
in Section 72(m)(7) of the Code, of a shareholder or a settlor of a living trust
(provided AIM Distributors is notified of such death or post-purchase disability
at the time of the redemption request and is provided with satisfactory evidence
of such death or post-purchase disability), (2) in connection with certain
distributions from individual retirement accounts, custodial accounts maintained
pursuant to Code Section 403(b), deferred compensation plans qualified under
Code Section 457 and plans qualified under Code Section 401 (collectively,
"Retirement Plans"), (3) pursuant to a Systematic Withdrawal Plan, provided that
amounts withdrawn under such plan do not exceed on an annual basis 12% of the
value of the shareholder's investment in Class B or Class C shares at the time
the shareholder elects to participate in the Systematic Withdrawal Plan, (4)
effected pursuant to the right of a Multiple Class Fund to liquidate a
shareholder's account if the aggregate net asset value of shares held in the
account is less than the designated minimum account size described in the
prospectus of such Multiple Class Fund, (5) effected by AIM of its investment in
Class B or Class C shares and (6) of Class C shares where such investor's dealer
of record, due to the nature of the investor's account, notifies AIM
Distributors prior to the time of investment that the dealer waives the payment
otherwise payable to the dealer described in the fifth paragraph under the
caption "Terms and Conditions of Purchase of the AIM Funds -- All Groups of AIM
Funds.".
Waiver category (1) above applies only to redemptions of Class B or Class C
shares held at the time of death or initial determination of post-purchase
disability.
Waiver category (2) above applies only to redemptions resulting from:
(i) required minimum distributions to plan participants or
beneficiaries who are age 70- 1/2 or older, and only with respect to that
portion of such distributions which does not exceed 12% annually of the
participant's or beneficiary's account value;
(ii) in kind transfers of assets where the participant or beneficiary
notifies AIM Distributors of such transfer no later than the time such
transfer occurs;
(iii) tax-free rollovers or transfers of assets to another Retirement
Plan invested in Class B or Class C shares of one or more Multiple Class
Funds;
MCF-A 07/97
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(iv) tax-free returns of excess contributions or returns of excess
deferral amounts; and
(v) distributions upon the death or disability (as defined in the
Code) of the participant or beneficiary.
CONTINGENT DEFERRED SALES CHARGE PROGRAM FOR LARGE PURCHASES. Except for
purchases of Class B and Class C shares of a Multiple Class Fund and purchases
of shares of the No Load Funds and Lower Load Funds, A CONTINGENT DEFERRED SALES
CHARGE OF 1% APPLIES TO PURCHASES OF $1,000,000 OR MORE THAT ARE REDEEMED WITHIN
18 MONTHS OF THE DATE OF PURCHASE. For a description of the AIM Funds
participating in this program, see "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions." This charge will be 1% of the
lesser of the value of the shares redeemed (excluding reinvested dividends and
capital gain distributions) or the total original cost of such shares. In
determining whether a contingent deferred sales charge is payable, and the
amount of any such charge, shares not subject to the contingent deferred sales
charge are redeemed first (including shares purchased by reinvested dividends
and capital gains distributions and amounts representing increases from capital
appreciation), and then other shares are redeemed in the order of purchase. No
such charge will be imposed upon exchanges unless the shares acquired by
exchange are redeemed within 18 months of the date the shares were originally
purchased. For purposes of computing this 18-MONTH PERIOD (i) shares of any Load
Fund, Class A shares of AIM ADVISOR CASH MANAGEMENT FUND or AIM Cash Reserve
Shares of AIM MONEY MARKET FUND which were acquired through an exchange of
shares which previously were subject to the 1% contingent deferred sales charge
will be credited with the period of time such exchanged shares were held, and
(ii) shares of any Load Fund which are subject to the 1% contingent deferred
sales charge and which were acquired through an exchange of shares of a Lower
Load Fund or a No Load Fund which previously were not subject to the 1%
contingent deferred sales charge will not be credited with the period of time
such exchanged shares were held. The charge will be waived in the following
circumstances: (1) redemptions of shares by employee benefit plans ("Plans")
qualified under Sections 401 or 457 of the Code, or Plans created under Section
403(b) of the Code and sponsored by nonprofit organizations as defined under
Section 501(c)(3) of the Code, where shares are being redeemed in connection
with employee terminations or withdrawals, and (a) the total amount invested in
a Plan is at least $1,000,000, (b) the sponsor of a Plan signs a letter of
intent to invest at least $1,000,000 in one or more of the AIM Funds, or (c) the
shares being redeemed were purchased by an employer-sponsored Plan with at least
100 eligible employees; provided, however, that Plans created under Section
403(b) of the Code which are sponsored by public educational institutions shall
qualify under (a), (b) or (c) above on the basis of the value of each Plan
participant's aggregate investment in the AIM Funds, and not on the aggregate
investment made by the Plan or on the number of eligible employees; (2)
redemptions of shares following the death or post-purchase disability, as
defined in Section 72(m)(7) of the Code, of a shareholder or a settlor of a
living trust; (3) redemptions of shares purchased at net asset value by private
foundations or endowment funds where the initial amount invested was at least
$1,000,000; (4) redemptions of shares purchased by an investor in amounts of
$1,000,000 or more where such investor's dealer of record, due to the nature of
the investor's account, notifies AIM Distributors prior to the time of
investment that the dealer waives the payments otherwise payable to the dealer
as described in the third paragraph under the caption "Terms and Conditions of
Purchase of the AIM Funds -- All Groups of AIM Funds"; and (5) pursuant to a
Systematic Withdrawal Plan, provided that amounts withdrawn under such plan do
not exceed on an annual basis 12% of the value of the shareholder's investment
in Class A shares at the time the shareholder elects to participate in the
Systematic Withdrawal Plan.
REDEMPTIONS BY MAIL. Redemption requests must be in writing and sent to the
Transfer Agent. Upon receipt of a redemption request in proper form, payment
will be made as soon as practicable, but in any event will normally be made
within seven days after receipt. However, in the event of a redemption of shares
purchased by check, the investor may be required to wait up to ten business days
before the redemption proceeds are sent. See "Terms and Conditions of Purchase
of the AIM Funds -- Timing of Purchase Orders."
Requests for redemption must include: (a) original signatures of each
registered owner exactly as the shares are registered; (b) the Fund and the
account number of shares to be redeemed; (c) share certificates, either properly
endorsed or accompanied by a duly executed stock power, for the shares to be
redeemed if such certificates have been issued and the shares are not in the
custody of the Transfer Agent; (d) signature guarantees, as described below; and
(e) any additional documents that may be required for redemption by
corporations, partnerships, trusts or other entities. The burden is on the
shareholder to inquire as to whether any additional documentation is required.
Any request not in proper form may be rejected and in such case must be renewed
in writing.
In addition to these requirements, shareholders who have invested in a fund to
establish an IRA, should include the following information along with a written
request for either partial or full liquidation of fund shares: (a) a statement
as to whether or not the shareholder has attained age 59- 1/2; and (b) a
statement as to whether or not the shareholder elects to have federal income tax
withheld from the proceeds of the liquidation.
REDEMPTIONS BY TELEPHONE. Shareholders may request a redemption by telephone.
If a shareholder does not wish to allow telephone redemptions by any person in
his account, he should decline that option on the account application. The
telephone redemption feature can be used only if: (a) the redemption proceeds
are to be mailed to the address of record or wired to the pre-authorized bank
account as indicated on the account application; (b) there has been no change of
address of record on the account within the preceding 30 days; (c) the shares to
be redeemed are not in certificate form; (d) the person requesting the
redemption can provide proper identification information; and (e) the proceeds
of the redemption do not exceed $50,000. Accounts in AIM Distributors' prototype
retirement plans (such as IRA and IRA/SEP) or 403(b) plans are not eligible for
the telephone redemption option. AIM
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Distributors has made arrangements with certain dealers and investment advisors
to accept telephone instructions for the redemption of shares. AIM Distributors
reserves the right to impose conditions on these dealers and investment
advisors, including the condition that they enter into agreements (which contain
additional conditions with respect to the redemption of shares) with AIM
Distributors. The Transfer Agent and AIM Distributors will not be liable for any
loss, expense or cost arising out of any telephone redemption request effected
in accordance with the authorization set forth at that item of the account
application if they reasonably believe such request to be genuine, but may in
certain cases be liable for losses due to unauthorized or fraudulent
transactions if they do not follow reasonable procedures for verification of
telephone transactions. Such reasonable procedures may include recordings of
telephone transactions (maintained for six months), requests for confirmation of
the shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transaction.
EXPEDITED REDEMPTIONS (AIM MONEY MARKET FUND ONLY). If a redemption order is
received prior to 11:30 a.m. Eastern Time, the redemption will be effective on
that day and AIM MONEY MARKET FUND will endeavor to transmit payment on that
same business day. If the redemption order is received after 11:30 a.m. and
prior to NYSE Close, the redemption will be made at the next determined net
asset value and payment will generally be transmitted on the next business day.
REDEMPTIONS BY CHECK (AIM TAX-EXEMPT CASH FUND, AIM ADVISOR CASH MANAGEMENT
FUND and AIM Cash Reserve Shares of AIM MONEY MARKET FUND). After completing the
appropriate authorization form, shareholders may use checks to effect
redemptions from AIM TAX-EXEMPT CASH FUND, AIM ADVISOR CASH MANAGEMENT FUND and
the AIM Cash Reserve Shares of AIM MONEY MARKET FUND. This privilege does not
apply to retirement accounts or qualified plans. Checks may be drawn in any
amount of $250 or more. Checks drawn against insufficient shares in the account,
against shares held less than ten business days, or in amounts of less than the
applicable minimum will be returned to the payee. The payee of the check may
cash or deposit it in the same way as an ordinary bank check. When a check is
presented to the Transfer Agent for payment, the Transfer Agent will cause a
sufficient number of shares of such fund to be redeemed to cover the amount of
the check. Shareholders are entitled to dividends on the shares redeemed through
the day on which the check is presented to the Transfer Agent for payment.
TIMING AND PRICING OF REDEMPTION ORDERS. Shares of the various AIM Funds
(other than AIM MONEY MARKET FUND) are redeemed at their net asset value next
computed after a request for redemption in proper form (including signature
guarantees and other required documentation for written redemptions) is received
by the Transfer Agent, except that shares that are subject to a contingent
deferred sales charge, may be subject to the imposition of deferred sales
charges that will be deducted from the redemption proceeds. See "Multiple
Distribution System" and "Contingent Deferred Sales Charge Program for Large
Purchases." Orders for the redemption of shares received in proper form prior to
NYSE Close on any business day of an AIM Fund will be confirmed at the price
determined as of the close of that day. Orders received after NYSE Close will be
confirmed at the price determined on the next business day of an AIM Fund.
Redemptions of shares of AIM MONEY MARKET FUND received prior to 12:00 noon or
NYSE Close on any business day of the Fund will be confirmed at the price next
determined. It is the responsibility of the dealer to ensure that all orders are
transmitted on a timely basis. Any resulting loss from the dealer's failure to
submit a request for redemption within the prescribed time frame will be borne
by that dealer. Telephone redemption requests must be made by NYSE Close on any
business day of an AIM Fund and will be confirmed at the price determined as of
the close of that day. No AIM Fund will accept requests which specify a
particular date for redemption or which specify any special conditions.
Payment of the proceeds of redeemed shares is normally mailed within seven
days following the redemption date. However, in the event of a redemption of
shares purchased by check, the investor may be required to wait up to ten
business days before the redemption proceeds are sent. See "Terms and Conditions
of Purchase of the AIM Funds -- Timing of Purchase Orders." A charge for special
handling (such as wiring of funds or expedited delivery services) may be made by
the Transfer Agent. The right of redemption may not be suspended or the date of
payment upon redemption postponed except under unusual circumstances such as
when trading on the NYSE is restricted or suspended. Payment of the proceeds of
redemptions relating to shares for which checks sent in payment have not yet
cleared will be delayed until it is determined that the check has cleared, which
may take up to ten business days from the date that the check is received.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect the
investor, the AIM Funds, AIM Distributors, and their agents by verifying the
signature of each investor seeking to redeem, transfer, or exchange shares of an
AIM Fund. Examples of when signature guarantees are required are: (1)
redemptions by mail in excess of $50,000; (2) redemptions by mail if the
proceeds are to be paid to someone other than the name(s) in which the account
is registered; (3) written redemptions requesting proceeds to be sent by wire to
other than the bank of record for the account; (4) redemptions requesting
proceeds to be sent to a new address or an address that has been changed within
the past 30 days; (5) requests to transfer the registration of shares to another
owner; (6) telephone exchange and telephone redemption authorization forms; (7)
changes in previously designated wiring instructions; and (8) written
redemptions or exchanges of shares previously reported as lost, whether or not
the redemption amount is under $50,000 or the proceeds are to be sent to the
address of record. These requirements may be waived or modified upon notice to
shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term is defined in rules adopted by the Securities and
Exchange Commission ("SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such as
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certain domestic banks, credit unions, securities dealers, or securities
exchanges. The Transfer Agent will also accept signatures with either: (1) a
signature guaranteed with a medallion stamp of the STAMP Program, or (2) a
signature guaranteed with a medallion stamp of the NYSE Medallion Signature
Program, provided that in either event, the amount of the transaction involved
does not exceed the surety coverage amount indicated on the medallion. For
information regarding whether a particular institution or organization qualifies
as an "eligible guarantor institution," an investor should contact the Client
Services Department of AFS.
REINSTATEMENT PRIVILEGE (CLASS A SHARES AND LIMITED MATURITY TREASURY SHARES
ONLY). Within 90 days of a redemption, a shareholder may invest all or part of
the redemption proceeds in Class A shares of any AIM Fund (except Class A shares
of AIM ADVISOR CASH MANAGEMENT FUND) and AIM Limited Maturity Treasury Shares at
the net asset value next computed after receipt by the Transfer Agent of the
funds to be reinvested; provided, however, if the redemption was made from AIM
Limited Maturity Treasury Shares or Class A shares of AIM TAX-FREE INTERMEDIATE
SHARES, the reinvested proceeds will be subject to the difference in sales
charge between the shares redeemed and the shares the proceeds are reinvested
in. The shareholder must ask the Transfer Agent for such privilege at the time
of reinvestment. A realized gain on the redemption is taxable, and reinvestment
may alter any capital gains payable. If there has been a loss on the redemption
and shares of the same fund are repurchased, all of the loss may not be tax
deductible, depending on the timing and amount reinvested. Under the Code, if
the redemption proceeds of fund shares on which a sales charge was paid are
reinvested in (or exchanged for) shares of another AIM Fund at a reduced sales
charge within 90 days of the payment of the sales charge, the shareholder's
basis in the fund shares redeemed may not include the amount of the sales charge
paid, thereby reducing the loss or increasing the gain recognized from the
redemption; however, the shareholder's basis in the fund shares purchased will
include the sales charge. Each AIM Fund may amend, suspend or cease offering
this privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation. This privilege may only be exercised once
each year by a shareholder with respect to each AIM Fund.
Shareholders who are assessed a contingent deferred sales charge in connection
with the redemption of Class A shares and who subsequently reinvest a portion or
all of the value of the redeemed shares in Class A shares of any AIM Fund within
90 days after such redemption may do so at net asset value if such privilege is
claimed at the time of reinvestment. Such reinvested proceeds will not be
subject to either a front-end sales charge at the time of reinvestment or an
additional contingent deferred sales charge upon subsequent redemption. In order
to exercise this reinvestment privilege, the shareholder must notify the
Transfer Agent of his or her intent to do so at the time of reinvestment. This
reinvestment privilege does not apply to Class B or Class C shares.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each AIM Fund is determined
as of 4:00 p.m. Eastern Time (12:00 noon Eastern Time and NYSE Close with
respect to AIM MONEY MARKET FUND), on each "business day" of a fund as
previously defined. In the event the NYSE closes early (i.e. before 4:00 p.m.
Eastern Time) on a particular day, the net asset value of an AIM Fund's share
will be determined as of the close of the NYSE on such day. For purposes of
determining net asset value per share, futures and options contracts generally
will be valued 15 minutes after the close of trading of the NYSE.The net asset
value per share is calculated by subtracting a class' liabilities from its
assets and dividing the result by the total number of class shares outstanding.
The determination of net asset value per share is made in accordance with
generally accepted accounting principles. Among other items, liabilities include
accrued expenses and dividends payable, and total assets include portfolio
securities valued at their market value, as well as income accrued but not yet
received. Securities for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the supervision of
the fund's officers and in accordance with methods which are specifically
authorized by its governing Board of Directors or Trustees. Short-term
obligations with maturities of 60 days or less, and the securities held by the
Money Market Funds, are valued at amortized cost as reflecting fair value. AIM
MUNICIPAL BOND FUND, AIM TAX-EXEMPT BOND FUND OF CONNECTICUT and AIM TAX-FREE
INTERMEDIATE SHARES value variable rate securities that have an unconditional
demand or put feature exercisable within seven days or less at par, which
reflects the market value of such securities.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of an AIM Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined prior
to the close of the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which the
values of the securities are determined and the close of the NYSE which will not
be reflected in the computation of an AIM Fund's net asset value. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors or Trustees of the
applicable AIM Fund.
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DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
Each AIM Fund's policy regarding the payment of dividends and distributions is
set forth below.
<TABLE>
<CAPTION>
DISTRIBUTIONS DISTRIBUTIONS
OF NET OF NET
DIVIDENDS FROM REALIZED REALIZED
NET INVESTMENT SHORT-TERM LONG-TERM
FUND INCOME CAPITAL GAINS CAPITAL GAINS
---- -------------- ------------- -------------
<S> <C> <C> <C>
AIM ADVISOR CASH MANAGEMENT FUND.......... declared daily; paid monthly annually annually
AIM ADVISOR FLEX FUND..................... declared and paid quarterly quarterly annually
AIM ADVISOR INCOME FUND................... declared and paid monthly monthly annually
AIM ADVISOR INTERNATIONAL VALUE FUND...... declared and paid annually annually annually
AIM ADVISOR LARGE CAP VALUE FUND.......... declared and paid quarterly quarterly annually
AIM ADVISOR MULTIFLEX FUND................ declared and paid quarterly quarterly annually
AIM ADVISOR REAL ESTATE FUND.............. declared and paid quarterly quarterly annually
AIM AGGRESSIVE GROWTH FUND................ declared and paid annually annually annually
AIM BALANCED FUND......................... declared and paid quarterly annually annually
AIM BLUE CHIP FUND........................ declared and paid annually annually annually
AIM CAPITAL DEVELOPMENT FUND.............. declared and paid annually annually annually
AIM CHARTER FUND.......................... declared and paid quarterly annually annually
AIM CONSTELLATION FUND.................... declared and paid annually annually annually
AIM GLOBAL AGGRESSIVE GROWTH FUND......... declared and paid annually annually annually
AIM GLOBAL GROWTH FUND.................... declared and paid annually annually annually
AIM GLOBAL INCOME FUND.................... declared daily; paid monthly annually annually
AIM GLOBAL UTILITIES FUND................. declared daily; paid monthly annually annually
AIM GROWTH FUND........................... declared and paid annually annually annually
AIM HIGH YIELD FUND....................... declared daily; paid monthly annually annually
AIM INCOME FUND........................... declared daily; paid monthly annually annually
AIM INTERMEDIATE GOVERNMENT FUND.......... declared daily; paid monthly annually annually
AIM INTERNATIONAL EQUITY FUND............. declared and paid annually annually annually
AIM LIMITED MATURITY TREASURY SHARES...... declared daily; paid monthly annually annually
AIM MONEY MARKET FUND..................... declared daily; paid monthly at least annually annually
AIM MUNICIPAL BOND FUND................... declared daily; paid monthly annually annually
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT... declared daily; paid monthly annually annually
AIM TAX-EXEMPT CASH FUND.................. declared daily; paid monthly at least annually annually
AIM TAX-FREE INTERMEDIATE SHARES.......... declared daily; paid monthly annually annually
AIM VALUE FUND............................ declared and paid annually annually annually
AIM WEINGARTEN FUND....................... declared and paid annually annually annually
</TABLE>
In determining the amount of capital gains, if any, available for
distribution, net capital gains are offset against available net capital losses,
if any, carried forward from previous fiscal periods.
All dividends and distributions of an AIM Fund are automatically reinvested on
the payment date in full and fractional shares of such fund, unless the
shareholder has made an alternate election as to the method of payment.
Dividends and distributions attributable to a class are reinvested in additional
shares of such class, absent an election by a shareholder to receive cash or to
have such dividends and distributions reinvested in like shares of another
Multiple Class Fund, to the extent permitted. For funds that do not declare a
dividend daily, such dividends and distributions will be reinvested at the net
asset value per share determined on the ex-dividend date. For funds that declare
a dividend daily, such dividends and distributions will be reinvested at the net
asset value per share determined on the payable date. Shareholders may elect, by
written notice to the Transfer Agent, to receive such distributions, or the
dividend portion thereof, in cash, or to invest such dividends and distributions
in shares of another fund in the AIM Funds; provided that (i) dividends and
distributions attributable to Class B shares may only be reinvested in Class B
shares, (ii) dividends and distributions attributable to Class C shares may only
be reinvested in Class C shares (except Class C shares of AIM ADVISOR CASH
MANAGEMENT FUND) (iii) dividends and distributions attributable to Class A
shares or AIM Limited Maturity Treasury Shares may not be reinvested in Class A
shares of AIM ADVISOR CASH MANAGEMENT FUND or Class B or Class C shares, and
(iv) dividends and distributions attributable to the AIM Cash Reserve Shares of
AIM MONEY MARKET FUND may not be reinvested in the Class A shares of that Fund
or in any Class B or Class C shares. Investors who have not previously selected
such a reinvestment option on the account application form may contact the
Transfer Agent at any time to obtain a form to authorize such reinvestments in
another AIM Fund. Such reinvestments into the AIM Funds are not subject to sales
charges, and shares so purchased are automatically credited to the account of
the shareholder.
Dividends on Class B and Class C shares (except Class C shares of AIM ADVISOR
CASH MANAGEMENT FUND) are expected to be lower than those for Class A shares or
AIM Cash Reserve Shares because of higher distribution fees paid by Class B and
Class C shares (except Class C shares of AIM ADVISOR CASH MANAGEMENT FUND).
Dividends on all shares may also be affected by other class-specific expenses.
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Changes in the form of dividend and distribution payments may be made by the
shareholder at any time by notice to the Transfer Agent and are effective as to
any subsequent payment if such notice is received by the Transfer Agent prior to
the record date of such payment. Any dividend and distribution election remains
in effect until the Transfer Agent receives a revised written election by the
shareholder.
Any dividend or distribution paid by a fund which does not declare dividends
daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes, as
discussed below.
TAX MATTERS
Each AIM Fund has qualified and intends to qualify for treatment as a
regulated investment company under Subchapter M of the Code. As long as a fund
qualifies for this tax treatment, it is not subject to federal income taxes on
net investment income and capital gains that are distributed to shareholders.
Each fund, for purposes of determining taxable income, distribution requirements
and other requirements of Subchapter M, is treated as a separate corporation.
Therefore, no fund may offset its gains against another fund's losses and each
fund must individually comply with all of the provisions of the Code which are
applicable to its operations.
TAX TREATMENT OF DISTRIBUTIONS -- GENERAL. Because each AIM Fund intends to
distribute substantially all of its net investment income and net realized
capital gains to its shareholders, it is not expected that any such fund will be
required to pay any federal income tax. Each AIM Fund also intends to meet the
distribution requirements of the Code to avoid the imposition of a
non-deductible 4% excise tax calculated as a percentage of certain undistributed
amounts of taxable ordinary income and capital gain net income. Nevertheless,
shareholders normally are subject to federal income taxes, and any applicable
state and local income taxes, on the dividends and distributions received by
them from a fund whether in the form of cash or additional shares of a fund,
except for tax-exempt dividends paid by AIM MUNICIPAL BOND FUND, AIM TAX-EXEMPT
BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND, and AIM TAX-FREE
INTERMEDIATE SHARES (the "Tax-Exempt Funds") which are exempt from federal tax.
Dividends paid by a fund (other than capital gain distributions) may qualify for
the federal 70% dividends received deduction for corporate shareholders to the
extent of the qualifying dividends received by the fund on domestic common or
preferred stock. It is not likely that dividends received from AIM ADVISOR CASH
MANAGEMENT FUND, AIM ADVISOR INCOME FUND, AIM ADVISOR INTERNATIONAL VALUE FUND,
AIM ADVISOR REAL ESTATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
GROWTH FUND, AIM GLOBAL INCOME FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EQUITY FUND, AIM LIMITED
MATURITY TREASURY SHARES, AIM MONEY MARKET FUND, AIM MUNICIPAL BOND FUND, AIM
TAX-EXEMPT BOND FUND OF CONNECTICUT, AIM TAX-EXEMPT CASH FUND or AIM TAX-FREE
INTERMEDIATE SHARES will qualify for this dividends received deduction. Shortly
after the end of each year, shareholders will receive information regarding the
amount and federal income tax treatment of all distributions paid during the
year. Certain dividends declared in October, November or December of a calendar
year are taxable to shareholders as though received on December 31 of that year
if paid to shareholders during January of the following calendar year. No gain
or loss will be recognized by shareholders upon the automatic conversion of
Class B shares of a Multiple Class Fund into Class A shares of such Fund. With
respect to tax-exempt shareholders, distributions from the Funds will not be
subject to federal income taxation to the extent permitted under the applicable
tax-exemption.
For each redemption of a fund's shares by a non-exempt shareholder, the fund
or the securities dealer effecting the transaction is required to file an
information return with the IRS.
TO AVOID BEING SUBJECT TO FEDERAL INCOME TAX WITHHOLDING AT THE RATE OF 31% ON
DIVIDENDS, DISTRIBUTIONS AND REDEMPTION PAYMENTS, SHAREHOLDERS OF A FUND MUST
FURNISH THE FUND WITH THEIR TAXPAYER IDENTIFICATION NUMBER AND CERTIFY UNDER
PENALTIES OF PERJURY THAT THE NUMBER PROVIDED IS CORRECT AND THAT THEY ARE NOT
SUBJECT TO BACKUP WITHHOLDING FOR ANY REASON.
Under existing provisions of the Code, nonresident alien individuals, foreign
partnerships and foreign corporations may be subject to federal income tax
withholding at a 30% rate on ordinary income dividends and distributions (other
than exempt-interest dividends and capital gain dividends) and return of capital
distributions. Under applicable treaty law, residents of treaty countries may
qualify for a reduced rate of withholding or a withholding exemption.
DISTRIBUTIONS MAY BE SUBJECT TO TREATMENT UNDER FOREIGN, STATE OR LOCAL TAX
LAWS THAT DIFFERS FROM THE FEDERAL INCOME TAX CONSEQUENCES DISCUSSED HEREIN.
ADDITIONAL INFORMATION ABOUT TAXES IS SET FORTH IN THE STATEMENT OF ADDITIONAL
INFORMATION.
TAX-EXEMPT FUNDS -- SPECIAL TAX INFORMATION. Shareholders will not be required
to include the "exempt-interest" portion of dividends paid by the Tax-Exempt
Funds in their gross income for federal income tax purposes. However,
shareholders will be required to report the receipt of exempt-interest dividends
and other tax-exempt interest on their federal income tax returns. Moreover,
exempt-interest dividends from the Tax-Exempt Funds may be subject to state
income taxes, may give rise to a federal alternative minimum tax liability, may
affect the amount of social security benefits subject to federal income tax, may
affect the deductibility of interest on certain indebtedness of the shareholder,
and may have other collateral federal income tax consequences. The Tax-Exempt
Funds may invest in Municipal Securities the interest on which will constitute
an item of tax preference and which therefore could give rise to a federal
alternative minimum tax liability for shareholders, and may invest up to 20% of
their net assets in such securities and
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other taxable securities. For additional information concerning the alternative
minimum tax and certain collateral tax consequences of the receipt of
exempt-interest dividends, see the Statements of Additional Information
applicable to the Tax-Exempt Funds.
The Tax-Exempt Funds may pay dividends to shareholders which are taxable, but
will endeavor to avoid investments which would result in taxable dividends. The
percentage of dividends which constitute exempt-interest dividends, and the
percentage thereof (if any) which constitute an item of tax preference, will be
determined annually. This percentage may differ from the actual percentages for
any particular day.
To the extent that dividends are derived from taxable investments or net
realized short-term capital gains, they will constitute ordinary income for
federal income tax purposes, whether received in cash or additional shares.
Distributions of net long-term capital gains will be taxable as long-term
capital gains, whether received in cash or additional shares, and regardless of
the length of time a particular shareholder may have held his shares.
From time to time, proposals have been introduced before Congress that would
have the effect of reducing or eliminating the federal tax exemption on
Municipal Securities. If such a proposal were enacted, the ability of the
Tax-Exempt Funds to pay exempt-interest dividends might be adversely affected.
AIM INTERMEDIATE GOVERNMENT FUND and AIM LIMITED MATURITY TREASURY
SHARES -- SPECIAL TAX INFORMATION. Certain states exempt from state income taxes
dividends paid by mutual funds out of interest on U.S. Treasury and certain
other U.S. Government obligations, and investors should consult with their own
tax advisors concerning the availability of such exemption.
AIM ADVISOR INTERNATIONAL VALUE FUND, AIM INTERNATIONAL EQUITY FUND, AIM
GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL INCOME FUND
AND AIM GLOBAL UTILITIES FUND -- SPECIAL TAX INFORMATION. For taxable years in
which it is eligible to do so, each of these funds may elect to pass through to
shareholders credits for foreign taxes paid. If the fund makes such an election,
a shareholder who receives a distribution (1) will be required to include in
gross income his proportionate share of foreign taxes allocable to the
distribution and (2) may claim a credit or deduction for such share for his
taxable year in which the distribution is received, subject to the general
limitations imposed on the allowance of foreign tax credits and deductions.
Shareholders should also note that certain gains or losses attributable to
fluctuations in exchange rates or foreign currency forward contracts may
increase or decrease the amount of income of the fund available for distribution
to shareholders, and should note that if such losses exceed other income during
a taxable year, the fund would not be able to pay ordinary income dividends.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110, serves as custodian for the
portfolio securities and cash of the AIM Funds other than AIM MUNICIPAL BOND
FUND, AIM LIMITED MATURITY TREASURY SHARES AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT, AIM TAX-EXEMPT CASH FUND and AIM TAX-FREE INTERMEDIATE SHARES, for
which The Bank of New York, 90 Washington Street, 11th Floor, New York, New York
10286, serves as custodian. Texas Commerce Bank National Association, P.O. Box
2558, Houston, Texas 77252-8084, serves as Sub-Custodian for retail purchases of
the AIM Funds.
A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a wholly
owned subsidiary of AIM, serves as each AIM Fund's transfer agent and dividend
payment agent.
LEGAL COUNSEL. The law firm of Ballard Spahr Andrews & Ingersoll,
Philadelphia, Pennsylvania, serves as counsel to the AIM Funds and passes upon
the legality of the shares offered pursuant to this Prospectus.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an A I M Fund Services, Inc. Client Services Representative by
calling (800) 959-4246. The Transfer Agent may impose certain copying charges
for requests for copies of shareholder account statements and other historical
account information older than the current year and the immediately preceding
year.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the fund(s) named on the cover page prior to investing.
Recipients of this Prospectus will be provided with a copy of the annual report
of the fund(s) to which this Prospectus relates, upon request and without
charge. If several members of a household own shares of the same fund, only one
annual or semi-annual report will be mailed to that address. To receive
additional copies, please call (800) 347-4246, or write to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739. A Statement of Additional
Information has been filed with the SEC and is available upon request and
without charge, by writing or calling AIM Distributors. The SEC maintains a Web
site at http://www.sec.gov that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund. This Prospectus omits certain information contained in the
registration statement filed with the SEC. Copies of the registration statement,
including items omitted from this Prospectus, may be obtained from the SEC by
paying the charges prescribed under its rules and regulations.
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APPENDIX A
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DESCRIPTION OF MONEY MARKET INSTRUMENTS
The following list does not purport to be an exhaustive list of all Money
Market Instruments, and the Funds reserve the right to invest in Money Market
Instruments other than those listed below:
U.S. GOVERNMENT DIRECT OBLIGATIONS -- Bills, notes and bonds issued by the U.S.
Treasury.
U.S. GOVERNMENT AGENCIES SECURITIES -- Certain federal agencies such as the
Government National Mortgage Association have been established as
instrumentalities of the U.S. Government to supervise and finance certain types
of activities. Issues of these agencies, while not direct obligations of the
U.S. Government, are either backed by the full faith and credit of the United
States or are guaranteed by the Treasury or supported by the issuing agencies'
right to borrow from the Treasury.
BANKERS' ACCEPTANCES -- A bill of exchange or time draft drawn on and accepted
by a commercial bank. It is used by corporations to finance the shipment and
storage of goods and to furnish dollar exchange. Maturities are generally six
months or less.
CERTIFICATES OF DEPOSIT -- A negotiable interest-bearing instrument with a
specific maturity. Certificates of deposit are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market, prior to maturity.
TIME DEPOSITS -- A non-negotiable receipt issued by a bank in exchange for the
deposit of funds. Like a certificate of deposit, it earns a specified rate of
interest over a definite period of time; however, it cannot be traded in the
secondary market.
COMMERCIAL PAPER -- The term used to designate unsecured short-term promissory
notes issued by corporations and other entities. Maturities on these issues vary
from a few days to nine months.
REPURCHASE AGREEMENTS -- A repurchase agreement is a contractual undertaking
whereby the seller of securities (limited to U.S. Government securities,
including securities issued or guaranteed by the U.S. Treasury or the various
agencies and instrumentalities of the U.S. Government, including mortgage-backed
securities issued by U.S. Government agencies) agrees to repurchase the
securities at a specified price on a future date determined by negotiations.
MASTER NOTES -- Unsecured demand notes that permit investment of fluctuating
amounts of money at varying rates of interest pursuant to arrangements with
issuers who meet the quality criteria of a Fund. The interest rate on a master
note may fluctuate based upon changes in specified interest rates or be reset
periodically according to a prescribed formula or may be a set rate. Although
there is no secondary market in master notes, if such notes have a demand
feature, the payee may demand payment of the principal amount of the note on
relatively short notice.
VARIABLE AND FLOATING RATE INSTRUMENTS -- Certain instruments issued, guaranteed
or sponsored by the U.S. Government or its agencies, state and local government
issuers, and certain debt instruments issued by domestic banks or corporations,
may carry variable or floating rates of interest. Such instruments bear interest
at rates which are not fixed, but which vary with changes in specified market
rates or indices, such as a Federal Reserve composite index.
A-21
<PAGE> 174
APPENDIX B
- --------------------------------------------------------------------------------
DESCRIPTION OF OBLIGATIONS ISSUED OR GUARANTEED
BY U.S. GOVERNMENT AGENCIES OR INSTRUMENTALITIES
AIM INTERMEDIATE GOVERNMENT FUND may invest in "Agency Securities," as defined
in the Prospectus, including some or all of those listed below. The following
list does not purport to be an exhaustive list of all Agency Securities, and the
Fund reserves the right to invest in Agency Securities other than those listed
below.
EXPORT-IMPORT BANK CERTIFICATES -- are certificates of beneficial interest and
participation certificates issued and guaranteed by the Export-Import Bank of
the United States.
FEDERAL FARM CREDIT SYSTEM NOTES AND BONDS -- are bonds issued by a
cooperatively owned, nationwide system of banks and associations supervised by
the Farm Credit Administration, an independent agency of the U.S. Government.
FEDERAL HOME LOAN BANK NOTES AND BONDS -- are notes and bonds issued by the
Federal Home Loan Bank System.
FHA DEBENTURES -- are debentures issued by the Federal Housing Administration
of the U.S. Government.
FHA INSURED NOTES -- are bonds issued by the Farmers Home Administration of
the U.S. Government.
FEDERAL HOME LOAN MORTGAGE CORPORATION ("FHLMC") BONDS -- are bonds issued and
guaranteed by FHLMC, a corporate instrumentality of the U.S. Government. The
Federal Home Loan Banks own all the capital stock of FHLMC, which obtains its
funds by selling mortgages (as well as participation interests in the mortgages)
and by borrowing funds through the issuance of debentures and otherwise.
FHLMC PARTICIPATION CERTIFICATES OR "FREDDIE MACS" -- represent undivided
interests in specified groups of conventional mortgage loans (and/or
participation interests in those loans) underwritten and owned by FHLMC. At
least 95% of the aggregate principal balance of the whole mortgage loans and/or
participations in a group formed by FHLMC typically consist of single-family
mortgage loans, and not more than 5% consists of multi-family loans. FHLMC
Participation Certificates are not guaranteed by, and do not constitute a debt
or obligation of, the U.S. Government or any Federal Home Loan Bank. FHLMC
Participation Certificates are issued in fully registered form only, in original
unpaid principal balances of $25,000, $100,000, $200,000, $500,000, $1 million
and $5 million. FHLMC guarantees to each registered holder of a Participation
Certificate, to the extent of such holder's pro rata share (i) the timely
payment of interest accruing at the applicable certificate rate on the unpaid
principal balance outstanding on the mortgage loans, and (ii) collection of all
principal on the mortgage loans without any offset or deductions. Pursuant to
these guaranties, FHLMC indemnifies holders of Participation Certificates
against any reduction in principal by reason of charges for property repairs,
maintenance, and foreclosure.
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA") BONDS -- are bonds issued and
guaranteed by the Federal National Mortgage Association, a federally chartered
and privately-owned corporation.
FNMA PASS-THROUGH CERTIFICATES OR "FANNIE MAES" -- are mortgage pass-through
certificates issued and guaranteed by FNMA. FNMA Certificates represent a
fractional undivided ownership interest in a pool of mortgage loans either
provided from FNMA's own portfolio or purchased from primary lenders. The
mortgage loans included in the pool are conventional, insured by the Federal
Housing Administration or guaranteed by the Veterans Administration. FNMA
Certificates are not backed by, nor entitled to, the full faith and credit of
the U.S. Government.
Loans not provided from FNMA's own portfolio are purchased only from primary
lenders that satisfy certain criteria developed by FNMA, including depth of
mortgage origination experience, servicing experience and financial capacity.
FNMA may purchase an entire loan pool from a single lender, and issue
Certificates backed by that loan pool alone, or may package a pool made up of
loans purchased from various lenders.
Various types of mortgage loans, and loans with varying interest rates, may be
included in a single pool, although each pool will consist of mortgage loans
related to one-family or two-to-four family residential properties.
Substantially all FNMA mortgage pools currently consist of fixed interest rate
and growing equity mortgage loans, although FNMA mortgage pools may also consist
of adjustable interest rate mortgage loans or other types of mortgage loans.
Each mortgage loans must conform to FNMA's published requirements or guidelines
with respect to maximum principal amount, loan-to-value ratio, loan term,
underwriting standards and insurance coverage.
All mortgage loans are held by FNMA as trustee pursuant to a trust indenture
for the benefit of Certificate holders. The trust indenture gives FNMA
responsibility for servicing or administering the loans in a pool. FNMA
contracts with the lenders or other servicing institutions to perform all
services and duties customary to the servicing of mortgages, as well as duties
specifically prescribed by FNMA, and under FNMA supervision. FNMA may remove
service providers for cause.
The pass-through rate on FNMA Certificates is the lowest annual interest rate
borne by an underlying mortgage loan in the pool, less a fee to FNMA as
compensation for servicing and for FNMA's guarantee. Lenders servicing the
underlying mortgage loans receive as
A-22
<PAGE> 175
compensation a portion of the fee paid to FNMA, the excess yields on pooled
loans with coupon rates above the lowest rate borne by any mortgage loan in the
pool and certain other amounts collected, such as late charges.
The minimum size of a FNMA pool is $1 million of mortgage loans. Registered
holders purchase Certificates in amounts not less than $25,000.
FNMA Certificates are marketed by the servicing lender banks, usually through
securities dealers. The lender of a single lender pool typically markets all
Certificates based on that pool, and lenders of multiple lender pools market
Certificates based on a pro rata interest in the aggregate pool. The amounts of
FNMA Certificates currently outstanding is limited.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA") CERTIFICATES OR "GINNIE
MAES" -- are mortgage-backed securities which represent a partial ownership
interest in a pool of mortgage loans issued by lenders such as mortgage bankers,
commercial banks and savings and loan associations. Each mortgage loan included
in the pool is either insured by the Federal Housing Administration or
guaranteed by the Veterans Administration. A "pool" or group of such mortgages
is assembled, and, after being approved by GNMA, is offered to investors through
securities dealers. GNMA is a U.S. Government corporation within the Department
of Housing and Urban Development.
The Portfolio will purchase only GNMA Certificates of the "modified
pass-through" type, which entitle the holder to receive its proportionate share
of all interest and principal payments owed on the mortgage pool, net of fees
paid to the issuer and GNMA, regardless of whether or not the mortgagor actually
makes the payment. GNMA Certificates differ from bonds in that the principal is
paid back monthly by the borrower over the term of the loan rather than returned
in a lump sum at maturity. Payment of principal of and interest on GNMA
Certificates of the "modified pass-through" type is guaranteed by GNMA and
backed by the full faith and credit of the U.S. Government.
The average life of a GNMA Certificate is likely to be substantially less than
the original maturity of the mortgage pools underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures will usually
result in the return on the greater part of principal invested far in advance of
the maturity of the mortgages in the pool. Foreclosures impose no risk to
principal investment because of the GNMA guarantee.
As the prepayment rates of individual mortgage pools will vary widely, it is
not possible to accurately predict the average life of a particular issue of
GNMA Certificates. However, statistics published by the FHA indicate that the
average life of a single-family dwelling mortgage with 25- to 30-year maturity,
the type of mortgage which backs the vast majority of GNMA Certificates, is
approximately 12 years. It is therefore customary practice to treat GNMA
Certificates as 30-year mortgage-backed securities which prepay fully in the
twelfth year.
As a consequence of the fees paid to GNMA and the issuer of GNMA Certificates,
the coupon rate of interest of GNMA Certificates is lower than the interest paid
on the VA-guaranteed or FHA-insured mortgages underlying the Certificates.
The yield which will be earned on GNMA Certificates may vary from their coupon
rates for the following reasons: (i) Certificates may be issued at a premium or
discount, rather than at par; (ii) Certificates may trade in the secondary
market at a premium or discount after issuance; (iii) interest is earned and
compounded monthly which has the effect of raising the effective yield earned on
the Certificates; and (iv) the actual yield of each Certificate is affected by
the prepayment of mortgages included in the mortgage pool underlying the
Certificates and the rate at which principal so prepaid is reinvested. In
addition, prepayment of mortgages included in the mortgage pool underlying a
GNMA Certificate purchased at a premium may result in a loss to the Portfolio.
Due to the large amount of GNMA Certificates outstanding and active
participation in the secondary market by securities dealers and investors, GNMA
Certificates are highly liquid instruments. Prices of GNMA Certificates are
readily available from securities dealers and depend on, among other things, the
level of market rates, the Certificate's coupon rate and the prepayment
experience of the pool of mortgages backing each Certificate.
GENERAL SERVICES ADMINISTRATION PARTICIPATION CERTIFICATES -- are
participation certificates issued by the General Services Administration of the
U.S. Government.
MARITIME ADMINISTRATION BONDS -- are bonds issued and provided by the
Department of Transportation of the U.S. Government.
NEW COMMUNITIES DEBENTURES -- are debentures issued in accordance with the
provisions of Title IV of the Housing and Urban Development Act of 1968, as
supplemented and extended by Title VII of the Housing and Urban Development Act
of 1970, the payment of which is guaranteed by the U.S. Government.
PUBLIC HOUSING NOTES AND BONDS -- are short-term project notes and long-term
bonds issued by public housing and urban renewal agencies in connection with
programs administered by the Department of Housing and Urban Development of the
U.S. Government, the payment of which is secured by the U.S. Government.
SBA DEBENTURES -- are debentures fully guaranteed as to principal and interest
by the Small Business Administration of the U.S. Government.
SLMA DEBENTURES -- are debentures backed by the Student Loan Marketing
Association.
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<PAGE> 176
TITLE XI BONDS -- are bonds issued in accordance with the provisions of Title
XI of the Merchant Marine Act of 1936, as amended, the payment of which is
guaranteed by the U.S. Government.
WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY BONDS -- are bonds issued by
the Washington Metropolitan Area Transit Authority and are guaranteed by the
Secretary of Transportation of the U.S. Government.
A-24
<PAGE> 177
APPENDIX C
- --------------------------------------------------------------------------------
DESCRIPTIONS OF RATING CATEGORIES
The following are descriptions of ratings assigned by Moody's Investors
Service, Inc. ("Moody's") and Standard and Poor's Ratings Services ("S&P") to
certain debt securities in which AIM HIGH YIELD FUND and AIM INCOME FUND may
invest. See the Statement of Additional Information for descriptions of other
Moody's and S&P rating categories and those of other rating agencies.
MOODY'S: Aaa -- Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds. These are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A -- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements, their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
S&P: AAA -- Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C -- Debt rated BB, B, CCC, CC and C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the lowest degree of speculation and
C the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or large exposures
to adverse conditions.
A-25
<PAGE> 178
APPLICATION INSTRUCTIONS
SOCIAL SECURITY OR TAXPAYER ID NUMBER. Investors should make sure that the
social security number or taxpayer identification number (TIN) which appears in
Section 1 of the Application complies with the following guidelines:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE SOCIAL SECURITY GIVE TAXPAYER I.D.
ACCOUNT TYPE NUMBER OF: ACCOUNT TYPE NUMBER OF:
<S> <C> <C> <C>
Individual Individual Trust, Estate, Pension Trust, Estate, Pension
Plan Trust Plan Trust and not
personal TIN of fiduciary
Joint Individual First individual listed in the
"Account Registration" portion
of the Application
Unif. Gifts to Minor Corporation, Partnership, Corporation, Partnership,
Minors/Unif. Other Organization Other Organization
Transfers to Minors
Legal Guardian Ward, Minor or
Incompetent
Sole Proprietor Owner of Business Broker/Nominee Broker/Nominee
</TABLE>
- --------------------------------------------------------------------------------
Applications without a certified TIN will not be accepted unless the applicant
is a nonresident alien, foreign corporation or foreign partnership and has
attached a completed IRS Form W-8.
BACKUP WITHHOLDING. Each AIM Fund, and other payers, must, according to IRS
regulations, withhold 31% of redemption payments and reportable dividends
(whether paid or accrued) in the case of any shareholder who fails to provide
the Fund with a TIN and a certification that he is not subject to backup
withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an incorrect TIN, or
(3) the investor is notified by the IRS that the investor is subject to backup
withholding because the investor failed to report all of the interest and
dividends on such investor's tax return (for reportable interest and
dividends only), or
(4) the investor fails to certify to the Fund that the investor is not subject
to backup withholding under (3) above (for reportable interest and
dividend accounts opened after 1983 only), or
(5) the investor does not certify his TIN. This applies only to reportable
interest, dividend, broker or barter exchange accounts opened after 1983,
or broker accounts considered inactive during 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies.
Certain payees and payments are exempt from backup withholding and information
reporting and such entities should check the box "Exempt from Backup
Withholding" on the Application. A complete listing of such exempt entities
appears in the Instructions for the Requester of Form W-9 (which can be obtained
from the IRS) and includes, among others, the following:
- - a corporation
- - an organization exempt from tax under Section 501(a), an individual retirement
plan (IRA), or a custodial account under Section 403(b)(7)
- - the United States or any of its agencies or instrumentalities
- - a state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities
- - a foreign government or any of its political subdivisions, agencies or
instrumentalities
- - an international organization or any of its agencies or instrumentalities
- - a foreign central bank of issue
- - a dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
- - a futures commission merchant registered with the Commodity Futures Trading
Commission
- - a real estate investment trust
- - an entity registered at all times during the tax year under the Investment
Company Act of 1940
- - a common trust fund operated by a bank under Section 584(a)
- - a financial institution
- - a middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List
- - a trust exempt from tax under Section 664 or described in Section 4947
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
IRS PENALTIES -- Investors who do not supply the AIM Funds with a correct TIN
will be subject to a $50 penalty imposed by the IRS unless such failure is due
to reasonable cause and not willful neglect. If an investor falsifies
information on this form or makes any other false statement resulting in no
backup withholding on an account which should be subject to backup withholding,
such investor may be subject to a $500 penalty imposed by the IRS and to certain
criminal penalties including fines and/or imprisonment.
MCF-A 07/97
B-1
<PAGE> 179
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign entities are
not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8
remains in effect for three calendar years beginning with the calendar year in
which it is received by the Fund. Such shareholders may, however, be subject to
appropriate withholding as described in the Prospectus under "Dividends,
Distributions and Tax Matters."
SPECIAL INFORMATION REGARDING TELEPHONE EXCHANGE PRIVILEGE. By signing the new
Account Application form, an investor appoints the Transfer Agent as his true
and lawful attorney-in-fact to surrender for redemption any and all unissued
shares held by the Transfer Agent in the designated account(s), or in any other
account with any of the AIM Funds, present or future, which has the identical
registration as the designated account(s), with full power of substitution in
the premises. The Transfer Agent and AIM Distributors are thereby authorized and
directed to accept and act upon any telephone redemptions of shares held in any
of the account(s) listed, from any person who requests the redemption proceeds
to be applied to purchase shares in any one or more of the AIM Funds, provided
that such fund is available for sale and provided that the registration and
mailing address of the shares to be purchased are identical to the registration
of the shares being redeemed. An investor acknowledges by signing the form that
he understands and agrees that the Transfer Agent and AIM Distributors may not
be liable for any loss, expense or cost arising out of any telephone exchange
requests effected in accordance with the authorization set forth in these
instructions if they reasonably believe such request to be genuine, but may in
certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transaction. The Transfer Agent
reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone exchange privilege at any time without notice.
SPECIAL INFORMATION REGARDING TELEPHONE REDEMPTION PRIVILEGE. By signing the
new Account Application form, an investor appoints the Transfer Agent as his
true and lawful attorney-in-fact to surrender for redemption any and all
unissued shares held by the Transfer Agent in the designated account(s), present
or future, with full power of substitution in the premises. The Transfer Agent
and AIM Distributors are thereby authorized and directed to accept and act upon
any telephone redemptions of shares held in any of the account(s) listed, from
any person who requests the redemption. An investor acknowledges by signing the
form that he understands and agrees that the Transfer Agent and AIM Distributors
may not be liable for any loss, expense or cost arising out of any telephone
redemption requests effected in accordance with the authorization set forth in
these instructions if they reasonably believe such request to be genuine, but
may in certain cases be liable for losses due to unauthorized or fraudulent
transactions. Procedures for verification of telephone transactions may include
recordings of telephone transactions (maintained for six months), requests for
confirmation of the shareholder's Social Security Number and current address,
and mailings of confirmations promptly after the transactions. The Transfer
Agent reserves the right to cease to act as attorney-in-fact subject to this
appointment, and AIM Distributors reserves the right to modify or terminate the
telephone redemption privilege at any time without notice. An investor may elect
not to have this privilege by marking the appropriate box on the application.
Then any exchanges must be effected in writing by the investor (see the
applicable Fund's prospectus under the caption "Exchange Privilege -- Exchanges
by Mail").
MCF-A 07/97
B-2
<PAGE> 180
[AIM LOGO
APPEARS THE AIM FAMILY OF FUNDS--Registered Trademark--
HERE]
<TABLE>
<S> <C> <C>
Investment Advisor
A I M Advisors, Inc. TABLE OF CONTENTS
11 Greenway Plaza, Suite 100 INVESTMENT OBJECTIVES.................... 2
Houston, TX 77046-1173 SUMMARY.................................. 2
THE FUNDS................................ 4
Table of Fees and Expenses............. 4
Transfer Agent Financial Highlights................... 7
A I M Fund Services, Inc. Performance............................ 19
P.O. Box 4739 About the Funds........................ 19
Houston, TX 77210-4739 Investment Programs.................... 20
Certain Investment Strategies and
Policies............................... 24
Custodian Management............................. 27
State Street Bank and Trust Company Organization of the Trust.............. 31
225 Franklin Street INVESTOR'S GUIDE TO THE AIM FAMILY OF
Boston, MA 02110 FUNDS--Registered Trademark--.......... A-1
Introduction to The AIM Family of
Funds.................................. A-1
The Bank of New York How to Purchase Shares................. A-1
90 Washington Street Terms and Conditions of Purchase of the
New York, NY 10286 AIM Funds........................... A-2
[AIM Municipal Bond Fund only] Special Plans.......................... A-9
Exchange Privilege..................... A-11
How to Redeem Shares................... A-13
Principal Underwriter Determination of Net Asset Value....... A-17
A I M Distributors, Inc. Dividends, Distributions and Tax
P.O. Box 4739 Matters................................ A-18
Houston, TX 77210-4739 General Information.................... A-20
Appendix A............................. A-21
Appendix B............................. A-22
Independent Accountants Appendix C............................. A-25
KPMG Peat Marwick LLP
700 Louisiana Application Instructions................. B-1
NationsBank Bldg.
Houston, TX 77002
</TABLE>
For more complete information about any other fund in The AIM Family of
Funds--Registered Trademark--, including charges and expenses, please
call (800) 347-4246 or write to A I M Distributors, Inc. and request a free
prospectus. Please read the prospectus carefully before you invest or send
money.
<PAGE> 181
APPENDIX IV
Reproduced below is a discussion of the performance of AIM Intermediate
Government Fund for the six-month period ended June 30,1997, that was prepared
by the officers and AIM and was included in its Semi-annual Report dated June
30, 1997.
The Managers' Overview
AIM INTERMEDIATE GOVERNMENT FUND PROVIDES
ATTRACTIVE CURRENT INCOME DESPITE VOLATILE MARKET
A roundtable discussion with the Fund management team for AIM Intermediate
Government Fund for the six months ended June 30, 1997.
- -------------------------------------------------------------------------------
Q. IT WAS A TUMULTUOUS ENVIRONMENT FOR BONDS. HOW DID THE FUND PERFORM DURING
THE REPORT- ING PERIOD?
A. The first quarter was particularly trying for bond investors, and the Fund
made little progress. Improved market conditions during the second quarter
enabled the Fund to generate most of its gain for the reporting period. The
Fund's current income remained strong throughout the period. The Fund's
30-day yield on Class A and Class B shares was 6.45% and 5.97%,
respectively, as of June 30, 1997. Total return was 3.03% for Class A
shares and 2.60% for Class B shares in the six months ended June 30, 1997.
That compared favorably to the 2.64% total return for the Lipper
Intermediate U.S. Government Funds Index.
Q. CONCERNS OVER THE ECONOMY AND HIGHER INTEREST RATES DOMINATED THE PERIOD.
HOW DID THAT AFFECT BOND INVESTMENTS?
A. The bond market sold off sharply through the end of April, when the
benchmark 30-year U.S. Treasury bond hit a peak weekly closing yield of
7.13% in reaction to reports of vigorous growth in the economy. Indicators
seemed pointed either to an acceleration in inflation or to action by the
Federal Reserve to stave off price pressures. But the market later
rebounded nearly as sharply, owing to, in various measures, an apparent
slowdown in the economy plus the absence of inflation. The rally in bonds
took the yield on the benchmark 30-year U.S. Treasury bond to 6.78% by June
30--the lowest level since late February.
Q. WHAT TRIGGERED THE TURNAROUND?
A. The rally in bonds was touched off in April by news that the Consumer Price
Index (CPI) had risen 0.1%--half the increase expected by analysts, a trend
that continued into June. That news, combined with lower than expected
increases in employment costs and a record six consecutive declines in
producers prices, encouraged some analysts to speculate that the chances
the Fed will tighten monetary policy again this year are diminishing.
Indeed, following the increase in short-term interest rates in March, the
Fed elected to leave rates unchanged in May. Investors looking for greater
diversification amid a record stock market turned to bonds. Bond and income
funds witnessed an inflow of $2.75 billion in May, compared with an inflow
of $759.9 million in April.
Q. HOW DID THESE FACTORS AFFECT THE FUND?
A. The Fund lost ground early in the reporting period as fixed-income
securities were pressured by economic uncertainty and the resulting
increase in interest rates. However, the Fund's performance was cushioned
by its strong participation in the mortgage market. Mortgage-backed
securities--which comprised 64% of the Fund as of June 30--tend to benefit
from rising interest rates. When mortgage rates top 8%, homeowners are
discouraged from refinancing and the rate of mortgage prepayments slows
appreciably. Continuing the trend from 1996, mortgage-backed securities
outperformed U.S. Treasury securities of equivalent duration. That
advantage diminished somewhat as interest rates declined in May and bonds
rebounded sharply with encouraging economic reports. The Fund's invest
=========================================================================
CURRENT YIELD ADVANTAGE
-------------------------------------------------------------------------
As of 6/30/97
FUND CLASS A 30-DAY YIELD 6.45%
2-YEAR U.S. TREASURY NOTE 6.03*
6-MONTH CD 5.65**
=========================================================================
5.97% was the 30-day yield for the Fund's Class B shares. *Government
securities, such as U.S. Treasury bills, notes, and bonds offer a high degree
of safety and are guaranteed as to the timely payment of principal and interest
if held to maturity. **Bank certificates of deposit, which are insured by the
FDIC for up to $100,000, are short-term investments that pay fixed principal
and interest, but are subject to fluctuating rollover rates and early
withdrawal penalties. CD income is calculated using the six-month annualized
average monthly CD rate reported by the Bank Rate Monitor. Fund shares are not
insured, and their value will vary with market conditions.
------------------------------------------------------------
Investors looking for
greater diversification amid
a record stock market
turned to bonds.
------------------------------------------------------------
See important Fund & index disclosures inside front cover.
2
<PAGE> 182
ment in U.S. Treasury securities, about 15% of the portfolio, gained as
rates drifted lower. In addition, prices for U.S. Treasury securities were
aided by a narrowing of supply during the reporting period as fewer issues
were offered at auction. That also served to narrow yield spreads of
government securities across maturity levels.
Q. How are mortgage-backed securities affected by declining interest rates?
A. Declining interest rates encourage mortgage prepayments. That means
investors in mortgage-backed securities receive their investment back when
reinvestment rates are lower. And analysts anticipate that homeowners may
be able to refinance their mortgages more cheaply in the coming months than
last December. Nonetheless, mortgage analysts have suggested that there is
strong support for mortgage-backed securities from bidders who are
well-equipped to handle periodic prepayment risk and are not likely to
reduce their mortgage portfolios dramatically. Federally chartered agencies
like Federal National Mortgage Association and Federal Home Loan Mortgage
Corporation, who buy mortgages from banks and thrifts, play a key role as a
strong and continuing source of demand for mortgage-backed securities.
Q. What is your outlook for the fixed-income market?
A. Fixed-income funds should fare well as long as the economy grows in a 2% to
3% range. And indications are that the fair weather should continue--the
Federal Reserve has described the current economic environment as ideal.
Inflation--bond investors' worst enemy--is showing no signs of a resurgence
and the supply of U.S. Treasury bonds is growing slowly, which tightens
demand and helps cushion the price of those securities. Interest rates
should remain stable--long-term rates have even declined slightly. However,
market watchers don't anticipate substantially lower rates for U.S.
Treasury bonds from current levels. That lessens the likelihood of
significant prepayment risk for mortgage-backed securities. Key factors we
see driving the government securities market in coming months include:
o The Fed indicated recently that no further monetary policy changes may
be necessary in 1997.
o Foreign demand for U.S. government issues is up sharply.
o Recently passed legislation for a balanced budget should contribute to a
further reduction in the supply of U.S. Treasury debt issues.
===============================================================================
PORTFOLIO COMPOSITION
- -------------------------------------------------------------------------------
As of 6/30/97
Mortgage-Backed Obligations 64.3%
U.S. Treasury Obligations 14.6%
U.S. Agency Obligations 10.0%
Cash Equivalents 11.1%
BREAKDOWN OF MORTGAGE-BACKED OBLIGATIONS
Federal National Mortgage Assn. 61.4%
Federal Home Loan Mortgage Corp. 24.6
Government National Mortgage Assn. 14.0
S&P RATING AAAf
WEIGHTED AVERAGE MATURITY 8.96 years
DURATION 4.06 years
===============================================================================
FUND MANAGERS USE WEIGHTED AVERAGE MATURITY AND DURATION TO MANAGE RISK
In the box above showing the Fund's portfolio composition, we indicate the
weighted average maturity and duration. These both measure the effects of time
on the portfolio, but there the similarity ends:
o Weighted average maturity is an average of the term to maturity remaining
on each of the Fund's bond holdings.
o Duration is the average time it takes to receive the interest and the
principal on a bond.
For example, if we compared two bonds of identical quality and maturity,
the two bonds could have the same weighted average maturity. However, the bond
with the higher coupon would have the lower duration because the investor would
collect all payments in a shorter average amount of time. Using these tools,
fund managers can manage the sensitivity of a portfolio to changes in interest
rates. A longer duration on a bond or a portfolio, like a longer weighted
average maturity, indicates more sensitivity to interest rate changes because
the investment is committed for a longer period. During periods of rising
interest rates as noted earlier in 1997, the Fund's managers tend to shorten
one or both of these measures to reduce the impact on the Fund's share values.
See important Fund & index disclosures inside front cover.
3
<PAGE> 183
APPENDIX V
Reproduced below is a discussion of the performance of AIM Advisors
Income Fund for the fiscal year ended December 31, 1996, that was prepared by
its officers and investment advisor and included in its Annual Report dated
December 31, 1996.
INVESCO ADVISOR REAL ESTATE FUND
MARKET PERSPECTIVE
Boosted by strong fourth quarter return performance of 18.9%, 1996 was an
exceptional year for the REIT market. Total return for the year of 35.3%, as
reported by the NAREIT Equity Index, exceeded all other broad measures of stock
performance. The exceptional performance may in part be explained by investor
interest in the diversification benefits of REITs relative to the S&P 500.
During July's broader market volatility, the S&P 500 and the Russell 2000 (small
capitalization stocks) Index declined by -4.4% and -8.7%, respectively. In
contrast, REITs were up a modest 0.4% during July. Real estate securities are
tending to perform more like their underlying real estate earnings and less like
the general stock market.
PORTFOLIO COMMENTS
Total return for the INVESCO Advisor Real Estate Fund was 36.4% for 1996.
During the year, the fund benefited from being appropriately overweighted in the
hotel and industrial/office sectors. Since inception (5/1/95), the Real Estate
Fund has produced an average annual return of 26.9%.
During 1996, following a pattern similar to that of 1995, REITs, which operate
in the office (+51.8%) and hotel (+49.2%) sectors, were again the star
performers. Another strong sector, regional mall REITs (+44.6%) recovered from a
dismal 1995. Returns are generally reflecting the improved real estate
fundamentals being experienced by REITs which operate in these property sectors.
We believe there are four primary reasons which continue to make REITs worthy
of investment consideration. The first reason is a high dividend yield. The
second factor that makes REITs a worthy consideration is solid real estate
fundamentals. The third factor is portfolio diversification. And finally,
long-term REIT industry growth is quite favorable.
REAL ESTATE FUND
TOTAL RETURN PERFORMANCE*
[LOGO OF GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Invesco Advisor Real Estate Fund NAREIT CPI Treasury Bill
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------
05/1/95 25,000 25,000 25,000 25,000
12/95 27,282 28,859 25,302 25,811
12/96 37,220 39,034 26,150 27,168
- ----------------------------------------------------------------------------------------
</TABLE>
INVESCO Advisor Real Estate Fund's average annual total returns for the period
ended December 31, 1996 is:*
1 year: 36.43%; and, since inception (May 1, 1995): 26.89%
INVESCO ADVISOR INCOME FUND
MARKET PERSPECTIVE
The Lehman Government/Corporate Index return was a lackluster 2.9% in 1996 as
interest rates generally rose. The bond market was a roller coaster ride during
the year with long treasury bonds starting out at 5.9%, and then going to 7.2%
in June before settling back to 6.6% at year-end. Not surprisingly, this pattern
was similar to that of Gross Domestic Product growth rates. The latest Consumer
Price Index figures are also causing a bit of concern to bondholders, rising to
a 3.3% rate after bottoming at 2.3% in May, 1994.
PORTFOLIO COMMENTS
The INVESCO Advisor Income Fund posted a return of -1.2% for 1996. Because of
poor returns in the first half of the year when interest rates were rising, the
fund trailed the broader fixed income benchmarks.
The fund's investment discipline revolves around three factors: the
portfolio's average maturity, the sector allocation, and individual security
selections. The fund's maturity strategy is slightly defensive, which means that
its average maturity (currently 6.7 years) is a little shorter than the
market's. This strategy generally provides more protection in down or bearish
markets where interest rates are rising and bond prices are falling. The sector
allocation is
5
<PAGE> 184
determined by the relative attractiveness of corporate bonds and mortgage secu-
rities compared with U.S. Treasury
Securities. The fund is primarily invested in high quality, government bonds.
INCOME FUND
TOTAL RETURN PERFORMANCE*
[LOGO OF GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Invesco Adviser LBG/CBI CPI Treasury Bill
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/86 25,000 25,000 25,000 25,000
1987 24,775 25,573 26,239 26,550
1988 26,160 27,511 27,300 28,438
1989 28,548 31,428 28,539 30,915
1990 30,781 34,030 30,511 33,407
1991 34,616 39,519 31,375 35,313
1992 36,257 42,515 32,330 36,573
1993 38,936 47,145 33,179 37,741
1994 38,236 45,472 34,052 39,420
1995 46,311 54,220 34,948 41,714
1996 45,742 55,787 36,119 43,908
- -------------------------------------------------------------------------
</TABLE>
INVESCO Advisor Income Fund's average annual total returns for the periods ended
December 31, 1996 are:*
1 year: -1.23%; 3 years: 5.52%; 5 years: 5.73%;
and, 10 years: 6.23%
*Total return assumes reinvestment of dividends and capital gain
distributions. Past performance is not a guarantee of future results. Investment
return and principal value will vary so that, when redeemed, an investor's
shares may be worth more or less than when purchased. The S&P 500 is an
unmanaged index of common stocks considered representative of the broad market.
The Lehman Government/Corporate Index (LBG/CBI) is an unmanaged index considered
representative of the broad bond market. Consumer Price Index (CPI) is a
representative index of inflation in the economy. European Australian, Far East
(EAFE) Index is an unmanaged index of stocks considered representative of
foreign markets. National Association of Real Estate Investment Trust (NAREIT)
Index is an unmanaged index of common stocks of all tax-qualified equity REITs
listed on major U.S. exchanges or OTC. Flex Benchmark is 60% S&P 500 and 40%
LBG/CBI. MultiFlex Benchmark is 20% S&P 500, 20% LBG/CBI, 20% Russell 2000 Index
(an index of the 2,000 smallest common stocks), 20% NAREIT and 20% EAFE.
INVESCO Advisor Funds, Inc.
STATEMENT OF INVESTMENT SECURITIES
December 31, 1996
<TABLE>
- ---------------------------------------------------------------------------------
<CAPTION>
Shares or
Principal
Description Amount Value
- ---------------------------------------------------------------------------------
<S> <C> <C>
INVESCO ADVISOR FLEX FUND
COMMON STOCKS 68.17%
BASIC MATERIALS 2.53%
Dow Chemical Co........................................ 60,000 $ 4,702,500
Imperial Chemical Industries PLC, ADR.................. 50,000 2,600,000
Imperial Tobacco Group PLC, ADR*....................... 87,500 1,129,030
Westvaco Corp.......................................... 135,000 3,881,250
------------
12,312,780
------------
CAPITAL GOODS 7.07%
Boeing Co.............................................. 60,000 6,382,500
COMPAQ Computer Corp.*................................. 100,000 7,425,000
General Electric Co.................................... 75,000 7,415,625
Lockheed Martin Corp................................... 70,000 6,405,000
Snap-On Tools Corp..................................... 60,000 2,137,500
Whirlpool Corp......................................... 100,000 4,662,500
------------
34,428,125
------------
CONSUMER CYCLICAL 9.39%
Deluxe Corp............................................ 150,000 4,912,500
Ford Motor Co.......................................... 175,000 5,578,125
Gannett Co., Inc....................................... 50,000 3,743,750
K Mart Corp.*.......................................... 250,000 2,593,750
Liz Claiborne, Inc..................................... 100,000 3,862,500
McDonald's Corp........................................ 110,000 4,977,500
Penney (J.C.) Co., Inc................................. 85,000 4,143,750
Reebok International, Ltd.............................. 100,000 4,200,000
Rite-Aid Corp.......................................... 75,000 2,981,250
Tandy Corp............................................. 60,000 2,640,000
V.F. Corp.............................................. 90,000 6,075,000
------------
45,708,125
------------
CONSUMER STAPLES 17.28%
Abbott Laboratories.................................... 100,000 5,075,000
American Brands, Inc................................... 110,000 5,458,750
American Home Products Corp............................ 100,000 5,862,500
Anheuser-Busch Cos., Inc............................... 150,000 6,000,000
Archer-Daniels-Midland Co.............................. 300,000 6,600,000
Columbia/HCA Healthcare, Inc........................... 150,000 6,112,500
Fleming Cos., Inc...................................... 100,000 1,725,000
Genuine Parts Co....................................... 100,000 4,450,000
Heinz (H.J.) Co........................................ 150,000 5,362,500
Lilly (Eli) & Co....................................... 90,000 6,570,000
Mylan Laboratories, Inc................................ 350,000 5,862,500
Philip Morris Cos., Inc................................ 65,000 7,320,625
Schering-Plough Corp................................... 100,000 6,475,000
</TABLE>
6
