BAIRD CAPITAL
DEVELOPMENT FUND
SEMIANNUAL
REPORT
MARCH 31, 1996
(BAIRD LOGO)
BAIRD CAPITAL DEVELOPMENT FUND
SEMIANNUAL REPORT May 28, 1996
DEAR FELLOW SHAREHOLDER:
The tug-o-war between the "tastes great" crowd (the economy is on sound footing
and should strengthen further later in the year), and the "less filling"
contingent (the economy is weak, and likely to get weaker) continues. The bond
market is in the "tastes great" camp, as interest rates have risen across the
board through the first quarter. 2The stock market was generally strong through
the first quarter of 1996, suggesting that investors have felt the economy is
sufficiently strong to support earnings growth, yet not so strong as to raise
the specter of rising inflation. The Baird Capital Development Fund's net
asset value rose 1.6%, lagging the major indices somewhat. We suspect that much
of the stock market move continues to be driven by substantial inflows of cash,
which have tended to be deployed into the larger market cap securities.
Generally speaking, during the first quarter, the broader the market index, the
weaker the results.
The comments from Alan Greenspan and the Fed notwithstanding, we lean towards
the "less filling" camp, and suspect that 1996 will show very modest growth in
the economy, and corporate earnings may well be flat to slightly down for the
year. In such an environment, the market should focus more on companies'
specific fundamentals, rather than demonstrating the recent propensity to throw
dollars at the biggest of the big companies. We continue to focus our efforts
on finding and investing in companies that should do relatively well
fundamentally, and which are priced attractively in the market. As is
customary, below we discuss some of our holdings, both old and new.
BELDEN INC. -- Belden is a leading manufacturer and supplier of specialty
products in the wire and cable industry, focusing on 5 niches; computer
networking cable (35% of sales), cable television cable (10% of sales), cable
for the audio/video market (14% of sales), industrial applications including
computers, robotics and instrumentation (15% of sales) and electrical power
cords (25% of sales). International markets account for 35% of revenue, and
present the Company with exciting growth opportunities. Founded in 1902 and
headquartered in St. Louis, Belden was acquired by Cooper Industries in 1981,
then spun-out as an independent company again in an initial public offering in
September of 1993. The Company has seven manufacturing facilities in the U.S.,
and one in Europe, which came from the acquisition of Netherlands-based Pope
Cable and Wire. We believe Belden represents a solid investment, based upon its
attractive niche businesses, high operating margins, quality management, and
international growth prospects. We believe Belden can grow earnings 15% a year
through internal growth, acquisitions, and operating margin improvement.
Considering the positive factors cited above, the valuation is very attractive
at 14 times our $2.05 earnings per share estimate for this year.
DELUXE CORP. -- Based in St. Paul, Minnesota, Deluxe Corp. is the nation's
largest supplier of checks, deposit tickets, and other magnetic encoded
transaction forms. About 10 years ago, the Company recognized the slowing
demand for checks, due largely to electronic alternatives (ATMs, credit cards,
debit cards, financial EDI, etc.) and began providing software and processing
for electronic payments. While this was a logical strategic move, profitability
from the electronics payments business proved to be quite disappointing.
Indeed, rather than offsetting the slowdown in their paper-based check business,
the newer, electronic-based business exacerbated the slide in profit margins.
Having been considered a "blue chip" for many years, Deluxe's decline in
fortunes was not taken lightly by investors. Over the past several years, the
stock fell from nearly $50 all the way to the mid-twenties. About nine months
ago, the Company's board of directors acted decisively and brought in a new CEO,
Gus Blanchard. Blanchard is a tough, no-nonsense type, with experience turning
around troubled companies, most recently a business segment of AT&T. Having
reviewed Mr. Blanchard's plans for arresting the decline in check printing
margins and being more selective and strategic on the electronic payments side
of the business, we believe he can restore the "luster" to this franchise's name
over the course of the next 12-18 months. While we wait, the dividend provides
close to a 5% yield, limiting downside risk and enhancing the total return.
POLICY MANAGEMENT SYSTEMS CORP. -- Policy Management Systems was recently
removed from your portfolio due primarily to the declining quality of earnings.
Over the past four quarters we have been disturbed by the level of
capitalization of both marketing and software development expenses (this is the
process of converting an expense to an asset, then depreciating it over the
expected life of the asset). While these items are perfectly acceptable under
FASB rules, they represent, in essence, borrowing from the future growth of the
Company, and if the software is not commercially successful, write-offs will
result. With the balance sheet asset "capitalized software" approaching $150
million, and stagnant cash flow growth (despite reported earnings growth), we
felt it prudent to move to the sidelines. Further cementing this move was the
recent weakening in software sales and our assessment that a rebound would not
take place until 1997. Policy Management Systems continues to be the dominant
player in the insurance software industry and we will revisit this stock at a
later date, provided the quality of earnings issues have been properly
addressed.
As recently disclosed to you and as further described in Note 7 -- Subsequent
Events, the proposed reorganization of the Baird Capital Development Fund with
AIMCapital Development Fund, a newly-created portfolio of AIM Equity Funds,
Inc., has been temporarily postponed until issues relating to the administrative
dissolution of the Baird Capital Development Fund can be resolved. The
administrative dissolution does not affect the net asset value of the Baird
Capital Development Fund or its earnings distribution and redemption policies.
The Fund's assets continue to be managed by Fiduciary Management and Robert W.
Baird as investment advisor and sub-advisor, respectively, in accordance with
its investment objective and policies. We will keep you informed of any
developments on this matter.
Thank you for your continuing confidence in Baird Capital Development Fund, Inc.
and your patience as we work to complete the reorganization with AIMCapital
Development Fund.
Sincerely,
/s/ Marcus C. Low, Jr. /s/ Ted D. Kellner, C.F.A. /s/ Donald S.Wilson, C.F.A.
Marcus C. Low, Jr. Ted D. Kellner, C.F.A. Donald S. Wilson, C.F.A.
President Portfolio Manager Portfolio Manager
BAIRD CAPITAL DEVELOPMENT FUND, INC.
STATEMENT OF NET ASSETS
March 31, 1996 (Unaudited)
QUOTED
SHARES OR PRINCIPAL AMOUNT COST MARKET VALUE
-------------------------- ----- ------------
LONG-TERM INVESTMENTS 88.9% (A)<F2>
COMMON STOCKS -- 83.3% (A)<F2>
BANKS/SAVINGS & LOANS -- 2.3%
46,500 Marshall & Ilsley Corp. $582,430 $1,214,812
COMPUTERS -- 2.3%
45,000 Stratus Computer, Inc.*<F1> 1,403,475 1,248,750
CONSUMER PRODUCTS - DURABLES -- 6.2%
40,000 Harley-Davidson, Inc. 265,750 1,555,000
65,000 Juno Lighting, Inc. 731,000 893,750
30,000 Kimball International, Inc. B 778,379 855,000
---------- ---------
1,775,129 3,303,750
CONSUMER PRODUCTS - NON-DURABLES -- 1.4%
28,000 Newell Co. 500,150 749,000
ELECTRONICS -- 2.5%
45,000 Belden Inc. 1,176,700 1,327,500
ENERGY/ENERGY SERVICES -- 1.7%
25,000 Burlington Resources Inc. 974,125 928,125
FOOD & BEVERAGES -- 1.8%
25,000 Universal Foods Corp. 782,860 953,125
HEALTH INDUSTRIES -- 13.6%
90,000 Biomet, Inc.*<F1> 1,006,875 1,260,000
35,000 Dentsply International Inc. 1,133,750 1,408,750
30,000 Haemonetics Corp.*<F1> 559,500 495,000
30,000 Sofamor/Danek Group, Inc.*<F1> 480,950 1,016,250
30,000 St. Jude Medical, Inc.*<F1> 751,500 1,119,390
80,000 Sybron International Corp.*<F1> 998,860 1,960,000
---------- ----------
4,931,435 7,259,390
INSURANCE -- 5.4%
10,000 Poe & Brown, Inc. 246,250 245,000
30,000 Progressive Corp. (Ohio) 1,065,210 1,338,750
28,800 Providian Corp. 622,316 1,285,200
---------- ----------
1,933,776 2,868,950
LEISURE/RESTAURANTS -- 3.0%
181,200 Ryan's Family Steak Houses, Inc.*<F1> 1,367,125 1,630,800
MISCELLANEOUS-BUSINESS SERVICES -- 1.8%
28,500 G & K Services, Inc. 281,625 762,375
5,000 On Assignment, Inc.* <F1> 81,650 190,000
---------- --------
363,275 952,375
MISCELLANEOUS-CONSUMER MANUFACTURING -- 2.6%
20,000 Lancaster Colony Corp. 612,500 745,000
35,000 LSI Industries Inc. 372,350 630,000
--------- ---------
984,850 1,375,000
MISCELLANEOUS-FINANCE -- 3.1%
52,000 Federal National Mortgage Association 677,710 1,657,500
PAPER/PACKAGING -- 2.1%
48,125 Wausau Paper Mills Co. 717,199 1,106,875
POLLUTION CONTROL -- 5.1%
81,000 Browning-Ferris Industries, Inc. 2,376,634 2,551,500
25,000 Harding Lawson Associates Group, Inc.*<F1>
(formerly Harding Associates, Inc.) 355,250 150,000
---------- -----------
2,731,884 2,701,500
PRINTING/PUBLISHING/FORMS -- 2.3%
40,000 Deluxe Corp. 1,175,008 1,255,000
PRODUCER MANUFACTURING -- 8.6%
13,800 Bandag, Inc. 731,120 727,950
7,400 Bandag, Inc. Class A 319,428 382,950
70,000 Pall Corp. 1,102,097 1,793,750
24,200 Regal-Beloit Corp. 166,980 508,200
60,000 Watts Industries, Inc. 1,299,276 1,192,500
---------- ----------
3,618,901 4,605,350
RETAIL TRADE -- 7.9%
72,000 Casey's General Stores, Inc. 582,625 1,692,000
115,000 Family Dollar Stores, Inc. 1,593,200 1,696,250
60,000 Mac Frugal's Bargains o Close-outs Inc.*<F1> 1,016,230 840,000
---------- ---------
3,192,055 4,228,250
SOFTWARE/SERVICE -- 9.6%
15,000 Compuware Corp.*<F1> 607,500 345,000
80,000 Mentor Graphics Corp.*<F1> 802,500 1,140,000
20,000 Policy Management Systems Corp.*<F1> 583,493 900,000
80,000 SunGard Data Systems Inc.*<F1> 708,605 2,740,000
----------- ----------
2,702,098 5,125,000
WARRANTS -- 0.0%
790 Windmere Corp. Warrants, 01/19/98*<F1> -- 1,778
----------- -----------
Total common stocks 31,590,185 44,492,830
U.S. TREASURY NOTES -- 5.6% (A)<F2>
$3,000,000U.S. Treasury Notes, 4.375%, due 8/15/96 3,019,219 2,988,750
----------- ----------
Total long-term investments 34,609,404 47,481,580
SHORT-TERM INVESTMENTS 11.0% (A)<F2>
VARIABLE RATE DEMAND NOTES
$2,075,000American Family Financial Services 2,075,000 2,075,000
756,529 General Mills, Inc. 756,529 756,529
480,000 Pitney Bowes Credit Corp. 480,000 480,000
2,600,000 Wisconsin Electric Power Company 2,600,000 2,600,000
----------- ----------
Total short-term investments 5,911,529 5,911,529
----------- ----------
Total investments $40,520,933 53,393,109
-----------
-----------
Cash and receivables, less
liabilities -- 0.1% (A)<F2> 37,801
-----------
NET ASSETS $53,430,910
-----------
-----------
Net Asset Value Per Share ($0.01 par value
20,000,000 shares authorized), redemption
price ($53,430,910 / 2,172,722
shares outstanding) $24.59
-----------
-----------
Maximum Offering Price Per Share
(net asset value plus 6.10% of the net asset
value or 5.75% of the offering price calculated
as $24.59 x 100 / 94.25) $26.09
-----------
-----------
* <F1>Non-income producing security.
(a)<F2>Percentages for the various classifications relate to net assets.
The accompanying notes to financial statements are an integral part of this
statement.
STATEMENT OF OPERATIONS
For the Period Ended March 31, 1996 (Unaudited)
INCOME:
Dividends $250,053
Interest 250,700
---------
Total income 500,753
---------
EXPENSES:
Management fees -- Adviser 113,893
Management fees -- Sub-Adviser 90,436
Distributor fees 72,000
Transfer agent fees 31,823
Administrative services 21,306
Printing and postage expense 21,250
Professional fees 17,687
Custodian fees 5,790
Registration fees 2,865
Other expenses 2,935
---------
Total expenses 379,985
---------
NET INVESTMENT INCOME 120,768
---------
NET REALIZED GAIN ON INVESTMENTS 963,925
NET INCREASE IN UNREALIZED APPRECIATION ON INVESTMENTS 1,283,954
----------
NET GAIN ON INVESTMENTS 2,247,879
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,368,647
----------
----------
The accompanying notes to financial statements are an integral part of this
statement.
STATEMENTS OF CHANGES IN NET ASSETS
For the Period Ended March 31, 1996 (Unaudited)
and for the Year Ended September 30, 1995
1996 1995
---------- ---------
OPERATIONS:
Net investment income $120,768 $159,617
Net realized gain on investments 963,925 5,612,531
Net increase in unrealized appreciation
on investments 1,283,954 3,054,593
---------- ----------
Net increase in net assets resulting
from operations 2,368,647 8,826,741
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income
($0.0723 and $0.0249 per share, respectively) (159,557) (56,619)
Distributions from net realized gains
($2.5432 and $1.1155 per share, respectively) (5,612,528) (2,536,513)
----------- -----------
Total distributions (5,772,085)(2,593,132)*<F3>
----------- -----------
FUND SHARE ACTIVITIES:
Proceeds from shares issued
(216,862 and 195,408 shares, respectively) 5,117,371 4,530,286
Net asset value of shares issued in distributions
(125,187 and 57,724 shares, respectively) 2,848,000 1,286,104
Cost of shares redeemed (403,826 and
304,827 shares, respectively) (9,776,747) (7,211,431)
----------- ----------
Net decrease in net assets derived
from Fund share activities (1,811,376) (1,395,041)
----------- ----------
TOTAL (DECREASE) INCREASE (5,214,814) 4,838,568
NET ASSETS AT THE BEGINNING OF THE PERIOD 58,645,724 53,807,156
----------- ----------
NET ASSETS AT THE END OF THE PERIOD
(including undistributed net investment income
of $120,675 and $159,464, respectively) $53,430,910 $58,645,724
---------- ----------
---------- ----------
*<F3>Total distributions include $136,886 of ordinary income, of which 72% is
eligible for the corporate dividends received deduction.
The accompanying notes to financial statements are an integral part of this
statement.
FINANCIAL HIGHLIGHTS
(Selected Data for each share of the Fund outstanding throughout each period)
<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE PERIOD
ENDED
MARCH 31, YEARS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period $26.25 $23.54 $23.27 $21.67 $21.35 $15.38 $19.16 $14.81 $18.50 $15.44 $13.33
Income from investment
operations:
Net investment
income (loss) 0.06 0.07 0.04 0.04 0.11 0.13 0.19 0.14 (0.03) (0.04) (0.12)
Net realized and
unrealized gains (losses)
on investments***<F6> 0.90 3.78 0.80 3.54 2.17 6.77 (3.86) 4.21 (2.54) 3.19 4.28
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 0.96 3.85 0.84 3.58 2.28 6.90 (3.67) 4.35 (2.57) 3.15 4.16
Less distributions:
Dividends from net
investment income (0.07) (0.02) (0.04) (0.08) (0.10) (0.20) (0.11) -- -- -- --
Distributions from net
realized gains (2.55) (1.12) (0.53) (1.90) (1.86) (0.73) -- -- (1.12) (0.09) (2.05)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from distributions (2.62) (1.14) (0.57) (1.98) (1.96) (0.93) (0.11) -- (1.12) (0.09) (2.05)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period $24.59 $26.25 $23.54 $23.27 $21.67 $21.35 $15.38 $19.16 $14.81 $18.50 $15.44
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL INVESTMENT
RETURN****<F7> 9.1%*<F4> 17.2% 3.7% 17.9% 11.6% 47.8%(19.3%) 29.4%(12.8%) 20.6% 35.8%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (in 000's $) 53,431 58,646 53,807 52,169 38,236 26,713 18,454 21,372 18,868 23,052 10,233
Ratio of expenses to
average net assets**<F5> 1.4%*<F4> 1.3% 1.4% 1.4% 1.6% 1.7% 1.7% 1.7% 2.3% 2.5% 2.1%
Ratio of net investment
income (loss) to
average net assets 0.4%*<F4> 0.3% 0.2% 0.2% 0.5% 0.7% 1.1% 0.3% (0.6%) (0.4%) (0.5%)
Portfolio turnover rate 8.3% 20.4% 29.5% 25.2% 47.7% 64.1% 63.8% 50.5% 55.6% 80.1% 41.9%
*<F4>Annualized.
**<F5>Includes a 1% distribution fee through December 12, 1985, a .75%
distribution fee from June 21, 1986 through September 30, 1988 and a .45%
distribution fee beginning October 1, 1988.
***<F6>On a per share basis this amount may not agree with the net realized
and unrealized gains (losses) experienced on the portfolio securities for the
period because of the timing of sales and repurchases of the Fund's shares in
relation to fluctuating market values of the portfolio.
****<F7>Total return does not include the sales load.
The accompanying notes to financial statements are an integral part of this
statement.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996 (Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- The following is a summary of
significant accounting policies of the Baird Capital Development Fund, Inc. (the
"Fund"), which is registered under the Investment Company Act of 1940. The Fund
was incorporated under the laws of Wisconsin on February 21, 1984.
(a) Each security, excluding short-term investments, is valued at the last sale
price reported by the principal security exchange on which the issue is
traded, or if no sale is reported, the latest bid price. Securities which are
traded over-the-counter are valued at the latest bid price. Securities for
which quotations are not readily available are valued at fair value as
determined by the investment adviser under the supervision of the Board of
Directors. Short-term investments are valued at amortized cost which
approximates quoted market value. Investment transactions are recorded no
later than the first business day after the trade date. Cost amounts, as
reported on the statement of net assets, are the same for Federal income tax
purposes.
(b) Net realized gains and losses on common stock are computed on the basis of
the cost of specific certificates.
(c) Provision has not been made for Federal income taxes since the Fund has
elected to be taxed as a "regulated investment company" and intends to
distribute substantially all income to its shareholders and otherwise comply
with the provisions of the Internal Revenue Code applicable to regulated
investment companies.
(d) Dividend income is recorded on the ex-dividend date. Interest income is
recorded on the accrual basis.
(e) The Fund has significant investments in short-term variable rate demand
notes, which are unsecured instruments. The Fund may be susceptible to credit
risk with respect to these notes to the extent the issuer defaults on its
payment obligation. The Fund's policy is to monitor the creditworthiness of
the issuer and does not anticipate nonperformance by these counterparties.
(f) Generally accepted accounting principles require that permanent financial
reporting and tax differences be reclassified to capital stock.
(2) INVESTMENT ADVISER AND MANAGEMENT AGREEMENT AND TRANSACTIONS WITH RELATED
PARTIES -- The Fund has a management agreement with Fiduciary Management, Inc.
("FMI"), to serve as investment adviser and manager. Under the terms of the
agreement, the Fund will pay FMI a monthly management fee at the annual rate of
0.4125% of the daily net assets of the Fund. The Fund has an administrative
agreement with FMI to supervise all aspects of the Fund's operations except
those performed by FMI pursuant to the management agreement. Under the terms of
the agreement, the Fund will pay FMI a monthly administrative fee at the annual
rate of 0.1% of the daily net assets up to and including $30,000,000 and 0.05%
of the daily net assets of the Fund in excess of $30,000,000.
The Fund has a sub-advisory agreement with Robert W. Baird &Co. Incorporated
("RWB"), with whom certain officers and directors of the Fund are affiliated, to
serve as the sub-advisor. Under the terms of the agreement, the Fund will pay
RWB a monthly sub-advisory fee at the annual rate of 0.3275% of the daily net
assets of the Fund.
The Fund has adopted a Distribution Plan (the "Plan"), pursuant to Rule 12b-1
under the Investment Company Act of 1940, with RWB. The Plan provides that the
Fund may incur certain costs which may not exceed the lesser of a monthly amount
equal to 0.45% per year of the Fund's daily net assets or the actual
distribution costs incurred by RWB during the year. Amounts paid under the Plan
are paid monthly to RWB for any activities or expenses primarily intended to
result in the sale of shares of the Fund.
During the period ended March 31, 1996, the Fund was advised that RWB received
$22,467 from investors representing commissions on sales of Fund shares and
$5,800 from the Fund for brokerage fees on the execution of purchases and sales
of portfolio securities.
(3) DISTRIBUTION TO SHAREHOLDERS -- Net investment income and net realized gains
are distributed to shareholders.
(4) INVESTMENT TRANSACTIONS -- For the period ended March 31, 1996, purchases
and proceeds of sales of investment securities (excluding short-term securities)
were $4,051,435 and $7,110,586, respectively.
(5) ACCOUNTS PAYABLE AND ACCRUED LIABILITIES -- As of March 31, 1996,
liabilities of the Fund included the following:
Payable to FMI and RWB for management,
service and distribution fees $37,215
Payable to shareholders for redemptions 5,454
Other liabilities 32,601
(6) SOURCES OF NET ASSETS -- As of March 31, 1996, the sources of net assets
were as follows:
Fund shares issued and outstanding $39,474,208
Net unrealized appreciation on investments 12,872,176
Accumulated net realized gains on investments 963,851
Undistributed net investment income 120,675
----------
$53,430,910
----------
----------
Aggregate net unrealized appreciation as of March 31, 1996, consisted of the
following:
Aggregate gross unrealized appreciation $14,105,854
Aggregate gross unrealized depreciation (1,233,678)
----------
Net unrealized appreciation $12,872,176
----------
----------
(7) SUBSEQUENT EVENTS -- On December 20, 1995, the Fund entered into an
Agreement and Plan of Reorganization, pursuant to which the Fund would transfer
all of its net assets to AIM Capital Development Fund, a newly-created portfolio
of AIMEquity Funds, Inc. At a special meeting held on March 15, 1996, the
shareholders of the Fund approved the Agreement and Plan of Reorganization, and
the reorganization was to close before June 30, 1996. However, in the process of
preparing to close the reorganization, the parties discovered that the Fund had
been administratively dissolved on November 12, 1993 by the Wisconsin Secretary
of State due to a deficiency in making non-tax filings. The parties have
determined to postpone closing the reorganization until this matter can be
resolved. Pending resolution of this matter, the Board of Directors has
suspended sales of Fund shares.
The administrative dissolution does not affect the Fund's net asset value or its
earnings distribution and redemption policies. The Fund's assets continue to be
managed by Fiduciary Management, Inc. and Robert W. Baird &Co. Incorporated, as
investment advisor and sub-advisor, respectively, in accordance with the Fund's
investment objective and policies.
Efforts to have the administrative dissolution retroactively vacated are under
way. If these efforts are successful, the reorganization with the AIMCapital
Development Fund can be closed on its original terms, although the closing would
occur after June 30, 1996. If these efforts are not successful, the parties
presently intend to proceed with the transaction on the basis of mutually
satisfactory legal opinions and amended agreements. In such event, shareholders
of the Fund would receive supplemental disclosure describing the revised terms
of the reorganization and related matters, and will be asked to reapprove the
transaction with AIM. Expenses of the shareholders meeting to reapprove the
transaction would not be borne by the Fund. In the event that efforts to
retroactively vacate the administrative dissolution are not successful, and if
the reorganization with AIMCapital Development Funds is not completed, the Fund
will consider such other options as may be available to it at the time.
(8) MATTERS SUBMITTED TO A VOTE OF SHAREHOLDERS -- At a special meeting held
on March 15, 1996, the shareholders of the Fund approved the Agreement and Plan
of Reorganization and the reorganization transaction contemplated thereby. The
requisite vote for approval was a majority of the shares of the Fund outstanding
on the record date (January 25, 1996). Of the 2,276,202 shares outstanding on
the record date, 1,389,212 shares (or 61.0% of the total outstanding shares)
were present at the meeting in person or by proxy, 1,329,216 shares (or 58.4% of
the total outstanding shares) voted for approval of the Agreement and Plan of
Reorganization and the reorganization transaction, and 59,996 shares either
voted against or abstained from voting on the matter. However, as described in
Note 7 above, the reorganization has been postponed.
(BAIRD LOGO)
A NORTHWESTERN
MUTUAL COMPANY
Robert W. Baird & Co. Incorporated
777 E. Wisconsin Avenue, Milwaukee, WI 53202
Phone 414 765-3500. Toll Free 1-800-RW-BAIRD
(c)1996 Robert W. Baird & Co. Incorporated
</TABLE>
