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APPLICATION INSIDE
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
AIM Investment Securities Funds
AIM LIMITED MATURITY TREASURY SHARES
PROSPECTUS
NOVEMBER 21, 1996
AIM INVESTMENT SECURITIES FUNDS (the "Trust") is an open-end, series,
management investment company. Pursuant to this Prospectus, the Trust offers
shares of beneficial interest in one portfolio:
LIMITED MATURITY TREASURY PORTFOLIO (the "Fund") is a portfolio whose
investment objective is to seek liquidity with minimum fluctuation of
principal value, and, consistent with this objective, the highest total
return achievable. The Fund seeks to achieve this objective by investing
in an actively managed portfolio of U.S. Treasury notes and other direct
obligations of the U.S. Treasury.
THERE CAN BE NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS OBJECTIVES. THE NET
ASSET VALUE OF THE FUND VARIES DEPENDING ON THE MARKET VALUE OF ITS ASSETS.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE FUND'S SHARES ARE NOT FEDERALLY INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF THE FUND INVOLVE
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This Prospectus sets forth basic information about the Fund that prospective
investors should know before investing. It should be read and retained for
future reference. A Statement of Additional Information, dated November 21,
1996, has been filed with the United States Securities and Exchange
Commission (the "SEC") and is incorporated herein by reference. The Statement
of Additional Information is available without charge upon written request to
the Trust at P.O. Box 4739, Houston, TX 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 Fund.
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.
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TABLE OF CONTENTS
<TABLE>
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PAGE PAGE
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<S> <C> <C> <C>
SUMMARY............................... 2 How to Purchase Shares.............. A-1
THE FUND.............................. 4 Terms and Conditions of Purchase of
Table of Fees and Expenses.......... 4 the AIM Funds.................... A-2
Financial Highlights................ 5 Special Plans....................... A-7
Performance......................... 6 Exchange Privilege.................. A-8
Investment Program.................. 6 How to Redeem Shares................ A-10
Management.......................... 8 Determination of Net Asset Value.... A-13
Organization of the Trust........... 9 Dividends, Distributions and Tax
INVESTOR'S GUIDE TO THE AIM FAMILY OF Matters.......................... A-13
FUNDS............................... A-1 General Information................. A-16
Introduction to The AIM Family of APPLICATION INSTRUCTIONS.............. B-1
Funds............................ A-1
</TABLE>
SUMMARY
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THE FUND. AIM Investment Securities Funds (the "Trust") is a Delaware
business trust organized as an open-end, series, management investment company.
Currently, the Trust offers one investment portfolio: LIMITED MATURITY TREASURY
PORTFOLIO ("the "Fund"). The Fund consists of two classes: AIM Limited Maturity
Treasury Shares (the "Retail Class") and the Institutional Shares (the
"Institutional Class"). This Prospectus relates solely to shares of the Retail
Class of the Fund.
Shares of the Institutional Class of the Fund are offered to investors
pursuant to a separate prospectus. The Retail Class and the Institutional Class
may have differing fees and expenses, which may affect performance. To obtain
information about the Institutional Class, please call (800) 659-1005.
The investment objective of the Fund is to seek liquidity with minimum
fluctuation in principal value and, consistent with this investment objective,
the highest total return achievable. To achieve its objective, the Fund will
invest in U.S. Treasury notes and other direct obligations of the U.S. Treasury
and may (but does not currently intend to) engage in repurchase agreement
transactions with respect to such obligations. THERE IS NO ASSURANCE THAT THE
INVESTMENT OBJECTIVES OF THE FUND WILL BE ACHIEVED. For more complete
information on the Fund's investment objective and policies, see "Investment
Program."
THE ADVISOR. A I M Advisors, Inc. ("AIM") serves as the Fund's investment
advisor pursuant to a Master Investment Advisory Agreement (the "Advisory
Agreement"). AIM, together with its affiliates, manages or advises 43 investment
company portfolios. As of November 1, 1996, the total assets advised or managed
by AIM or its affiliates were approximately $58 billion. Under the terms of the
Advisory Agreement AIM supervises all aspects of the Fund's operations and
provides investment advisory services to the Fund. As compensation for these
services, AIM receives a fee based on the Fund's average daily net assets. Under
a Master Administrative Services Agreement, AIM may be reimbursed by the Fund
for its costs in performing, or arranging for the performance of, certain
accounting, shareholder servicing and other administrative services for the
Fund. Under a Transfer Agency and Service Agreement, A I M Fund Services, Inc.
("AFS"), AIM's wholly-owned subsidiary and a registered transfer agent, receives
a per account fee for its provision of transfer agency, dividend distribution
and disbursement, and shareholder services to the Fund. See "Management."
On November 4, 1996, A I M Management Group Inc. ("AIM Management")
announced that it had entered into an Agreement and Plan of Merger among INVESCO
plc ("INVESCO"), INVESCO Group Services Inc. and AIM Management, pursuant to
which AIM Management will be merged with INVESCO Group Services Inc. Subject to
a number of conditions being met, it is currently anticipated that the
transaction will occur in the early part of 1997. The Trust's investment
advisor, AIM, is a wholly owned subsidiary of AIM Management.
The proposed transaction may be deemed to cause an "assignment" (as that
term is defined under the Investment Company Act of 1940 (the "1940 Act")) of
the investment advisory agreement between the Trust and AIM. Under the 1940 Act
and the investment advisory agreement, an assignment results in the automatic
termination of the investment advisory agreement. The completion of the
transaction is contingent upon, among other things, the approval of both the
Board of Directors of the Trust and the shareholders of the Trust of a new
investment advisory agreement between the Trust and AIM. Management of the Trust
anticipates that the essential terms of the new investment advisory agreement,
including the investment advisory fees, would be the same as those under the
current investment advisory agreement between the Trust and AIM. It is also
anticipated that the investment advisory personnel responsible for the Trust
will remain unchanged. Upon consummation of the proposed transaction, employees
of INVESCO Group Services, Inc. and affiliated companies will be able to
purchase shares of The AIM Family of Funds at net asset value.
PURCHASING SHARES. Shares of the Retail Class are offered by this
Prospectus at the net asset value of the Fund plus a maximum sales charge of
1.00% of the public offering price, which sales charge is reduced on purchases
of $100,000 or more. Initial in-
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vestments in the Retail Class generally must be at least $500, and subsequent
investments must be at least $50. The distributor of the shares of the Retail
Class 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 Retail Class is one of several mutual funds
distributed by AIM Distributors (collectively, "The AIM Family of Funds").
Shares of the Retail Class may be exchanged for shares of any 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. Shareholders may redeem all or a portion of their shares
at their net asset value, generally without charge. See "How to Redeem Shares."
If the value of a shareholder's account is less than $500, the Trust may cause
the shares in the account to be redeemed at their net asset value.
DISTRIBUTIONS. The Fund currently declares dividends from net investment
income on a daily basis and pays such dividends on a monthly basis.
Distributions by the Fund from short-term capital gains and long-term capital
gains, if any, are paid annually. Dividends and distributions of the Fund may be
reinvested at their net asset value (without payment of a sales charge) in the
Fund's shares or, subject to certain conditions, in shares of another fund in
The AIM Family of Funds. See "Dividends, Distributions and Tax Matters" and
"Special Plans."
AIM, AIM Institutional Funds, AIM LINK, The AIM Family of Funds, The AIM
Family of Funds and Design (i.e., the AIM logo), and AIM and Design are
registered service marks and La Familia AIM de Fondos and La Familia AIM de
Fondos and Design are service marks of A I M Management Group Inc.
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THE FUND
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TABLE OF FEES AND EXPENSES
The following table is designed to help an investor in the Retail Class of
the Fund understand the various costs that the investor will bear, both directly
and indirectly. The fees and expenses set forth in this table are based on the
average net assets of the Retail Class of the Fund for the fiscal year ended
July 31, 1996. The rules and regulations 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>
RETAIL
CLASS
-------
<S> <C>
Shareholder Transaction Expenses
Maximum sales load imposed on purchase of shares (as a % of offering price)........ 1.00%
Maximum sales load on reinvested dividends and distributions (as a %
of offering price).............................................................. None
Deferred sales load (as a % of original purchase price or redemption proceeds,
as applicable).................................................................. None
Redemption fee (as a % of amount redeemed, as applicable).......................... None
Exchange fee*...................................................................... None
Annual Operating Expenses
(as a % of average net assets)
Management fees.................................................................... 0.20%
Rule 12b-1 Fees**.................................................................. 0.15%
Other expenses..................................................................... 0.19%
Total operating expenses........................................................ 0.54%
</TABLE>
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* No fee will be charged for exchanges among The AIM Family of Funds.
** It is possible that as a result of Rule 12b-1 fees, long-term shareholders
may pay more than the economic equivalent of the maximum front-end sales
charges permitted under rules of the National Association of Securities
Dealers, Inc. Given the Rule 12b-1 fee of the Retail Class, however, it is
estimated that it would take a substantial number of years for a shareholder
to exceed such maximum front-end sales charges.
EXAMPLES. An investor in the Fund would pay the following expenses on a $1,000
investment in shares of the Retail Class of the Fund, assuming (1) a 5% annual
return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
RETAIL
CLASS
-------
<S> <C>
1 year...................................................... $15
3 years..................................................... $27
5 years..................................................... $40
10 years..................................................... $77
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED TO BE REPRESENTATIVE OF THE
SHARES OF THE RETAIL CLASS OF THE FUND'S ACTUAL OR FUTURE EXPENSES, WHICH MAY BE
GREATER OR LESS THAN THOSE SHOWN. IN ADDITION, WHILE THE EXAMPLES ASSUME A 5%
ANNUAL RETURN, THE ACTUAL PERFORMANCE OF THE RETAIL CLASS 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.
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FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights during each of the
fiscal years ended July 31, 1996 and 1995, the eleven months ended July 31,
1994, each of the years in the five-year period ended August 31, 1993 and for
the period December 15, 1987 (date operations commenced) through August 31,
1988. All data have been audited by KPMG Peat Marwick LLP, independent auditors,
whose report on the financial statements and notes appears in the Statement of
Additional Information.
<TABLE>
<CAPTION>
JULY 31, AUGUST 31,
-------------------------------- --------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period........... $ 10.03 $ 9.96 $ 10.24 $ 10.21 $ 10.01 $ 9.79 $ 9.78 $ 9.80 $ 9.92
Income from
investment
operations:
Net investment
income......... 0.55 0.54 0.35 0.42 0.58 0.72 0.77 0.84 0.52
Net gains
(losses) on
securities
(both realized
and unrealized) (0.06) 0.07 (0.20) 0.05 0.29 0.22 0.01 (0.02) (0.12)
-------- -------- -------- -------- -------- ------- ------- ------- -------
Total from
investment
operations. 0.49 0.61 0.15 0.47 0.87 0.94 0.78 0.82 0.40
-------- -------- -------- -------- -------- ------- ------- ------- -------
Less
distributions:
Dividends from
net investment
income......... (0.55) (0.54) (0.35) (0.42) (0.58) (0.72) (0.77) (0.84) (0.52)
Distributions
from net
realized
capital gains.. -- -- (0.08) (0.02) (0.09) -- -- -- --
-------- -------- -------- -------- -------- ------- ------- -------
Total
distributions. (0.55) (0.54) (0.43) (0.44) (0.67) (0.72) (0.77) (0.84) (0.52)
-------- -------- -------- -------- -------- ------- ------- -------
Net asset value,
end of period.... $ 9.97 $ 10.03 $ 9.96 $ 10.24 $ 10.21 $ 10.01 $ 9.79 $ 9.78 $ 9.80
======== ======== ======== ======== ======== ======= ======= ======= =======
Total return(a)... 4.98% 6.36% 1.52% 4.65% 8.93% 9.95% 8.32% 8.71% 4.11%
======== ======== ======== ======== ======== ======= ======= ======= =======
Ratios/supplemental
data
Net assets, end
of period (000s
omitted)........ $359,048 $274,480 $329,942 $348,937 $260,454 $131,880 $79,871 $70,781 $62,342
======== ======== ======== ======== ======== ======= ======= ======= =======
Ratio of expenses
to average net
assets.......... 0.54%(b) 0.51% 0.47%(c) 0.46% 0.48% 0.54% 0.50%(d) 0.45%(e) 0.35%(c)(e)
======== ======== ======== ======== ======== ======= ======= ======= =======
Ratio of net
investment
income to
average net
assets.......... 5.45%(b) 5.44% 3.75%(c) 4.07% 5.60% 7.25% 7.90%(d) 8.59%(e) 7.02%(c)(e)
======== ======== ======== ======== ======== ======= ======= ======= =======
Portfolio
turnover rate... 117.09% 120.01% 120.40% 122.99% 119.62% 214.74% 192.46% 219.53% 140.83%
======== ======== ======== ======== ======== ======= ======= ======= =======
Borrowings for the
period:
Amount of debt
outstanding at
end of period
(000s
omitted)........ -- -- -- -- -- -- -- $ 9,943 $19,232
Average amount of
debt outstanding
during the
period (000s
omitted)(f)..... -- -- -- -- -- -- $ 5,101 $14,301 $ 4,110
Average number of
shares
outstanding
during the
period (000s
omitted)(f)..... 32,350 28,337 34,101 30,416 18,378 10,559 7,389 7,295 2,429
Average amount of
debt per share
during the
period.......... -- -- -- -- -- -- $ 0.69 $ 1.96 $1.69
</TABLE>
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(a) Does not deduct sales charges and for periods of less than one year, total
return is not annualized.
(b) Ratios are based on average net assets of $325,704,724.
(c) Annualized.
(d) After waiver of advisory fees.
(e) After waiver of advisory fees and expense reimbursements.
(f) Averages computed on a daily basis.
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PERFORMANCE
The Fund's performance may be quoted in advertising in terms of yield or
total return. Both types of performance are based on historical results and are
not intended to indicate future performance. All advertisements of the Fund will
disclose the maximum sales charge imposed on purchases of the Fund's shares. If
any advertised performance data does not reflect the maximum sales charge, such
advertisement will disclose that the sales charge has not been deducted in
computing the performance data, and that, if reflected, the maximum sales charge
would reduce the performance quoted. See the Statement of Additional Information
for further details concerning performance comparisons used in advertisements by
the Fund. Further information regarding the Fund's performance is contained in
the Fund's annual report to shareholders, which is available upon request and
without charge.
A Fund's yield is a way of showing the rate of income the Fund earns on its
investments as a percentage of the share price. In order to calculate yield, a
Fund takes the interest income earned from its portfolio of investments for a
30-day period (net of expenses), divides such interest by the number of the
Fund's shares, and expresses the result as an annualized percentage rate based
on the Fund's offering price (including the 1.00% maximum sales charge) at the
end of the 30-day period. Yields are calculated according to accounting methods
that are standardized for all stock and bond funds. Because yield accounting
methods differ from the methods used for other accounting purposes, a Fund's
yield may not equal the income paid to an investor's account or the income
reported in the Fund's financial statements.
A Fund may also quote its distribution rate, which is calculated by
dividing dividends declared during a specified period by the Fund's maximum
offering price at the end of the period and annualizing the result.
A Fund's total return shows its overall change in value, including changes
in share price assuming all of 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 annually compounded 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.
From time to time and in its discretion, AIM may waive all or a portion of
its advisory fees and/or assume certain expenses of the Fund. Such a practice
will have the effect of increasing the Fund's yield and total return. The
performance of the Fund will vary from time to time and past results are not
necessarily representative of future results. A Fund's performance is a function
of its portfolio management in selecting the type and quality of portfolio
securities and is affected by the operating expenses of the Fund and general
market conditions.
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INVESTMENT PROGRAM
INVESTMENT OBJECTIVE. The investment objective of the Fund is to seek
liquidity with minimum fluctuation in principal value, and, consistent with this
objective, the highest total return achievable. There can be no assurance that
the Fund will achieve its investment objective. The Fund's investment objective
is a fundamental policy, which may be changed only by the affirmative vote of
the holders of a majority of the outstanding shares of beneficial interest of
the Fund.
INVESTMENT POLICIES. The Fund will attempt to achieve its objective by
investing in an actively managed portfolio of U.S. Treasury notes and other
direct obligations of the U.S. Treasury.
The Fund will attempt to enhance its total return through capital
appreciation when market factors, such as economic and market conditions and the
prospects for interest rate changes, indicate that capital appreciation may be
available without significant risk to principal. The Fund will only purchase
securities whose maturities do not exceed three (3) years. The Fund's policy of
investing in securities with remaining maturities of three (3) years or less
will result in high portfolio turnover. Under normal circumstances, the average
portfolio maturity of the Fund will range between one-and-one-half (1 1/2) and
two (2) years. Since brokerage commissions are not normally paid on investments
of the type made by the Fund, the high turnover rate should not adversely affect
the net income of the Fund.
U.S. TREASURY SECURITIES. The Fund may invest in U.S. Treasury obligations,
which are direct obligations of the U.S. Treasury and which differ only in their
interest rates, maturities, and times of issuance, including U.S. Treasury
bills, U.S. Treasury notes and U.S. Treasury bonds.
LOANS OF PORTFOLIO SECURITIES. The Fund may from time to time loan
securities from its portfolio to brokers, dealers and financial institutions and
receive collateral in cash or U.S. Treasury obligations which will be maintained
at all times in an amount equal to at least 100% of the current market value of
the loaned securities; provided, however, that such loans are made according to
the guidelines of the SEC and the Trust's Board of Trustees. The Fund will be
entitled to the interest paid upon investment of the cash collateral in its
permitted investments or to the payment of a premium or fee for the loan. The
Fund may at any time call such loans
6
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and obtain the securities loaned. However, if the borrower of the securities
should default on its obligation to return the securities borrowed, the value of
the collateral may be insufficient to permit the Fund to reestablish its
position by making a comparable investment due to changes in market conditions.
The Fund may pay reasonable fees to persons unaffiliated with the Fund in
connection with the arranging of such loans. The Fund will only engage in
securities lending transactions with broker-dealers registered with the SEC, or
with federally-supervised banks or savings and loan associations.
WHEN-ISSUED OR DELAYED DELIVERY TRADING. The Fund may purchase U.S.
Treasury obligations on a when-issued basis, and it may purchase or sell such
securities for delayed delivery. These transactions occur when securities are
purchased or sold by the Fund with payment and delivery to take place in the
future in order to secure what is considered an advantageous yield and price to
the Fund at the time of entering into the transaction. The value of the security
on the delivery date may be more or less than its purchase price. The Fund's
custodian bank will segregate cash or short-term U.S. Treasury obligations in an
aggregate amount equal to the amount of its commitments in connection with such
delayed delivery and when-issued purchase transactions. No delayed delivery or
when-issued commitments will be made if, as a result, more than 25% of the
Fund's net assets would be so committed.
BORROWING. Subject to its investment restrictions (see "Investment
Restrictions"), the Fund may borrow money from banks for temporary or emergency
purposes to meet redemption requests which might otherwise require the untimely
disposition of securities. The Fund may not borrow for the purpose of increasing
income. If there are unusually heavy redemptions because of changes in interest
rates or for any other reason, the Fund may have to sell a portion of its
investment portfolio at a time when it may be disadvantageous to do so. Selling
Fund securities under these circumstances may result in a lower net asset value
per share or decreased dividend income, or both. The Fund believes that, in the
event of abnormally heavy redemption requests, its borrowing provisions would
help to mitigate any such effects and could make the forced sale of its
portfolio securities less likely.
REVERSE REPURCHASE AGREEMENTS. A reverse repurchase agreement involves the
sale of securities held by the Fund, with an agreement that the Fund will
repurchase such securities at an agreed-upon price, date and interest payment.
It is the current operating policy of the Fund to enter into reverse repurchase
agreements (which are considered to be borrowings under the 1940 Act) only for
temporary or emergency purposes and not as a means to increase income, even
though the Fund's investment restrictions permit the Fund to engage in reverse
repurchase agreements for income enhancement. The Fund will enter into a reverse
repurchase agreement only when the interest income to be earned from the
investment of the proceeds of the transaction is greater than the interest
expense of the transaction. During the time a reverse repurchase agreement is
outstanding, the Fund will maintain a segregated custodial account containing
U.S. Treasury obligations having a value equal to the repurchase price under
such reverse repurchase agreement. Any investment gains made by the Fund with
monies borrowed through reverse repurchase agreements will cause the net asset
value of the Fund's shares to rise faster than would be the case if the Fund had
no such borrowings. On the other hand, if the investment performance resulting
from the investment of borrowings obtained through reverse repurchase agreements
fails to cover the cost of such borrowings to the Fund, the net asset value of
the Fund will decrease faster than would otherwise be the case.
ILLIQUID SECURITIES. The Fund will limit its investment in illiquid
securities to no more than 15% of its net assets, including repurchase
agreements with remaining maturities in excess of seven (7) days.
The investment policies described above may be changed by the Board of
Trustees without the affirmative vote of a majority of the outstanding shares of
beneficial interest of the Fund.
INVESTMENT RESTRICTIONS. The Fund's investment program is subject to a
number of investment restrictions which reflect self-imposed standards as well
as federal and state regulatory limitations. These restrictions are designed to
minimize certain risks associated with investing in certain types of securities
or engaging in certain transactions. The most significant of these restrictions
provide that the Fund will not:
(1) purchase any security unless the security is a direct obligation
of the U.S. Treasury or is a repurchase agreement with respect to a direct
obligation of the U.S. Treasury;
(2) issue senior securities in the form of indebtedness, borrow money,
except from banks for temporary or emergency purposes, such as to meet
redemption requests (not for the purpose of increasing income), or borrow
through reverse repurchase agreements (which may be entered into for the
purpose of increasing income) if, as a result of any such borrowings, the
amount borrowed would exceed 33 1/3% of the value of the Fund's assets
(including the proceeds of such securities issued or money borrowed) less
its liabilities (not including the liabilities incurred in connection with
such issuance or borrowing);
(3) make loans of money other than (a) through the purchase of debt
securities in accordance with the Fund's investment program, and (b) by
entering into repurchase agreements; or
(4) lend any portfolio securities if the value of the securities
loaned by it would exceed an amount equal to one-third of its total assets.
The foregoing investment restrictions (as well as certain others set forth in
the Statement of Additional Information) are matters of fundamental policy which
may not be changed without the affirmative vote of the holders of a majority of
the outstanding shares of beneficial interest of the Fund.
7
<PAGE> 8
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MANAGEMENT
The overall management of the business and affairs of the Fund is vested in
the Trust's Board of Trustees. The Board of Trustees approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including the investment advisory agreement with AIM, the administrative
services agreement with AIM, the distribution agreement with AIM Distributors
regarding distribution of shares of the Retail Class, the agreement with The
Bank of New York as custodian and the agreement with AFS as transfer agent for
the Retail Class of the Fund. The day-to-day operations of the Fund are
delegated to the Trust's officers and to AIM, subject always to the objectives
and policies of the Fund and to the general supervision of the Trust's 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.
Information concerning the Board of Trustees may be found in the Statement of
Additional Information.
INVESTMENT ADVISOR. A I M Advisors, Inc., 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046, serves as the investment advisor to the Fund pursuant to a
Master Investment Advisory Agreement, dated October 18, 1993 (the "Advisory
Agreement"). AIM was organized in 1976 and, together with its affiliates,
manages or advises 43 investment company portfolios (including the Fund). As of
November 1, 1996, the total assets of the investment company portfolios were
approximately $58 billion. AIM is a wholly-owned subsidiary of AIM Management.
Under the terms of the Advisory Agreement, AIM supervises all aspects of
the Fund's operations and provides investment advisory services to the Fund. AIM
obtains and evaluates economic, statistical and financial information to
formulate and implement investment programs for the Fund. The Advisory Agreement
also provides that, upon the request of the Board of Trustees, AIM may perform
or arrange for the performance of certain accounting, shareholder servicing and
other administrative services for the Fund 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 Fund have entered into a Master
Administrative Services Agreement, dated as of October 18, 1993, pursuant to
which AIM is entitled to receive from the 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 Fund's principal financial
officer and his staff, and any expenses related to such services, as well as the
services of staff responding to various shareholder inquires. In addition, the
Fund and A I M Fund Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739, a
wholly-owned subsidiary of AIM and registered transfer agent, receives a fee
pursuant to a Transfer Agency and Service Agreement for its provision of
transfer agency, dividend distribution and disbursement, and shareholder
services to the Fund.
For a discussion of AIM's brokerage allocation policies and practices, see
"Portfolio Transactions and Brokerage Allocation" in the Statement of Additional
Information. In accordance with policies established by the trustees, AIM may
take into account sales of shares of the Fund and other funds advised by AIM in
selecting broker-dealers to effect portfolio transactions on behalf the Fund.
FEES AND EXPENSES. Pursuant to the Advisory Agreement, the Trust pays AIM a
fee with respect to the Fund calculated at the annual rate of 0.20% of the first
$500 million of the Fund's average daily net assets plus 0.175% of the Fund's
average daily net assets in excess of $500 million. For the year ended July 31,
1996, the Fund paid 0.20% of its average daily net assets to AIM for its
advisory services, and the Retail Class' total expenses of the same period,
stated as a percentage of average daily net assets of the Retail Class, was
0.54%.
For the year ended July 31, 1996, the Fund paid 0.01% of its average daily
net assets to AIM for reimbursement for administrative services.
FEE WAIVERS. In order to increase the yield 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 such fiscal year. Fee waivers or
reductions and waivers of expense reimbursements, other than those set forth in
the Advisory Agreement, may be rescinded at any time without notice to
investors.
PORTFOLIO MANAGEMENT. AIM uses a team approach and disciplined investment
strategy in providing investment advisory services to all its accounts,
including the Fund. AIM's investment staff consists of 118 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 the Fund are Karen Dunn Kelley, Meggan M. Walsh
and Paula A. Permenter. Ms. Kelley is Senior Vice President of A I M Capital
Management, Inc. ("AIM Capital"), a wholly-owned subsidiary of AIM; Vice
President of AIM and of the Trust; and has been responsible for the Fund since
1992. Ms. Kelly has been associated with AIM since 1989 and has a total of 14
years of experience as an investment professional. Ms. Walsh is Vice President
of AIM Capital and has been responsible for the Fund since 1992. Ms. Walsh has
been associated with AIM since 1991 and has a total of nine years of experience
as an investment professional. Prior to 1991, Ms. Walsh was Manager of
Short-Term U.S. Commercial Paper and Euro-Commercial Paper Programs at
Nationale-Nederlanden North America Corporation. Paula A. Permenter has been
responsible for the Fund since 1996. Ms. Permenter has been associated with AIM
since 1996 and has eight 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.
8
<PAGE> 9
DISTRIBUTOR. The Trust has entered into a Master Distribution Agreement,
dated October 15, 1993, relating to the shares of the Retail Class (the
"Distribution Agreement") with AIM Distributors, a registered broker-dealer and
a wholly-owned subsidiary of AIM, to act as the distributor of shares of the
Retail Class. 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 Agreement provides AIM Distributors with the
exclusive right to distribute shares of the Retail Class through affiliated
broker-dealers and through other broker-dealers with whom AIM Distributors has
entered into selected dealer agreements.
DISTRIBUTION PLAN. The Trust has adopted a Master Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act with respect to the Retail
Class. Under the Plan the Fund with respect to the Retail Class will pay
compensation of 0.15% per annum of the average daily net assets of the Retail
Class to AIM Distributors for the purpose of financing any activity which is
primarily intended to result in the sale of shares of the Retail Class. The Plan
is designed to compensate AIM Distributors for certain promotional and other
sales-related costs, and to implement an incentive program which provides for
periodic payments to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
shares of the Retail Class.
Under the Plan, AIM Distributors may in its discretion from time to time
agree to waive voluntarily all or a portion of its fee, while retaining its
ability to be reimbursed for such fee prior to the end of the fiscal year.
Activities that may be financed under the Plan include, but are not limited
to, the following: preparation and distribution of advertising material and
sales literature, printing of prospectuses and statements of additional
information (and supplements thereto) and reports for other than existing
shareholders, supplemental payments made to dealers and other institutions such
as asset-based sales charges or as payments of service fees under shareholder
services arrangements and the cost of administering the Plan.
The Plan does not obligate the Retail Class to reimburse AIM Distributors
for the actual expenses AIM Distributors may incur in fulfilling its obligations
under the Plan. Thus, even if AIM Distributors' actual expenses exceed the fee
payable to AIM Distributors thereunder at any given time, the Retail Class will
not be obligated to pay more than that fee, but if AIM Distributors' expenses
are less than the fee it receives, AIM Distributors will retain the full amount
of the fee.
The Plan provides that it will continue in effect so long as it is
specifically approved at least annually by a majority of the Trust's entire
Board of Trustees, including a majority of the trustees who are not "interested
persons" (as defined in the 1940 Act) of the Trust and who have no direct or
indirect financial interest in the operation of the Plan or in any agreements
related to the Plan ("Qualified Trustees"), unless terminated by vote of a
majority of the Qualified Trustees, or by vote of the holders of a majority of
the outstanding shares of the Retail Class. The Plan may not be amended to
increase materially the limit upon distribution expenses described above unless
approved by shareholders of the Retail Class, as applicable, and no other
material amendment to the Plan may be made unless approved by a majority of the
Board of Trustees, including a majority of the Qualified Trustees. While the
Plan is in effect, the selection and nomination of Qualified Trustees will be at
the discretion of the Qualified Trustees.
Under the Plan, certain financial institutions which have entered into
service agreements and which sell shares of the Retail Class on an agency basis,
may receive payments from the Retail Class pursuant to the Plan. AIM
Distributors does not act as principal, but rather as agent, for the Retail
Class in making such payments. The Retail Class 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.
Payments pursuant to the Plan are subject to any applicable limitations
imposed by rules of the National Association of Securities Dealers, Inc.
("NASD"). The Plan conforms to rules of the NASD by limiting payments made to
dealers and other financial institutions who provide continuing personal
shareholder services to their customers who purchase and own shares of the
Retail Class to no more than 0.25% per annum of the average daily net assets of
the Retail Class attributable to the customers of such dealers of financial
institutions. The Plan also imposes a cap on the total amount of sales charges,
including asset-based sales charges, that may be paid by the Retail Class. The
Plan requires the officers of the Trust to provide the Board of Trustees at
least quarterly with a written report of the amounts expended pursuant to the
Plan and the purposes for which such expenditures were made. The Board of
Trustees shall review these reports in connection with their decisions with
respect to the Plan.
- --------------------------------------------------------------------------------
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 was originally organized as a Maryland
corporation on November 4, 1988 and on October 15, 1993 was reorganized as a
Delaware business trust.
All shares of the Trust have equal rights with respect to voting, except
that (i) the holders of shares of all classes of a particular portfolio of the
Trust (a "Portfolio") voting together will have the exclusive right to vote on
matters (such as advisory fees) pertaining solely to that Portfolio, and (ii)
the holders of shares of a particular class will have the exclusive right to
vote on matters pertain-
9
<PAGE> 10
ing to distribution plans or shareholder service plans, if any such plans are
adopted, relating solely to such class. There are no preemptive or conversion
rights applicable to any of the Trust's shares. The Trust's shares, when issued,
will be fully paid and non-assessable.
The Retail Class and Institutional Class have different shareholders and
are allocated certain differing class expenses, such as distribution and/or
service fees related to their respective shares. The difference between the
expenses of the Retail Class and Institutional Class may affect performance. To
obtain information about the Institutional Class, please call Fund Management
Company ("FMC"), a registered broker-dealer and a wholly-owned subsidiary of
AIM, at (800) 659-1005. FMC is the exclusive distributor of the Institutional
Class.
The Trust is not required to hold annual or regular meetings of
shareholders. Meetings of shareholders of a class 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.
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, a shareholder of the Trust enjoys 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.
10
<PAGE> 11
THE TOLL-FREE NUMBER FOR ACCESS TO ROUTINE ACCOUNT INFORMATION
AND SHAREHOLDER ASSISTANCE IS
(800) 959-4246 (7:30 A.M. TO 5:30 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 AGGRESSIVE GROWTH FUND AIM INCOME FUND+
AIM BALANCED FUND+ AIM INTERMEDIATE GOVERNMENT FUND+
AIM BLUE CHIP FUND+ AIM INTERNATIONAL EQUITY FUND+
AIM CAPITAL DEVELOPMENT FUND+ AIM LIMITED MATURITY TREASURY SHARES
AIM CHARTER FUND+ AIM MONEY MARKET FUND*+
AIM CONSTELLATION FUND AIM MUNICIPAL BOND FUND+
AIM GLOBAL AGGRESSIVE GROWTH FUND+ AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM GLOBAL GROWTH FUND+ AIM TAX-EXEMPT CASH FUND*
AIM GLOBAL INCOME FUND+ AIM TAX-FREE INTERMEDIATE SHARES
AIM GLOBAL UTILITIES FUND+ AIM VALUE FUND+
AIM GROWTH FUND+ AIM WEINGARTEN FUND+
AIM HIGH YIELD FUND+
</TABLE>
* Shares of AIM TAX-EXEMPT CASH FUND, and Class C Shares of AIM MONEY MARKET
FUND, are offered to investors at net asset value, without payment of a sales
charge, as described below.
+ Shares of different classes of these funds, including the Class A and Class B
Shares of AIM MONEY MARKET FUND, are offered to investors at different sales
charges pursuant to a Multiple Distribution System. For more information
consult the prospectus of any of these funds.
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
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.
RET 11/96
A-1
<PAGE> 12
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 may be purchased at their respective net asset value
plus a sales charge as indicated below, except that shares of AIM TAX-EXEMPT
CASH FUND and Class C Shares of AIM MONEY MARKET FUND (the "No Load Funds") are
sold without a sales charge. 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.
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 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
INVESTOR'S SALES CHARGE CONCESSION
--------------------------------------------- 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."
RET 11/96
A-2
<PAGE> 13
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 AIM TAX-EXEMPT BOND FUND OF CONNECTICUT; and the Class A
shares of each of 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
INVESTOR'S SALES CHARGE CONCESSION
--------------------------------------------- AS A
AS A AS A PERCENTAGE
PERCENTAGE PERCENTAGE OF THE
OF THE PUBLIC OF THE NET PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
- ----------------------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/ or advance a service fee on such
transactions. See "All Groups of AIM Funds." Purchases of $1,000,000 or more are
at net asset value, subject to a contingent deferred sales charge of 1% if
shares are redeemed prior to 18 months from the date such shares were purchased,
as described under the caption "How to Redeem Shares -- Contingent Deferred
Sales Charge Program for Large Purchases."
GROUP III. Certain AIM Funds are currently sold with a sales charge ranging
from 1.00% to 0.50% of the offering price on purchases of less than $1,000,000.
These AIM Funds are AIM LIMITED MATURITY TREASURY SHARES and AIM TAX-FREE
INTERMEDIATE SHARES.
<TABLE>
<CAPTION>
INVESTOR'S SALES CHARGE DEALER
--------------------------------------------- CONCESSION
AS A AS A AS A
PERCENTAGE PERCENTAGE PERCENTAGE
OF THE PUBLIC OF THE NET OF THE PUBLIC
AMOUNT OF INVESTMENT IN OFFERING AMOUNT OFFERING
SINGLE TRANSACTION PRICE INVESTED PRICE
- ----------------------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
</TABLE>
There is no sales charge on purchases of $1,000,000 or more; however, AIM
Distributors may pay a dealer concession and/ or advance a service fee on such
transactions.
ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the entire
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 reallowed 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 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
RET 11/96
A-3
<PAGE> 14
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.
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, 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.
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 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 and NYSE Close on each business day of AIM
MONEY MARKET FUND.
SPECIAL INFORMATION RELATING TO AIM MONEY MARKET FUND AND AIM TAX-EXEMPT CASH
FUND (THE "MONEY MARKET FUNDS"). Because each Money Market Fund uses the
amortized cost method of valuing the securities it holds and rounds its per
share net asset value to the nearest whole cent, it is anticipated that the net
asset value of the shares of such funds will remain constant at $1.00 per share.
However, there is no assurance that either 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.
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 (except for
the No Load Funds, which are sold without payment of a sales charge) provided
that such purchases are made by a "purchaser" as hereinafter defined. Purchases
of shares of AIM TAX-EXEMPT CASH FUND, Class C shares of AIM MONEY MARKET FUND
and Class B shares of funds offered pursuant to a Multiple Distribution System
will not be taken into account in determining whether a purchase qualifies for a
reduction in initial sales charges.
The term "purchaser" means:
o an individual and his or her spouse and minor 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);
RET 11/96
A-4
<PAGE> 15
o a 403(b) plan, the employer/sponsor of which is an organization described
under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), 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;
o a trustee or fiduciary purchasing for a single trust, estate or single
fiduciary account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Code) and 457 plans, although more than one beneficiary or participant is
involved;
o a SEP, SARSEP where the employer has notified AIM Distributors in writing
that all of its related employee SEP or SARSEP accounts should be linked;
o any other organized group of persons, whether incorporated or not, provided
the organization has been in existence for at least six months and has some
purpose other than the purchase at a discount of redeemable securities of a
registered investment company; or
o 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) the No
Load Funds and (ii) Class B Shares of funds offered pursuant to a Multiple
Distribution System) 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-in-fact
to surrender for redemption any or all escrowed 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) the No Load Funds
and (ii) Class B Shares
RET 11/96
A-5
<PAGE> 16
of funds offered pursuant to a Multiple Distribution System) 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) the No Load Funds and (ii) Class B Shares of funds offered
pursuant to a Multiple Distribution System) owned by such purchaser, calculated
at their then current public offering price. If a purchaser so qualifies for a
reduced sales charge, the reduced sales charge applies to the total amount of
money then being invested by such purchaser and not just to the portion that
exceeds the breakpoint above which a reduced sales charge applies. For example,
if a purchaser already owns qualifying shares of any AIM Fund with a value of
$20,000 and wishes to invest an additional $20,000 in a fund with a maximum
initial sales charge of 5.50%, the reduced initial sales charge of 5.25% will
apply to the full $20,000 purchase and not just to the $15,000 in excess of the
$25,000 breakpoint. To qualify for obtaining the discount applicable to a
particular purchase, the purchaser or his dealer must furnish AFS with a list of
the account numbers and the names in which such accounts of the purchaser are
registered at the time the purchase is made.
PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the AIM Funds at
net asset value (without payment of an initial sales charge) may be made in
connection with: (a) the reinvestment of dividends and distributions from a fund
(see "Dividends, 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 initial amount invested in
the fund(s) 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 omnibus account per fund and the financial institution or service
organization 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 up to 1.00% of the net asset value of
any shares of the Load Funds (as defined on page A-8 herein), up to 0.10% of the
net asset value of any shares of AIM LIMITED MATURITY TREASURY SHARES, and up to
0.25% of the net asset value of any shares of all other AIM Funds 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 Obli-
RET 11/96
A-6
<PAGE> 17
gations"). Class A shares of such funds may also be purchased at net asset value
by other unit investment trusts approved by the Board of Directors of AIM Equity
Funds, Inc. Unit holders of such trusts may elect to invest cash distributions
from such trusts in Class A shares of AIM WEINGARTEN FUND or AIM CONSTELLATION
FUND at net asset value, including: (a) distributions of any dividend
income or other income received by such trusts; (b) distributions of any net
capital gains received in respect of Class A shares of AIM WEINGARTEN FUND or
AIM CONSTELLATION FUND and proceeds of the sale of Class A shares of AIM
WEINGARTEN FUND or AIM CONSTELLATION FUND used to redeem units of such trusts;
and (c) proceeds from the maturity of the Treasury Obligations at the
termination dates of such trusts. Prior to the termination dates of such trusts,
a unit holder may invest the proceeds from the redemption or repurchase of his
units in Class A shares of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND at net
asset value, provided: (a) that the investment in Class A shares of AIM
WEINGARTEN FUND or AIM CONSTELLATION FUND is effected within 30 days of such
redemption or repurchase; and (b) that the unit holder or his dealer provides
AIM Distributors with a letter which: (i) identifies the name, address and
telephone number of the dealer who sold to the unit holder the units to be
redeemed or repurchased; and (ii) states that the investment in Class A shares
of AIM WEINGARTEN FUND or AIM CONSTELLATION FUND is being funded exclusively by
the proceeds from the redemption or repurchase of units of such trusts.
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
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. 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.
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, 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 the twenty-fifth day of each 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. 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 pay-
RET 11/96
A-7
<PAGE> 18
ing 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; 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).
- --------------------------------------------------------------------------------
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, 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; shares of certain of the AIM Funds, 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 shares of certain other funds, 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 AGGRESSIVE GROWTH FUND -- CLASS A AIM HIGH YIELD FUND -- CLASS A AIM LIMITED MATURITY TREASURY
AIM BALANCED FUND -- CLASS A AIM INCOME FUND -- CLASS A SHARES
AIM BLUE CHIP FUND -- CLASS A AIM INTERMEDIATE GOVERNMENT AIM TAX-FREE INTERMEDIATE SHARES
AIM CAPITAL DEVELOPMENT FUND -- CLASS A
FUND -- CLASS A AIM INTERNATIONAL EQUITY NO LOAD FUNDS:
AIM CHARTER FUND -- CLASS A FUND -- CLASS A --------------
AIM CONSTELLATION FUND -- CLASS A AIM MONEY MARKET FUND -- CLASS A AIM MONEY MARKET FUND -- CLASS C
AIM GLOBAL AGGRESSIVE GROWTH AIM MUNICIPAL BOND AIM TAX-EXEMPT CASH FUND
FUND -- CLASS A FUND -- CLASS A
AIM GLOBAL GROWTH FUND -- CLASS A AIM TAX-EXEMPT BOND FUND
AIM GLOBAL INCOME FUND -- CLASS A OF CONNECTICUT
AIM GLOBAL UTILITIES FUND -- CLASS A AIM VALUE FUND -- CLASS A
AIM GROWTH FUND -- CLASS A AIM WEINGARTEN FUND -- CLASS A
</TABLE>
Shares of any AIM Fund may be exchanged for shares of any other AIM Fund,
except that (i) Load Funds share purchases of $1,000,000 or more which are
subject to a contingent deferred sales charge may not be exchanged for Lower
Load Funds or for AIM TAX-EXEMPT CASH FUND, (ii) Lower Load Funds share
purchases of $1,000,000 or more and No Load 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, and (iii) if the fund
offers more than one class of shares, the exchange must be between the same
class of shares. DEPENDING UPON THE FUND FROM WHICH AND INTO WHICH AN EXCHANGE
IS BEING MADE, SHARES
RET 11/96
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<PAGE> 19
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>
LOWER LOAD NO LOAD
FROM: TO: LOAD FUNDS FUNDS FUNDS
- -------------------- --------------------------------------------- ----------------- -------------
<S> <C> <C> <C>
Load Funds.......... Net Asset Value Net Asset Value Net Asset Value
Lower Load Funds.... Net Asset Value Net Asset Value Net Asset Value
No Load Funds....... Offering Price if No Load Fund shares were Net Asset Value Net Asset Value
directly purchased. Net Asset Value if No if No Load shares
Load Fund shares were acquired upon exchange were acquired
of shares of any Load Fund or any Lower Load upon exchange of
Fund. shares of any
Load Fund or any
Lower Load Fund;
otherwise, Of-
fering Price.
</TABLE>
FOR SHARES INITIALLY PURCHASED ON OR AFTER MAY 1, 1994, THE FOREGOING TABLE IS
REVISED AS FOLLOWS:
<TABLE>
<CAPTION>
LOWER LOAD NO LOAD
FROM: TO: LOAD FUNDS FUNDS FUNDS
- -------------------- --------------------------------------------- ----------------- -------------
<S> <C> <C> <C>
Load Funds.......... Net Asset Value Net Asset Value Net Asset Value
Lower Load Funds.... Net Asset Value if shares were acquired upon Net Asset Value Net Asset Value
exchange of any Load Fund. Otherwise,
difference in sales charge will apply.
</TABLE>
<TABLE>
<S> <C> <C> <C>
No Load Funds....... Offering Price if No Load Fund shares were Net Asset Value Net Asset Value
directly purchased. Net Asset Value if No if No Load Fund
Load Fund shares were acquired upon exchange shares were
of shares of any Load Fund. Difference in acquired upon
sales charge will apply if No Load Fund exchange of
shares were acquired upon exchange of Lower shares of any
Load Fund shares. Load Fund or any
Lower Load Fund;
otherwise, Of-
fering Price.
</TABLE>
An exchange is permitted only in the following circumstances: (a) 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; (b) the
shares of the fund acquired through exchange must be qualified for sale in the
state in which the shareholder resides; (c) the exchange must be made between
accounts having identical registrations and addresses; (d) the full amount of
the purchase price for the shares being exchanged must have already been
received by the fund; (e) 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; (f) 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; (g) certificates representing shares must be returned before shares
can be exchanged; and (h) if the fund offers more than one class of shares, the
exchange must be between the same class of shares. There is no fee for exchanges
among the AIM Funds.
THE CURRENT PROSPECTUS OF EACH OF THE AIM FUNDS AND CURRENT INFORMATION
CONCERNING THE OPERATION OF THE EXCHANGE PRIVILEGE ARE AVAILABLE THROUGH AIM
DISTRIBUTORS OR THROUGH ANY DEALER WHO HAS EXECUTED AN APPLICABLE AGREEMENT WITH
AIM DISTRIBUTORS. BEFORE EXCHANGING SHARES, INVESTORS SHOULD REVIEW THE
PROSPECTUSES OF THE FUNDS WHOSE SHARES WILL BE ACQUIRED THROUGH EXCHANGE.
EXCHANGES OF SHARES ARE CONSIDERED TO BE SALES FOR FEDERAL AND STATE INCOME TAX
PURPOSES AND MAY RESULT IN A TAXABLE GAIN OR LOSS TO A SHAREHOLDER.
THE EXCHANGE PRIVILEGE IS NOT AN OPTION OR RIGHT TO PURCHASE SHARES BUT IS
PERMITTED UNDER THE RESPECTIVE POLICIES OF THE PARTICIPATING FUNDS, AND MAY BE
MODIFIED OR DISCONTINUED BY ANY OF SUCH FUNDS OR BY AIM DISTRIBUTORS AT ANY
TIME, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, WITHOUT NOTICE.
Shares of any AIM Fund (other than AIM MONEY MARKET FUND) to be exchanged are
redeemed at their net asset value as determined at NYSE Close on the day that an
exchange request in proper form (described below) is received. Exchange requests
received after NYSE Close will result in the redemption of shares at their net
asset value at NYSE Close on the next business day. See "Terms and Conditions of
Purchase of the AIM Funds -- Timing of Purchase, Exchange and Redemption Orders
(AIM MONEY MARKET FUND only)" for information regarding the timing of exchange
orders for AIM MONEY MARKET FUND. Normally, shares of an AIM Fund to be acquired
by exchange are purchased at their net asset value or applicable offering price,
as the case may be, determined on the date that such request is received, but
under unusual market conditions such purchases may be delayed for up to five
business days if it is determined that a fund would be materially disadvantaged
by an immediate transfer of the proceeds of the exchange. If a shareholder is
exchanging into a fund paying daily dividends (see "Dividends, Distributions and
Tax Matters -- Dividends and Distributions," be-
RET 11/96
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<PAGE> 20
low), 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.
- --------------------------------------------------------------------------------
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.
CONTINGENT DEFERRED SALES CHARGE PROGRAM FOR LARGE PURCHASES. Except for
purchases of shares of Lower Load Funds and No Load Funds, a contingent deferred
sales charge of 1% applies to purchases of $1,000,000 or more that are redeemed
within 18 months of the date of purchase. For a description of the AIM Funds
participating in this program, see "Terms and Conditions of Purchase of the AIM
Funds -- Sales Charges and Dealer Concessions." This charge will be 1% of the
lesser of the value of the shares redeemed (excluding reinvested dividends and
capital gain distributions) or the total original cost of such shares. In
determining whether a contingent deferred sales charge is payable, and the
amount of any such charge, shares not subject to the contingent deferred sales
charge are redeemed first (including shares purchased by reinvested dividends
and capital gains distributions and amounts representing increases from capital
appreciation), and then other shares are redeemed in the order of purchase. No
such charge will be imposed upon exchanges unless the shares acquired by
exchange are redeemed within 18 months of the date the shares were originally
purchased. For purposes of computing this 18-month period (i) shares of any Load
Fund or Class C 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 (not the entire
Plan) are being redeemed, and (a) the initial amount invested by a Plan in
one or more of the AIM Funds 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;
RET 11/96
A-10
<PAGE> 21
(2) redemptions of shares following the registered shareholder's (or
in the case of joint accounts, all registered joint owners') death or
disability, as defined in Section 72(m)(7) of the Code;
(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; and
(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."
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 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 be generally transmitted on the next business day.
REDEMPTIONS BY CHECK (NO LOAD FUNDS). After completing the appropriate
authorization form, shareholders may use checks to effect redemptions from the
No Load Funds. 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 which are subject to the contingent
deferred sales charge program for large purchases described above may be subject
to the imposition of deferred sales charges that will be deducted from the
redemption proceeds. See "Contingent Deferred Sales Charge Program for Large
Purchases."
RET 11/96
A-11
<PAGE> 22
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 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 United States
Securities and Exchange Commission (the "SEC"), and further provided that such
guarantor institution is listed in one of the reference guides contained in the
Transfer Agent's current Signature Guarantee Standards and Procedures, such as
certain domestic banks, credit unions, securities dealers, or securities
exchanges. The Transfer Agent will also accept signatures with either: (1) a
signature guaranteed with a medallion stamp of the STAMP Program, or (2) a
signature guaranteed with a medallion stamp of the NYSE Medallion Signature
Program, provided that in either event, the amount of the transaction involved
does not exceed the surety coverage amount indicated on the medallion. For
information regarding whether a particular institution or organization qualifies
as an "eligible guarantor institution," an investor should contact the Client
Services Department of AFS.
REINSTATEMENT PRIVILEGE (CLASS A SHARES ONLY). Within 90 days of a redemption,
a shareholder may invest all or part of the redemption proceeds in shares of any
AIM Fund, at the net asset value next computed after receipt by the Transfer
Agent of the funds to be reinvested; provided, however, if the redemption was
made from AIM LIMITED MATURITY TREASURY SHARES or 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 shares of any AIM Fund, and who subsequently reinvest a
portion or all of the value of the redeemed shares in 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.
RET 11/96
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<PAGE> 23
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each AIM Fund other than AIM
MONEY MARKET FUND will be determined as of NYSE Close, on each business day of a
fund. The net asset value (or share price) of AIM MONEY MARKET FUND will be
determined as of 12:00 noon and NYSE Close on each business day of the Fund. In
the event the NYSE closes early (i.e., before 4:00 p.m. Eastern Time) on a
particular day, the net asset value of 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 contract closing prices which are available
15 minutes after the close of trading of the NYSE will generally be used. 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.
- --------------------------------------------------------------------------------
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 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
</TABLE>
RET 11/96
A-13
<PAGE> 24
<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 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. 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. 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.
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 or 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
FUND 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 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 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.
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.
RET 11/96
A-14
<PAGE> 25
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 long-term 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.
Foreign persons who file a United States tax return after December 31, 1996
for a U.S. tax refund and who are not eligible to obtain a social security
number, must apply to the IRS for an individual taxpayer identification number
("ITIN"), using IRS Form W-7. For a copy of the IRS Form W-7 and accompanying
instructions, please contact your tax advisor or the Transfer Agent.
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 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 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.
RET 11/96
A-15
<PAGE> 26
- --------------------------------------------------------------------------------
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 LIMITED MATURITY
TREASURY SHARES, AIM MUNICIPAL BOND FUND, 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, 712 Main
Street, Houston, Texas 77002, 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 as
dividend payment agent.
LEGAL COUNSEL. The law firm of Ballard Spahr Andrews & Ingersoll,
Philadelphia, Pennsylvania, serves as counsel to the AIM Funds and has passed
upon the legality of the shares offered pursuant to this Prospectus.
SHAREHOLDER INQUIRIES. Shareholder inquiries concerning their accounts should
be directed to an AFS 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 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 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.
RET 11/96
A-16
<PAGE> 27
APPLICATION INSTRUCTIONS
SOCIAL SECURITY OR TAXPAYER ID NUMBER. Investors should make sure that the
social security number or taxpayer identification number (TIN) which appears in
Section 1 of the Application complies with the following guidelines:
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
GIVE SOCIAL SECURITY GIVE TAXPAYER I.D.
ACCOUNT TYPE NUMBER OF: ACCOUNT TYPE NUMBER OF:
------------ ---------- ------------ ----------
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 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.
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
RET 11/96
B-1
<PAGE> 28
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."
For United States tax returns filed after December 31, 1996 by foreign persons
for a U.S. tax refund, eligible foreign persons, who do not require a social
security number for any other purpose, must apply to the IRS for an individual
taxpayer identification number ("ITIN"). An ITIN application is made using IRS
Form W-7. See "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 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 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").
RET 11/96
B-2
<PAGE> 29
[AIM LOGO APPEARS HERE] THE AIM FAMILY OF FUNDS--Registered Trademark--
Investment Advisor
A I M Advisors, Inc.
11 Greenway Plaza, Suite 1919
Houston, TX 77046-1173
Transfer Agent
A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
Custodian
The Bank of New York
90 Washington Street, 11th Floor
New York, NY 10286
Principal Underwriter
A I M Distributors, Inc.
P.O. Box 4739
Houston, TX 77210-4739
Independent Accountants
KPMG Peat Marwick LLP
700 Louisiana
NationsBank Building
Houston, TX 77002
For more complete information about any other fund in The AIM Family of Funds,
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> 30
STATEMENT OF
ADDITIONAL INFORMATION
AIM INVESTMENT SECURITIES FUNDS
-----------------------
AIM LIMITED MATURITY TREASURY SHARES
(A CLASS OF THE LIMITED MATURITY TREASURY PORTFOLIO)
11 GREENWAY PLAZA
SUITE 1919
HOUSTON, TEXAS 77046-1173
(713) 626-1919
-----------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, AND
IT SHOULD BE READ IN CONJUNCTION WITH A PROSPECTUS OF THE ABOVE-NAMED FUND,
A COPY OF WHICH MAY BE OBTAINED FREE OF CHARGE FROM AUTHORIZED DEALERS OR
BY WRITING
A I M DISTRIBUTORS, INC., P.O. BOX 4739,
HOUSTON, TEXAS 77210- 4739
OR BY CALLING (800) 347-4246.
-----------------------
STATEMENT OF ADDITIONAL INFORMATION DATED: NOVEMBER 21, 1996
RELATING TO PROSPECTUS DATED: NOVEMBER 21, 1996
<PAGE> 31
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
GENERAL INFORMATION ABOUT THE TRUST . . . . . . . . . . . . . . . . . . . . 1
The Trust and its Shares . . . . . . . . . . . . . . . . . . . . . 1
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Yield Calculations . . . . . . . . . . . . . . . . . . . . . . . . 2
Total Return Calculations . . . . . . . . . . . . . . . . . . . . 2
Historical Portfolio Results . . . . . . . . . . . . . . . . . . . 3
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION . . . . . . . . . . . . . . 4
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . 5
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . 5
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Additional Investment Restrictions of the Fund . . . . . . . . . . 7
Investing in Securities Owned by Trustees and Officers . . . . . . 7
Investing for Control . . . . . . . . . . . . . . . . . . . . . . 8
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Trustees and Officers . . . . . . . . . . . . . . . . . . . . . . 8
Remuneration of Trustees . . . . . . . . . . . . . . . . . . . . . 11
AIM Funds Retirement Plan for Eligible Directors/Trustees . . . . 12
Deferred Compensation Agreements . . . . . . . . . . . . . . . . . 12
Investment Advisory and Other Services . . . . . . . . . . . . . . 13
Distribution Plan . . . . . . . . . . . . . . . . . . . . . . . . 15
THE DISTRIBUTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 16
HOW TO PURCHASE AND REDEEM SHARES . . . . . . . . . . . . . . . . . . . . . 17
NET ASSET VALUE DETERMINATION . . . . . . . . . . . . . . . . . . . . . . . 18
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS . . . . . . . . . . . . . . . . . 18
Reinvestment of Dividends and Distributions . . . . . . . . . . . 18
Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Qualification as a Regulated Investment Company . . . . . . . . . 19
Excise Tax on Regulated Investment Companies . . . . . . . . . . . 21
Fund Distributions . . . . . . . . . . . . . . . . . . . . . . . . 21
Sale or Redemption of Fund Shares . . . . . . . . . . . . . . . . 22
Foreign Shareholders . . . . . . . . . . . . . . . . . . . . . . . 23
Effect of Future Legislation; Local Tax Considerations . . . . . . 23
DESCRIPTION OF FUND SHARES . . . . . . . . . . . . . . . . . . . . . . . . 23
MISCELLANEOUS INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 24
Audit Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Custodian and Transfer Agent . . . . . . . . . . . . . . . . . . . 24
</TABLE>
i
<PAGE> 32
<TABLE>
<S> <C>
Principal Holders of Securities . . . . . . . . . . . . . . . . . 24
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . FS
</TABLE>
ii
<PAGE> 33
INTRODUCTION
AIM Investment Securities Funds (the "Trust") is a series mutual fund.
The rules and regulations of the United States Securities and Exchange
Commission (the "SEC") require all mutual funds to furnish prospective investors
with certain information concerning the activities of the fund being considered
for investment. This information is included in a Prospectus (the
"Prospectus"), dated November 21, 1996, which relates to the Trust's AIM Limited
Maturity Treasury Shares (the "Retail Class"), a class of the Limited Maturity
Treasury Portfolio (the "Fund"). Copies of the Prospectus and additional copies
of this Statement of Additional Information may be obtained without charge by
writing the principal distributor of the shares of the Retail Class, A I M
Distributors, Inc. ("AIM Distributors"), P.O. Box 4739, Houston, Texas
77210-4739, or by calling (800) 347-4246. Investors must receive and should
read a Prospectus before they invest in any Fund.
This Statement of Additional Information is intended to furnish
investors with additional information concerning the Fund. Some of the
information set forth in this Statement of Additional Information is also
included in the Prospectus. Additionally, the Prospectus and this Statement of
Additional Information omit certain information contained in the Trust's
Registration Statement filed with the SEC. Copies of the Registration
Statement including items omitted from the Prospectus and this Statement of
Additional Information, may be obtained from the SEC by paying the charges
prescribed under its rules and regulations. 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.
GENERAL INFORMATION ABOUT THE TRUST
THE TRUST AND ITS SHARES
The Trust was previously incorporated as a Maryland corporation on
November 4, 1888. Pursuant to an Agreement and Plan of Reorganization, the
Fund was reorganized on October 15, 1993, as a portfolio of AIM Investment
Securities Funds, a Delaware business trust. A copy of the Trust's Agreement
and Declaration of Trust dated May 5, 1993, as amended (the "Trust Agreement")
is on file with the SEC. Under the Trust Agreement, the Board of Trustees is
authorized to create new series of shares without the necessity of a vote of
shareholders of the Trust.
On October 15, 1993, the Fund succeeded to the assets and assumed the
liabilities of a fund with a corresponding name (the "Predecessor Fund") of
Short-Term Investments Co., a Massachusetts business trust ("STIC"), pursuant
to an Agreement and Plan of Reorganization between the Trust and STIC. All
historical financial information and other information contained in this
Statement of Additional Information for periods prior to October 15, 1993
relating to the Fund (or a class thereof) is that of the Predecessor Fund (or
corresponding class thereof). Shares of beneficial interest of the Trust are
redeemable at their net asset value at the option of the shareholder or at the
option of the Trust in certain circumstances. For information concerning the
methods of redemption and the rights of share ownership, investors should
consult the Prospectus under the captions "Organization of the Trust" and "How
to Redeem Shares."
The assets received by the Trust for the issuance or sale of shares of
each class, and all income, earnings, profits, losses and proceeds therefrom,
subject only to the rights of creditors, will be allocated to that Fund. They
constitute the underlying assets of the Fund, are required to be segregated on
the Trust's books of account, and are to be charged with the expenses with
respect to the Fund and its respective classes. Any general expenses of the
Trust not readily identifiable as belonging to a particular Fund are allocated
by or under the direction of the Board of Trustees, primarily on the basis of
relative net assets, or other relevant factors.
1
<PAGE> 34
Each share of beneficial interest of the Fund represents an equal
proportionate interest in the Fund with each other share and is entitled to
such dividends and distributions out of the income belonging to the Fund as are
declared by the Board. The Fund offers two separate classes of shares: AIM
Limited Maturity Treasury Shares, a retail class, and Institutional Shares, an
institutional class. Each class represents interests in the same portfolio of
investments but, as further described in the Prospectus, each such class is
subject to differing sales charges (if applicable) and expenses, which
differences will result in differing net asset values and dividends and
distributions. Upon any liquidation of the Trust, shareholders of each class
are entitled to share pro rata in the net assets belonging to the Fund
available for distribution.
PERFORMANCE INFORMATION
YIELD CALCULATIONS
Yields for the Fund used in advertising are computed as follows: (a)
divide the Fund's income for a given 30 day or one-month period, net of
expenses, by the average number of shares entitled to receive dividends during
the period; (b) divide the figure arrived at in step (a) by the Fund's offering
price (including the maximum sales charge) at the end of the period; and (c)
annualize the result (assuming compounding of income) in order to arrive at an
annual percentage rate. For purposes of yield quotation, income is calculated
in accordance with standardized methods applicable to all stock and bond mutual
funds. In general, interest income is reduced with respect to bonds trading at
a premium over their par value by subtracting a portion of the premium from
income on a daily basis, and is increased with respect to bonds trading at a
discount by adding a portion of the discount to daily income. Capital gains
and losses are excluded from the calculation.
The Fund may also quote its distribution rate, which expresses the
historical amount of income the Fund paid as dividends to its shareholders as a
percentage of the Fund's offering price. The distribution rate for the Retail
Class for the thirty day period ended July 31, 1996, was 5.11%. This
distribution rate was calculated by dividing dividends declared over the thirty
days ended July 31, 1996, as applicable, by the applicable Fund's maximum
offering price at the end of the period and annualizing the result.
Income calculated for the purposes of calculating the Fund's yield
differs from income as determined for other accounting purposes. Because of
the different accounting methods used, and because of the compounding assumed
in yield calculations, the yield quoted for the Fund may differ from the rate
of distributions the Fund paid over the same period or the rate of income
reported in the Fund's financial statements.
TOTAL RETURN CALCULATIONS
Total returns quoted in advertising reflect all aspects of the Fund's
return, including the effect of reinvesting dividends and capital gain
distributions, and any changes in the Fund's net asset value per share over the
period. Average annual returns are calculated by determining the growth or
decline in value of a hypothetical investment in the Fund over a stated period,
and then calculating the annual compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had been
constant over the period. While average annual returns are a convenient means
of comparing investment alternatives, investors should realize that the Fund's
performance is not constant over time, but changes from year to year, and that
average annual returns do not represent the actual year-to-year performance of
the Fund.
In addition to average annual total return, the Fund may quote
unaveraged or cumulative total return reflecting the simple change in value of
an investment over a stated period. Average annual and cumulative total
returns may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments, and/or a series of
redemptions over any time period. Total returns may be broken down into their
components of income and capital (including capital gains and changes in share
price) in order to illustrate the relationship of these factors and their
contributions to total return. Total returns,
2
<PAGE> 35
yields and other performance information may be quoted numerically or in a
table, graph or similar illustration. Total returns may be quoted with or
without taking any applicable maximum sales charge into account. If quoted
without the sales charge, the performance quotation will be noted by an
asterisk or other conspicuous footnote disclosing this fact. Excluding the
Fund's sales charge from a total return calculation produces a higher total
return figure.
HISTORICAL PORTFOLIO RESULTS
The Fund's performance may be compared in advertising to the
performance of other mutual funds in general, or of particular types of mutual
funds, especially those with similar objectives. Such performance data may be
prepared by Lipper Analytical Services, Inc. and other independent services
which monitor the performance of mutual funds. The Fund may also advertise
mutual fund performance rankings which have been assigned to it by such
monitoring services.
The Fund's performance may also be compared in advertising and other
materials to the performance of comparative benchmarks such as the Consumer
Price Index, the Standard & Poor's 500 Stock Index, and fixed-price investments
such as bank certificates of deposit and/or savings accounts. In addition, the
Fund's long-term performance may be described in advertising in relation to
historical, political and/or economic events. An investor should be aware that
an investment in the Fund is subject to risks not present in ownership of a
certificate of deposit, due to possible greater risk of loss of capital.
From time to time, the Fund's sales literature and/or advertisements
may discuss generic topics pertaining to the mutual fund industry. These
topics include, but are not limited to, literature addressing general
information about mutual funds, variable annuities, dollar-cost averaging,
stocks, bonds, money markets, certificates of deposit, retirement, retirement
plans, asset allocation, tax-free investing, college planning and inflation.
From time to time sales literature and/or advertisements may disclose
(i) top holdings included in the Fund's portfolio, (ii) certain selling group
members and/or (iii) certain institutional shareholders.
The following chart shows the total returns for the Retail Class for
the one and five year periods ended July 31, 1996, and the period beginning
December 15, 1987 (date operations commenced) through July 31, 1996.
<TABLE>
<CAPTION>
AVERAGE
ANNUAL RETURN CUMULATIVE RETURN
------------- -----------------
<S> <C> <C>
One year ended 07/31/96 3.93% 3.93%
Five year ended 07/31/96 5.30% 29.47%
12/15/87 through 07/31/96 6.52% 72.42%
</TABLE>
The 30-day yield for the Retail Class as of July 31, 1996, was 5.49%
During the one-year period ended July 31, 1996, a hypothetical $1,000
investment in the Retail Class at the beginning of such period would have been
worth $1,039. During the five-year period ended July 31, 1996, a hypothetical
$1,000 investment in the Retail Class at the beginning of such period would
have been worth $1,295. For the period from December 15, 1987 (date operations
commenced) through July 31, 1996, a hypothetical $1,000 investment in the
Retail Class would have been worth $1,724. Each of these figures assume the
maximum sales charge was paid and all distributions were reinvested.
3
<PAGE> 36
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
Subject to policies established by the Board of Trustees of the Trust,
A I M Advisors, Inc. ("AIM") is responsible for decisions to buy and sell
securities for the Fund, for the selection of broker-dealers, for the execution
of the Fund's investment portfolio transactions, for the allocation of
brokerage fees in connection with such transactions, and where applicable, for
the negotiation of commissions and spreads on transactions. Since purchases
and sales of portfolio securities by the Fund are usually principal
transactions, the Fund incurs little or no brokerage commissions. Portfolio
securities are normally purchased directly from the issuer or from a market
maker for the securities. The purchase price paid to dealers serving as market
makers may include a spread between the bid and asked prices. The Fund may
also purchase securities from underwriters at prices that include a commission
paid by the issuer to the underwriter.
AIM's primary consideration in effecting a security transaction is to
obtain the best net price and the most favorable execution of the order. To
the extent that the execution and prices offered by more than one dealer are
comparable, AIM may, in its discretion, effect transactions with dealers that
furnish statistical, research or other information or services which AIM deems
to be beneficial to the Fund's investment program. Such research services
supplement AIM's own research. Research services may include the following:
statistical and background information on the U.S. economy, industry groups and
individual companies; forecasts and interpretations with respect to the U.S.
money market, fixed income markets, equity markets, specific industry groups
and individual companies; information on federal, state, local and foreign
political developments; portfolio management strategies; performance
information on securities, indices and investment accounts; information
concerning prices of securities; the providing of equipment used to communicate
research information; the arranging of meetings with management of companies;
and the providing of access to consultants who supply research information.
Certain research services furnished by dealers may be useful to AIM with
clients other than the Fund. Similarly, any research services received by AIM
through placement of portfolio transactions of other clients may be of value to
AIM in fulfilling its obligations to the Fund. AIM is of the opinion that the
material received is beneficial in supplementing AIM's research and analysis;
and therefore, it may benefit the Fund by improving the quality of AIM's
investment advice. The advisory fee paid by the Fund is not reduced because
AIM receives such services, however, because AIM must evaluate information
received as a result of such services, and receipt of such services does not
reduce AIM's workload.
Provisions of the Investment Company Act of 1940, as amended (the
"1940 Act") and rules and regulations thereunder have been construed to
prohibit the Fund from purchasing securities or instruments from, or selling
securities or instruments to, any holder of 5% or more of the voting securities
of any investment company managed or advised by AIM. The Fund has obtained an
order of exemption from the SEC which permits the Fund to engage in certain
transactions with such 5% holder, if the Fund complies with conditions and
procedures designed to ensure that such transactions are executed at fair
market value and present no conflicts of interest.
AIM and its affiliates manage several other investment companies (the
"AIM Funds"), some of which may have investment objectives similar to those of
the Fund. It is possible that, at times, identical securities will be
appropriate for investment by the Fund and by one or more of the AIM Funds.
The position of each account, however, in the securities of the same issue, may
vary and the length of time that each account may choose to hold its investment
in the securities of the same issue may likewise vary. The timing and amount
of purchase by each account will also be determined by its cash position. If
the purchase or sale of securities consistent with the investment policies of
the Fund and one or more of the AIM Funds is considered at or about the same
time, transactions in such securities will be allocated among the Fund and the
AIM Funds in a manner deemed equitable by AIM. AIM may combine such
transactions, in accordance with applicable laws and regulations, in order to
obtain the best net price and most favorable execution. Simultaneous
transactions could, however, adversely affect the ability of the Fund to obtain
or dispose of the full amount of a security which it seeks to purchase or sell.
Under the 1940 Act, persons affiliated with the Fund are prohibited
from dealing with the Fund as principal in any purchase or sale of securities
unless an exemptive order allowing such transactions is obtained
4
<PAGE> 37
from the SEC. The Board of Trustees has adopted procedures pursuant to Rule
17a-7 under the 1940 Act related to portfolio transactions between the Fund and
the AIM Funds and the Fund may from time to time enter into transactions in
accordance with such Rule and procedures.
From time to time, an identical security may be sold by an AIM Fund or
another investment account advised by AIM or A I M Capital Management, Inc.
("AIM Capital") and simultaneously purchased by another investment account
advised by AIM or AIM Capital, when such transactions comply with applicable
rules and regulations and are deemed consistent with the investment
objective(s) and policies of the investment accounts advised by AIM or AIM
Capital. Procedures pursuant to Rule 17a-7 under the 1940 Act regarding
transactions between investment accounts advised by AIM or AIM Capital have
been adopted by the Boards of Directors/Trustees of the various AIM Funds,
including the Fund. Although such transactions may result in custodian, tax or
other related expenses, no brokerage commissions or other direct transaction
costs are generated by transactions among the investment accounts advised by
AIM or AIM Capital.
In some cases, the procedure for allocating portfolio transactions
among the Fund and the AIM Funds could have an adverse effect on the price or
amount of securities available to the Fund. In making such allocations, the
main factors considered by AIM are the respective investment objectives and
policies of the Fund and the AIM Funds, the relative size of portfolio holdings
of the same or comparable securities, the availability of cash for investment,
the size of investment commitments generally held and the judgments of the
persons responsible for recommending the investment.
Subject to the overall objective of obtaining the best price and most
favorable execution for the Fund, AIM may also consider sales of shares of the
Fund and of the other AIM Funds as a factor in the selection of broker-dealers
to execute portfolio transactions for the Fund.
The Fund paid no brokerage commissions to brokers affiliated with the
Fund during the past three fiscal years of the Fund.
PORTFOLIO TURNOVER
High portfolio turnover involves corresponding greater transaction
costs which are borne directly by the Fund, and may increase capital gains
which are taxable as ordinary income when distributed to shareholders.
Changes in the portfolio holdings of the Fund are made without regard
to whether a sale would result in a profit or loss. The turnover rates of the
Fund for the fiscal years ended July 31, 1996, 1995, and the eleven-month
period ended July 31, 1994, were 117.09%, 120.01%, and 120.40%, respectively.
INVESTMENT OBJECTIVES AND POLICIES
The following discussion of investment policies supplements the
discussion of the investment objectives and policies set forth in the
Prospectus under the heading "Investment Programs" and should be read only in
conjunction with the Prospectus. There can be no assurance that the Fund will
achieve its investment objective. The values of the securities in which the
Fund invests fluctuate based upon interest rates and market factors.
REPURCHASE AGREEMENTS. The Fund's investment policies permit it to
invest in repurchase agreements with banks and broker-dealers pertaining to
U.S. Treasury obligations. However, in order to maximize the Fund's dividends
which are exempt from state income taxation, as a matter of operating policy,
the Fund does not currently invest in repurchase agreements. A repurchase
agreement involves the purchase by the Fund of an investment contract from a
financial institution, such as a bank or broker-dealer, which contract is
secured by U.S. Treasury obligations of the type described above whose value is
equal to or greater than the value of the repurchase agreement, including the
agreed-upon interest. The agreement provides that
5
<PAGE> 38
the seller will repurchase the underlying securities at an agreed-upon time and
price. The total amount received on repurchase will exceed the price paid by
the Fund, reflecting the agreed-upon rate of interest for the period from the
date of the repurchase agreement to the settlement date. This rate of return
is not related to the interest rate on the underlying securities. The
difference between the total amount received upon the repurchase of the
securities and the price paid by the Fund upon their acquisition is accrued
daily as interest. Investments in repurchase agreements may involve risks not
associated with investments in the underlying securities. If the seller
defaulted on its repurchase obligations, the Fund would incur a loss to the
extent that the proceeds from a sale of the underlying securities were less
than the repurchase price under the agreement. The Fund will limit repurchase
agreements to transactions with sellers believed by AIM to present minimal
credit risk. Securities subject to repurchase agreements will be held by the
Fund's custodian or in the custodian's account with the Federal Reserve
Treasury Book-Entry System. Although the securities subject to repurchase
agreements might bear maturities in excess of one year, the Fund will not enter
into a repurchase agreement with an agreed-upon repurchase date in excess of
seven (7) calendar days from the date of acquisition by the Fund, unless the
Fund has the right to require the selling institution to repurchase the
underlying securities within seven (7) days of the date of acquisition.
INVESTMENT RESTRICTIONS
The most significant investment restrictions applicable to the Fund's
investment program are set forth in the Prospectus. The percentage limitations
set forth in such restrictions are calculated by giving effect to the purchase
in question and are based upon values at the time of purchase. The Fund may,
however, retain any security purchased in accordance with such restrictions
irrespective of changes in the values of the Fund's assets occurring subsequent
to the time of purchase.
Additionally, as a matter of fundamental policy which may not be
changed without the affirmative vote of the holders of a majority of the
outstanding shares of beneficial interest of all classes of the Fund, the Fund
will not:
(1) mortgage, pledge or hypothecate any assets except to
secure permitted borrowings of money from banks for temporary or
emergency purposes and then only in amounts not in excess of 33 1/3%
of the value of its total assets at the time of such borrowing;
(2) underwrite securities issued by any other person, except
to the extent that the purchase of securities and the later
disposition of such securities in accordance with the Fund's
investment program may be deemed an underwriting;
(3) invest in real estate;
(4) purchase or sell commodities or commodity futures
contracts, engage in arbitrage transactions, purchase securities on
margin, make short sales or invest in puts or calls;
(5) purchase oil, gas or mineral interests;
(6) invest in any obligation not payable as to principal and
interest in United States currency;
(7) invest 25% or more of the value of its total assets in
securities of issuers engaged in any one industry (excluding
securities which are a direct obligation of the U.S. Treasury or are
repurchase agreements with respect to a direct obligation of the U.S.
Treasury);
6
<PAGE> 39
(8) acquire any security having a remaining term to maturity
greater than three years; or
(9) acquire for value the securities of any other investment
company, except in connection with a merger, consolidation,
reorganization or acquisition of assets.
The Trust has obtained an opinion of Dechert Price & Rhoads, special
counsel to the Trust, that shares of the Fund are eligible for investment by a
federal credit union. In order to ensure that shares of the Fund meet the
requirements for eligibility for investment by federal credit unions, the Fund
has adopted the following policies:
(1) The Fund will enter into repurchase agreements only with:
(i) banks insured by the Federal Deposit Insurance Corporation (FDIC);
(ii) savings and loan associations insured by the FDIC; or (iii)
registered broker-dealers. The Fund will only enter into repurchase
transactions pursuant to a master repurchase agreement in writing with
the Fund's counterparty. Under the terms of a written agreement with
its custodian, the Fund receives on a daily basis written confirmation
of each purchase of a security subject to a repurchase agreement and a
receipt from the Fund's custodian evidencing each transaction. In
addition, securities subject to a repurchase agreement may be recorded
in the Federal Reserve Book-Entry System on behalf of the Fund by
its custodian. The Fund purchases securities subject to a repurchase
agreement only when the purchase price of the security acquired is
equal to or less than its market price at the time of the purchase.
(2) The Fund will only enter into reverse repurchase
agreements and purchase additional securities with the proceeds when
such proceeds are used to purchase other securities that either mature
on a date simultaneous with or prior to the expiration date of the
reverse repurchase agreement, or are subject to an agreement to resell
such securities within that same time period.
(3) The Fund will only enter into securities lending
transactions that comply with the same counterparty, safekeeping,
maturity and borrowing restrictions that the Fund observes when
participating in repurchase and reverse repurchase transactions.
(4) The Fund will enter into when-issued and delayed delivery
transactions only when the time period between trade date and
settlement date does not exceed 120 days, and only when settlement is
on a cash basis. When the delivery of securities purchased in such
manner is to occur within 30 days of the trade date, the Fund will
purchase the securities only at their market price as of the trade
date.
In addition, in order to comply with regulations governing the
liquidity requirements applicable to federal savings and loan associations, as
a matter of fundamental policy, the Fund will only invest in eligible
securities having a remaining term to maturity of three years or less.
ADDITIONAL INVESTMENT RESTRICTIONS OF THE FUND
The Fund's investment programs are also subject to a number of
investment restrictions which reflect self-imposed standards as well as federal
and state regulatory limitations. These restrictions are not matters of
fundamental policy and may be changed at any time by the trustees without the
approval of shareholders.
INVESTING IN SECURITIES OWNED BY TRUSTEES AND OFFICERS
The Fund will not purchase securities of an issuer if the officers and
trustees of the Trust and the officers and directors of the Fund's investment
advisor collectively own beneficially over 5% of the outstanding voting
securities of such issuer, in each case excluding holdings of any officer,
trustee or director of less than 1/2 of 1% of the outstanding voting securities
of such issuer.
7
<PAGE> 40
INVESTING FOR CONTROL
The Fund will not invest in companies for purposes of exercising
control or management.
In order to permit the sale of the Fund's shares in certain states,
the Fund may from time to time make commitments more restrictive than the
restrictions described herein. These restrictions are not matters of
fundamental policy, and should the Fund determine that any such commitment is
no longer in the best interest of their respective shareholders, they will
revoke the commitment by terminating sales of their shares in the states
involved.
MANAGEMENT
TRUSTEES AND OFFICERS
The trustees and officers of the Trust and their principal occupations
during the last five years are set forth below. Unless otherwise indicated,
the address of each trustee and officer is 11 Greenway Plaza, Suite 1919,
Houston, Texas 77046.
*CHARLES T. BAUER, Trustee and Chairman (77)
Director, Chairman and Chief Executive Officer, A I M Management Group
Inc.; and Chairman of the Board of Directors, A I M Advisors, Inc., A I M
Capital Management, Inc., A I M Distributors, Inc., A I M Fund Services, Inc.,
A I M Institutional Fund Services, Inc. and Fund Management Company.
BRUCE L. CROCKETT, Trustee (52)
906 Frome Lane
McLean, VA 22102
Formerly, Director, President and Chief Executive Officer, COMSAT
Corporation (includes COMSAT World Systems, COMSAT Mobile Communications,
COMSAT Video Enterprises and COMSAT RSI and COMSAT International Ventures),
President and Chief Operating Officer, COMSAT Corporation; President, World
Systems Division, COMSAT Corporation; and Chairman, Board of Governors of
INTELSAT; (each of the COMSAT companies listed above is an international
communication, information and entertainment-distribution services company).
OWEN DALY II, Trustee (72)
Six Blythewood Road
Baltimore, MD 21210
Director, Cortland Trust Inc. (investment company). Formerly,
Director, CF & I Steel Corp., Monumental Life Insurance Company and Monumental
General Insurance Company; and Chairman of the Board of Equitable
Bancorporation.
- -------------------------
* A trustee who is an "interested person" of the Trust and AIM as
defined in the 1940 Act.
8
<PAGE> 41
**CARL FRISCHLING, Trustee (59)
919 Third Avenue
New York, NY 10022
Partner, Kramer, Levin, Naftalis & Frankel (law firm). Formerly,
Partner, Reid & Priest (law firm); and, prior thereto, Partner, Spengler
Carlson Gubar Brodsky & Frischling (law firm).
*ROBERT H. GRAHAM, Trustee and President (49)
Director, President and Chief Operating Officer, A I M Management
Group Inc.; Director and President, A I M Advisors, Inc.; and Director and
Senior Vice President, A I M Capital Management, Inc., A I M Distributors,
Inc., A I M Fund Services, Inc., A I M Institutional Fund Services, Inc. and
Fund Management Company.
JOHN F. KROEGER, Trustee (72)
37 Pippins Way
Morristown, NJ 07960
Director, Flag Investors International Fund, Inc., Flag Investors
Emerging Growth Fund, Inc., Flag Investors Telephone Income Fund, Inc., Flag
Investors Equity Partners Fund, Inc., Total Return U.S. Treasury Fund, Inc.,
Flag Investors Intermediate Term Income Fund, Inc., Managed Municipal Fund,
Inc., Flag Investors Value Builder Fund, Inc., Flag Investors Maryland
Intermediate Tax-Free Income Fund, Inc., Flag Investors Real Estate Securities
Fund, Inc., Alex. Brown Cash Reserve Fund, Inc. and North American Government
Bond Fund, Inc. (investment companies). Formerly, Consultant, Wendell &
Stockel Associates, Inc. (consulting firm).
LEWIS F. PENNOCK, Trustee (54)
6363 Woodway, Suite 825
Houston, TX 77057
Attorney in private practice in Houston, Texas.
IAN W. ROBINSON, Trustee (73)
183 River Drive
Tequesta, FL 33469
Formerly, Executive Vice President and Chief Financial Officer, Bell
Atlantic Management Services, Inc. (provider of centralized management
services to telephone companies); Executive Vice President, Bell Atlantic
Corporation (parent of seven telephone companies); and Vice President and Chief
Financial Officer, Bell Telephone Company of Pennsylvania and Diamond State
Telephone Company.
LOUIS S. SKLAR, Trustee (57)
Transco Tower, 50th Floor
2800 Post Oak Blvd.
Houston, TX 77056
Executive Vice President, Development and Operations, Hines Interests
Limited Partnership (real estate development).
- --------------------------
** A trustee who is an "interested person" of the Trust as defined in the
1940 Act.
* A trustee who is an "interested person" of the Trust and AIM as
defined in the 1940 Act.
9
<PAGE> 42
***JOHN J. ARTHUR, Senior Vice President and Treasurer (52)
Senior Vice President and Treasurer, A I M Advisors, Inc.; and Vice
President and Treasurer, A I M Management Group Inc., A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund Services, Inc., A I M Institutional
Fund Services, Inc. and Fund Management Company.
GARY T. CRUM, Senior Vice President (49)
Director and President, A I M Capital Management, Inc.; Director and
Senior Vice President, A I M Management Group Inc., A I M Advisors, Inc.; and
Director, A I M Distributors, Inc.
***CAROL F. RELIHAN, Senior Vice President and Secretary (42)
Senior Vice President, Secretary and General Counsel, A I M
Advisors, Inc.; Vice President, General Counsel and Secretary, A I M Management
Group Inc.; Vice President and General Counsel, Fund Management Company; and
Vice President, A I M Capital Management, Inc., A I M Distributors, Inc., A I M
Fund Services, Inc. and A I M Institutional Fund Services, Inc.
DANA R. SUTTON, Vice President and Assistant Treasurer (37)
Vice President and Fund Controller, A I M Advisors, Inc.; and
Assistant Vice President and Assistant Treasurer, Fund Management Company.
MELVILLE B. COX, Vice President (53)
Vice President and Chief Compliance Officer, A I M Advisors, Inc.,
A I M Capital Management, Inc., A I M Fund Services, Inc., A I M Institutional
Fund Services, Inc., A I M Distributors, Inc. and Fund Management Company.
Formerly, Vice President, Charles Schwab & Co., Inc.; Assistant Secretary,
Charles Schwab Family of Funds and Schwab Investments; Chief Compliance
Officer, Charles Schwab Investment Management, Inc.; and Vice President,
Integrated Resources Life Insurance Co. and Capitol Life Insurance Co.
KAREN DUNN KELLEY, Vice President (36)
Senior Vice President, A I M Capital Management, Inc.; and Vice
President, A I M Advisors, Inc.
The standing committees of the Board of Trustees are the Audit
Committee, the Investments Committee, and the Nominating and Compensation
Committee.
The members of the Audit Committee are Messrs. Daly, Kroeger
(Chairman), Pennock and Robinson. The Audit Committee is responsible for
meeting with the Trust's auditors to review audit procedures and results and to
consider any matters arising from an audit to be brought to the attention of
the trustees as a whole with respect to the Trust's fund accounting or its
internal accounting controls, or for considering such matters as may from time
to time be set forth in a charter adopted by the Board of Trustees and such
committee.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly (Chairman), Kroeger and Pennock. The Investments Committee is responsible
for reviewing portfolio compliance, brokerage allocation, portfolio investment
pricing issues, interim dividend and distribution issues, and considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Trustees and such committee.
- --------------------------
*** Mr. Arthur and Ms. Relihan are married to each other.
10
<PAGE> 43
The members of the Nominating and Compensation Committee are Messrs.
Crockett, Daly, Kroeger, Pennock (Chairman) and Sklar. The Nominating and
Compensation Committee is responsible for considering and nominating
individuals to stand for election as trustees who are not interested persons as
long as the Trust maintains a distribution plan pursuant to Rule 12b-1 under
the 1940 Act, reviewing from time to time the compensation payable to the
disinterested trustees, and considering such matters as may from time to time
be set forth in a charter adopted by the Board of Trustees and such committee.
All of the trustees of the Trust also serve as directors or trustees
of some or all of the other AIM Funds. Certain of the Trust's executive
officers hold similar offices with some or all of the other AIM Funds.
REMUNERATION OF TRUSTEES
Each trustee is reimbursed for expenses incurred in connection with
each meeting of the Board of Trustees or any committee thereof. Each trustee
who is not also an officer of the Trust is compensated for his or her services
according to a fee schedule which recognizes the fact that such trustee also
serves as a trustee or director of the other AIM Funds. Each such trustee
receives a fee, allocated among the AIM Funds for which he or she serves as a
director or trustee, which consists of an annual retainer component and a
meeting fee component.
Set forth below is information regarding compensation paid or accrued
for each trustee of the Fund:
<TABLE>
<CAPTION>
==============================================================================
RETIREMENT
AGGREGATE BENEFITS TOTAL
COMPENSATION ACCRUED COMPENSATION
FROM THE BY ALL FROM ALL
DIRECTOR FUND(1) AIM FUNDS(2) AIM FUNDS(3)
------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer $ 0 $ 0 $ 0
------------------------------------------------------------------------------
Bruce L. Crockett 1,279 3,655 57,750
------------------------------------------------------------------------------
Owen Daly II 1,464 18,662 58,125
------------------------------------------------------------------------------
Carl Frischling 1,448 11,323 57,250
------------------------------------------------------------------------------
Robert H. Graham 0 0 0
------------------------------------------------------------------------------
John F. Kroeger 1,375 22,313 58,125
------------------------------------------------------------------------------
Lewis F. Pennock 1,237 5,067 58,125
------------------------------------------------------------------------------
Ian W. Robinson 1,283 15,381 56,750
------------------------------------------------------------------------------
Louis S. Sklar 1,460 6,632 57,250
==============================================================================
</TABLE>
- --------------------------
(1) The total amount of compensation deferred by all Trustees of the Fund
during the fiscal year ended July 31, 1996, including interest earned
thereon, was $5,261.
(2) During the fiscal year ended July 31, 1996, the total amount of
expenses allocated to the Fund in respect of such retirement benefits
was $2,759. Data reflects compensation estimated for the calendar
year ended December 31, 1995.
11
<PAGE> 44
(3) Messrs. Bauer, Daly, Graham, Kroeger and Pennock each serves as a
Director or Trustee of a total of 11 AIM Funds. Messrs. Crockett,
Frischling, Robinson and Sklar each serves as a Director or Trustee of
a total of 10 AIM Funds. Data reflects compensation estimated for the
calendar year ended December 31, 1995.
AIM FUNDS RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each trustee (who is not an employee of any of
the AIM Funds, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Trustees.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible trustee has attained age 65 and has completed at least five years of
continuous service with one or more of the regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "Applicable
AIM Funds"). Each eligible trustee is entitled to receive an annual benefit
from the Applicable AIM Funds commencing on the first day of the calendar
quarter coincident with or following his date of retirement equal to 75% of the
retainer paid or accrued by the Applicable AIM Funds for such trustee during
the twelve-month period immediately preceding the trustee's retirement
(including amounts deferred under a separate agreement between the Applicable
AIM Funds and the trustee) for the number of such Trustee's years of service
(not in excess of 10 years of service) completed with respect to any of the AIM
Funds. Such benefit is payable to each eligible trustee in quarterly
installments. If an eligible trustee dies after attaining the normal
retirement date but before receipt of any benefits under the Plan commences,
the trustee's surviving spouse (if any) shall receive a quarterly survivor's
benefit equal to 50% of the amount payable to the deceased trustee, for no more
than ten years beginning the first day of the calendar quarter following the
date of the trustee's death. Payments under the Plan are not secured or funded
by any AIM Fund.
Set forth below is a table that shows the estimated annual benefits
payable to an eligible trustee upon retirement assuming various compensation
and years of service classifications. The estimated credited years of service
for Messrs. Crockett, Daly, Frischling, Kroeger, Pennock, Robinson and Sklar
are 9, 9, 19, 18, 14, 9, and 7 years, respectively.
ESTIMATED BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
Annual Compensation Paid By All AIM Funds
$55,000 $60,000 $65,000
==========================================================
<S> <C> <C> <C> <C>
10 $41,250 $45,000 $48,750
Number of ----------------------------------------------------------
Years of 9 $37,125 $40,500 $43,875
Service With ----------------------------------------------------------
the AIM Funds 8 $33,000 $36,000 $39,000
----------------------------------------------------------
7 $28,875 $31,500 $34,125
----------------------------------------------------------
6 $24,750 $27,000 $29,250
----------------------------------------------------------
5 $20,625 $22,500 $24,375
==========================================================
</TABLE>
DEFERRED COMPENSATION AGREEMENTS
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of
this paragraph only, the "deferring trustees") have each executed a Deferred
Compensation Agreement (collectively, the
12
<PAGE> 45
"Agreements"). Pursuant to the Agreements, the deferring trustees may elect to
defer receipt of up to 100% of their compensation payable by the Fund, and such
amounts are placed into a deferral account. Currently, the deferring trustees
may select various AIM Funds in which all or part of their deferral accounts
shall be deemed to be invested. Distributions from the deferring trustees'
deferral accounts will be paid in cash, in generally equal quarterly
installments over a period of ten years beginning on the date the deferring
trustee's retirement benefits commence under the Plan. The Fund's Board of
Trustees, in its sole discretion, may accelerate or extend the distribution of
such deferral accounts after the deferring trustee's termination of service as
a trustee of the Fund. If a deferring trustee dies prior to the distribution
of amounts in his deferral account, the balance of the deferral account will be
distributed to his designated beneficiary in a single lump sum payment as soon
as practicable after such deferring trustee's death. The Agreements are not
funded and, with respect to the payments of amounts held in the deferral
accounts, the deferring trustees have the status of unsecured creditors of the
Fund and of each other AIM Fund from which they are deferring compensation.
During the fiscal year ended July 31, 1996 the Fund paid $4,141 to
Kramer, Levin, Naftalis & Frankel, the law firm in which Mr. Frischling, a
trustee of the Trust, is a partner.
INVESTMENT ADVISORY AND OTHER SERVICES
AIM is a wholly-owned subsidiary of A I M Management Group Inc. ("AIM
Management"), 11 Greenway Plaza, Suite 1919, Houston, Texas 77046-1173. AIM
Management is a holding company that has been engaged in the financial services
business since 1976. Certain of the directors and officers of AIM are also
executive officers of the Fund and their affiliations are shown under "Trustees
and Officers". AIM Capital, a wholly-owned subsidiary of AIM, is engaged in
the business of providing investment advisory services to investment companies,
corporations, institutions and other accounts.
AIM was organized in 1976, and together with its affiliates advises or
manages 43 investment company portfolios. As of November 1, 1996, the total
assets of the investment company portfolios advised or managed by AIM and its
affiliates were approximately $58 billion.
AIM and the Fund have adopted a Code of Ethics which requires
investment personnel and certain other employees (a) to pre-clear all personal
securities transactions subject to the Code of Ethics, (b) to file reports or
duplicate confirmations regarding such transactions (c) to refrain from
personally engaging in (i) short-term trading of a security, (ii) transactions
involving a security within seven days of an AIM Fund transaction involving the
same security, and (iii) transactions involving securities being considered for
investment by an AIM Fund and (d) to abide by certain other provisions under
the Code of Ethics. The Code of Ethics also prohibits investment personnel and
all other AIM employees from purchasing securities in an initial public
offering. Personal trading reports are reviewed periodically by AIM, and the
Board of Trustees reviews quarterly and annual reports (including information
on any substantial violations of the Code of Ethics). Violations of the Code
of Ethics may include censure, monetary penalties, suspension or termination of
employment.
The Trust, on behalf of the Fund, has entered into a Master Investment
Advisory Agreement (the "Advisory Agreement") and a Master Administrative
Services Agreement (the "Administrative Services Agreement") with AIM. See
"Management" in the Prospectus.
The Advisory Agreement provides that the Fund will pay or cause to be
paid all expenses of the Fund not assumed by AIM, including, without
limitation: brokerage commissions; taxes, legal, accounting, auditing or
governmental fees; the cost of preparing share certificates; custodian,
transfer and shareholder service agent costs; expenses of issue, sale,
redemption and repurchase of shares; expenses of registering and qualifying
shares for sale; expenses relating to trustees and shareholder meetings; the
cost of preparing and distributing reports and notices to shareholders; the
fees and other expenses incurred by the Trust on behalf of the Fund in
connection with membership in investment company organizations; the cost of
printing copies of prospectuses and statements of additional information
distributed to the Fund's shareholders; and all other charges and costs of the
Fund's operations unless otherwise explicitly provided.
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<PAGE> 46
The Advisory Agreement provides that if, for any fiscal year, the
total of all ordinary business expenses of the Fund, including all investment
advisory fees, but excluding brokerage commissions and fees, taxes, interest
and extraordinary expenses, such as litigation costs, exceed the applicable
expense limitations imposed by state securities regulations in any state in
which the Fund's shares are qualified for sale, as such limitations may be
raised or lowered from time to time, the aggregate of all such investment
advisory fees shall be reduced by the amount of such excess. The amount of any
such reduction to be borne by AIM shall be deducted from the monthly investment
advisory fee otherwise payable to AIM during such fiscal year. If required
pursuant to such state securities regulations, AIM will reimburse the Fund, no
later than the last day of the first month of the next succeeding fiscal year,
for any such annual operating expenses (after reduction of all investment
advisory fees in excess of such limitation).
The Advisory Agreement became effective on October 18, 1993 and will
continue in effect until June 30, 1997 and from year to year thereafter only if
such continuance is specifically approved at least annually by the Trust's
Board of Trustees or the vote of a "majority of the outstanding voting
securities" of the Fund (as defined in the 1940 Act) and (ii) the affirmative
vote of a majority of the trustees who are not parties to the Advisory
Agreement or "interested persons" of any such party (the "Non-Interested
Trustees") by votes cast in person at a meeting called for such purpose. The
Fund or AIM may terminate the Advisory Agreement on sixty (60) days' written
notice without penalty. The Advisory Agreement terminates automatically in the
event of its assignment. Under the Advisory Agreement, AIM is entitled to
receive from the Fund a fee calculated at the annual rate of 0.20% of the first
$500 million of the average daily net assets, plus 0.175% of the average daily
net assets in excess of $500 million.
For the fiscal year ended July 31, 1996, the fiscal year ended July
31, 1995 and the eleven-month period ended July 31, 1994, AIM received advisory
fees from the Fund of $933,207, $809,449, and $942,205, respectively.
The Administrative Services Agreement for the Fund provides that AIM
may provide or arrange for the performance of certain accounting, shareholder
servicing and other administrative services to the Fund which are not required
to be performed by AIM under the Advisory Agreement. For such services, AIM
would be entitled to receive from the Fund reimbursement of AIM's costs or such
reasonable compensation as may be approved by AIM and the Board of Trustees.
The Administrative Services Agreement provides that such agreement will
continue in effect until June 30, 1997, and shall continue in effect from year
to year thereafter if such continuance is specifically approved at least
annually by (i) the Trust's Board of Trustees or the vote of a "majority of the
outstanding voting securities" of the Fund (as defined in the 1940 Act) and
(ii) the affirmative vote of a majority of the Non-Interested Trustees, by
votes cast in person at a meeting called for such purpose. The Administrative
Services Agreement was approved by the Board of Trustees (including the
Non-Interested Trustees) and became effective on October 18, 1993.
For the fiscal year ended July 31, 1996, the fiscal year ended July
31, 1995 and the eleven-month period ended July 31, 1994, the Fund reimbursed
AIM for certain accounting, shareholder servicing and administrative services
in the amounts of $60,857, $82,199, and $91,445, respectively.
In addition, a sub-contract effective October 18, 1993 through October
31, 1994 between AIM and A I M Funds Services, Inc. ("AFS"), a registered
transfer agent and a wholly-owned subsidiary of AIM, provided that AFS perform
certain shareholder services for the Fund which are not required to be
performed by AIM under the Advisory Agreement. For such services, AFS was
entitled to receive from AIM such reimbursement of its costs associated with
providing those services.
For the eleven-month period ended July 31, 1994 and the period August
1, 1994 through October 31, 1994, AFS received shareholder services fees from
AIM with respect to the Retail Class in the amounts of $47,173 and $21,079,
respectively.
In addition, the Transfer Agency and Service Agreement, which became
effective November 1, 1994, provides that AFS will perform certain shareholder
services for the Fund for a fee per account serviced. The
14
<PAGE> 47
Transfer Agency and Service Agreement provides that AFS will receive a per
account fee plus out-of-pocket expenses to process orders for purchases,
redemptions and exchanges of shares, prepare and transmit payments for
dividends and distributions declared by the Fund, maintain shareholder accounts
and provide shareholders with information regarding the Fund and other
accounts.
For the fiscal year ended July 31, 1996 and for the period November 1,
1994 through July 31, 1995, AFS received from the Fund transfer agency and
shareholder services fees with respect to the Retail Class in the amounts of
$160,400 and $91,753, respectively.
DISTRIBUTION PLAN
The Trust has adopted a Master Distribution Plan (the "Plan") pursuant
to Rule 12b-1 under the 1940 Act relating to the Retail Class. The Plan
provides that the Retail Class pay a fee to AIM Distributors for distribution-
related services performed by AIM Distributors, including, but not limited to,
expenses of organizing and conducting sales seminars, printing of prospectuses
and statements of additional information (and supplements thereto) and reports
for other than existing shareholders, preparation and distribution of
advertising material and sales literature and costs of administering the Plan.
Under the Plan, AIM Distributors is entitled to receive a distribution fee,
which is accrued daily and paid monthly, of 0.15% on an annualized basis of the
average daily net assets of the Retail Class. Such amounts are intended to
compensate AIM Distributors for expenses incurred by it in performing
activities which are primarily intended to result in the sale of shares of the
Retail Class. The terms of the Plan are discussed in the Prospectus.
AIM Distributors is a wholly-owned subsidiary of AIM, which is a
wholly-owned subsidiary of AIM Management.
The Plan requires the officers of the Trust to provide the Board of
Trustees at least quarterly with a written report of the amounts expended
pursuant to the Plan and the purposes for which such expenditures were made.
The Trust's Board of Trustees reviews these reports in connection with their
decisions with respect to the Plan.
As required by Rule 12b-1 under the 1940 Act, the Plan was approved by
the Board of Trustees, including a majority of the trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan ("Qualified Trustees") on July 19, 1993. In
approving the Plan in accordance with the requirements of Rule 12b-1, the
trustees considered various factors and determined that there is a reasonable
likelihood that the Plan would benefit the Retail Class and its shareholders.
The Plan, unless terminated earlier in accordance with its terms,
shall continue in effect until June 30, 1997, and each year thereafter as long
as such continuance is specifically approved at least annually by the Trust's
Board of Trustees, including a majority of the Qualified Trustees.
The Plan may be terminated by a vote of a majority of the Qualified
Trustees, or, with respect to a Retail Class, by a vote of a majority of the
holders of the outstanding voting securities of the Retail Class. Any change
in the Plan that would increase materially the distribution expenses paid by
the Retail Class requires shareholder approval; otherwise the Plan may be
amended by the Trust's Board of Trustees, including a majority of the Qualified
Trustees, by votes cast in person at a meeting called for the purpose of voting
upon such amendment. As long as the Plan is in effect, the selection or
nomination of the Qualified Trustees is committed to the discretion of the
Qualified Trustees.
For the fiscal year ended July 31, 1996, AIM Distributors received
fees in the amount of $488,557, which constituted 0.15%, of the average daily
net assets of the Retail Class. An estimate by category of actual fees paid
by the Retail Class during the fiscal year ended July 31, 1996, were allocated
as follows:
15
<PAGE> 48
<TABLE>
<CAPTION>
1996
----
<S> <C>
Advertising $ 16,941
Printing and mailing prospectuses, semi-annual reports 2,990
and annual reports
Seminars 5,979
Compensation to Dealers 462,647
</TABLE>
Pursuant to an incentive program, AIM Distributors may enter into
agreements ("Shareholder Service Agreements") with investment dealers selected
by AIM Distributors from time to time to provide distribution assistance in
connection with the sale of the shares of the Retail Class to such dealers'
customers, and to provide continuing personal shareholder services to customers
who may, from time to time, directly or beneficially own shares of the Retail
Class. The distribution assistance and continuing personal shareholder
services to be rendered by dealers under the Shareholder Service Agreements may
include, but shall not be limited to, the following: distributing sales
literature; answering routine customer inquiries concerning the Retail Class;
assisting customers in changing dividend options, account designations and
addresses, and in enrolling in any of several special investment plans offered
in connection with the purchase of the shares of the Retail Class; assisting in
the establishment and maintenance of customer accounts and records and in the
processing of purchase and redemption transactions; investing dividends and any
capital gains distributions automatically in the shares of the Retail Class;
and providing such other information and services as the Retail Class or the
customer may reasonably request.
Under the Plan, in addition to the Shareholder Service Agreements
authorizing payments to selected dealers, banks may enter into Shareholder
Service Agreements authorizing payments under the Plan to be made to banks
which provide services to their customers who have purchased shares. Services
provided pursuant to Shareholder Service Agreements with banks may include some
or all of the following: answering shareholder inquiries regarding a Retail
Class and the Fund; performing sub-accounting; establishing and maintaining
shareholder accounts and records; processing customer purchase and redemption
transactions; providing periodic statements showing a shareholder's account
balance and the integration of such statements with those of other transactions
and balances in the shareholder's other accounts serviced by the bank;
forwarding applicable prospectuses, proxy statements, reports and notices to
bank clients who hold Retail Class shares; and such other administrative
services as a Retail Class reasonably may request, to the extent permitted by
applicable statute, rule or regulation.
The Plan is subject to any applicable limitations imposed from time to
time by rules of the National Association of Securities Dealers, Inc.
AIM Distributors does not act as principal, but rather as agent for
the Retail Class, in making dealer incentive and shareholder servicing payments
under the Plan. These payments are an obligation of the Retail Class and not
of AIM Distributors. Similar agreements may be permitted under the Plan for
institutions which provide recordkeeping for and administrative services to
401(k) plans.
THE DISTRIBUTION AGREEMENT
Information concerning AIM Distributors and the continuous offering of
shares of the Retail Class is set forth in the Prospectus under the caption
"How to Purchase Shares" and "Terms and Conditions of Purchase of the AIM
Funds." The Distribution Agreement (the "Distribution Agreement") became
effective on October 18, 1993. The Distribution Agreement provides that AIM
Distributors will bear the expenses of printing from the final proof and
distributing prospectuses and statements of additional information of the
Retail Class relating to public offerings made by AIM Distributors pursuant to
the Distribution Agreement (other than those prospectuses and statements of
additional information distributed to existing shareholders of the Retail
Class), and any promotional or sales literature used by AIM Distributors or
furnished by AIM Distributors to dealers in
16
<PAGE> 49
connection with the public offering of shares of the Retail Class, including
expenses of advertising in connection with such public offerings. AIM
Distributors has not undertaken to sell any specified number of shares of the
Retail Class.
The Distribution Agreement will continue in effect until June 30, 1997
and from year to year thereafter only if such continuation is specifically
approved at least annually by (i) the Board of Trustees or the vote of a
"majority of the outstanding voting securities" of the Fund (as defined in the
1940 Act) and (ii) the affirmative vote of a majority of the Non-Interested
Directors by votes cast in person at a meeting called for such purpose. The
Fund or AIM Distributors may terminate the Distribution Agreement on sixty (60)
days' written notice without penalty. The Distribution Agreement will
terminate automatically in the event of its "assignment," as defined under the
1940 Act.
For the fiscal year ended July 31, 1996, the fiscal year ended July
31, 1995 and the eleven-month period ended July 31, 1994, the total sales
charges paid in connection with the sale of shares of the Retail Class of the
Fund were $540,727, $377,682, and $384,784, respectively, of which AIM
Distributors retained $193,686, $89,885, and $98,879, respectively.
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner by which shares of the Retail
Class may be purchased appears in the Prospectus under the caption "How to
Purchase Shares", "Terms and Conditions of Purchase of the AIM Funds" and
"Special Plans."
The right of redemption may be suspended or the date of payment
postponed when (a) trading on the New York Stock Exchange ("NYSE") is
restricted, as determined by applicable rules and regulations of the SEC, (b)
the NYSE is closed for other than customary weekend and holiday closings, (c)
the SEC has by order permitted such suspension, or (d) an emergency, as
determined by the SEC, exists making disposition of portfolio securities or the
valuation of the net assets of the Fund not reasonably practicable.
The sales charge normally deducted on purchases of shares of the
Retail Class is used to compensate AIM Distributors and participating dealers
for their expenses incurred in connection with the distribution of such shares.
Since there is little expense associated with unsolicited orders placed
directly with AIM Distributors by persons, who, because of their relationship
with the Retail Class or with AIM and its affiliates, are familiar with the
Retail Class (e.g., due to the size of the transaction and shareholder records
required), AIM Distributors believes that it is appropriate and in the Fund's
best interests that such persons, and certain other persons whose purchases
result in relatively low expenses of distribution, be permitted to purchase
shares of the Retail Class through AIM Distributors without payment of a sales
charge. The persons who may purchase shares of the Retail Class without a
sales charge are set forth in the Prospectus under the caption "Terms and
Conditions of Purchase of the AIM Funds".
Complete information concerning the method of exchanging shares of the
Retail Class for shares of the other mutual funds managed or advised by AIM is
set forth in the Prospectus under the caption "Exchange Privilege."
Information concerning redemption of shares of the Retail Class is set
forth in the Prospectus under the caption "How to Redeem Shares." In addition
to the Fund's obligations to redeem shares, AIM Distributors may also
repurchase shares as an accommodation to shareholders. To effect a repurchase,
those dealers who have executed Selected Dealer Agreements with AIM
Distributors must phone orders to the order desk of the Fund at (800) 949-4246
and guarantee delivery of all required documents in good order. A repurchase
is effected at the net asset value per share of the Retail Class next
determined after such order is received. Such arrangement is subject to timely
receipt by AFS, transfer agent for the Retail Class, of all required documents
in good order. If such documents are not received within a reasonable time
after the order is placed, the order is subject to cancellation. While there
is no charge imposed by the Fund or by
17
<PAGE> 50
AIM Distributors when shares are redeemed or repurchased, dealers may charge a
fair service fee for handling the transaction.
The Trust agrees to redeem shares of the Fund, or any other future
portfolios of the Trust, solely in cash up to the lesser of $250,000 or 1% of
the Fund's net assets during any 90-day period for any one shareholder. In
consideration of the best interests of the remaining shareholders, the Trust
reserves the right to pay any redemption price exceeding this amount in whole
or in part by a distribution in kind of securities held by the Fund in lieu of
cash. It is highly unlikely that shares would ever be redeemed in kind. If
shares are redeemed in kind, however, the redeeming shareholder should expect
to incur transaction costs upon the disposition of the securities received in
the distribution.
NET ASSET VALUE DETERMINATION
Shares of the Funds offered by the Prospectus are sold at their net
asset value plus a sales charge of 1.00% of the public offering price per share
(1.01% of the amount invested), scaled down on purchases of $100,000 or more.
Shareholders may at any time redeem all or a portion of their shares at net
asset value without charge. The investor's price for purchase or redemption
will be determined by the net asset value of the relevant Fund's shares next
determined following the receipt of an order to purchase or a request to redeem
shares. The net asset value of the Funds vary depending on the market value of
their respective assets.
In accordance with the current SEC rules and regulations, the net
asset value of a share of the Fund will be determined once daily as of the
close of the NYSE, which is generally 4:00 p.m. Eastern Time on each business
day of the Fund. In the event the NYSE closes early (i.e. before 4:00 p.m.
Eastern Time) on a particular day, the net asset value of a Fund share is
determined as of the close of the NYSE on such day. The net asset value per
share of the Fund is determined by subtracting the liabilities (e.g., accrued
and dividends payable) of the Fund allocated to the class from the value of
securities, cash and assets (including interest accrued but not collected) of
the Fund allocated to the class; and dividing the result by the total number of
shares outstanding of such class. Determination of the Fund's net asset value
per share is made in accordance with generally accepted accounting principles.
Securities will be valued on the basis of prices provided by an
independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as yield, type of issue, coupon rate, maturity and
seasoning differential. Securities for which prices are not provided by the
pricing service are valued at the mean between the last bid and asked prices or
yield equivalent based upon quotes furnished by market makers for such
securities. 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 Trust's officers in accordance with methods which are
specifically authorized by the Board of Trustees. Short-term obligations
having 60 days or less to maturity are valued at amortized cost, which
approximates fair market value.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS
Income dividends and capital gains distributions are automatically
reinvested in additional shares of the same class of the Fund unless the
shareholder has requested in writing to receive such dividends and
distributions in cash or that they be invested in shares of another AIM Fund.
18
<PAGE> 51
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Fund and its shareholders that are not
described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussion here and in the Prospectus is not intended as a substitute for
careful tax planning. Investors are urged to consult their tax advisors with
specific reference to their own tax situation.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As
a regulated investment company, the Fund is not subject to federal income tax
on the portion of its net investment income (i.e., its taxable interest,
dividends and other taxable ordinary income, net of expenses) and realized
capital gain net income (i.e., the excess of capital gains over capital losses)
that it distributes to shareholders, provided that it distributes at least 90%
of its investment company taxable income (i.e., net investment income and the
excess of net short-term capital gain over net long-term capital loss) for the
taxable year (the "Distribution Requirement"), and satisfies certain other
requirements of the Code that are described below. Distributions by a Fund
made during the taxable year or, under specified circumstances, within 12
months after the close of the taxable year, will be considered distributions of
income and gains of the taxable year and can therefore satisfy the Distribution
Requirement.
In addition to satisfying the Distribution Requirement, the Fund must
(1) derive at least 90% of its gross income from dividends, interest, certain
payments with respect to securities loans, gains from the sale or other
disposition of stock or securities or foreign currencies (to the extent such
currency gains are ancillary to the Fund's principal business of investing in
stock or securities) and other income (including but not limited to gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies (the "Income Requirement");
and (2) derive less than 30% of its gross income (exclusive of certain gains on
designated hedging transactions that are offset by realized or unrealized
losses on offsetting positions) from the sale or other disposition of stock,
securities or foreign currencies (or options, futures or forward contracts
thereon) held for less than three months (the "Short-Short Gain Test").
However, foreign currency gains, including those derived from options, futures
and forward contracts, will not be characterized as Short-Short Gain if they
are directly related to the Fund's principal business of investing in stock or
securities (or options or futures thereon). Because of the Short-Short Gain
Test, the Fund may have to limit the sale of appreciated securities that it has
held for less than three months. However, the Short-Short Gain Test will not
prevent the Fund from disposing of investments at a loss, since the recognition
of a loss before the expiration of the three-month holding period is
disregarded. Interest (including original issue discount) received by the Fund
at maturity or upon the disposition of a security held for less than three
months will not be treated as gross income derived from the sale or other
disposition of such security within the meaning of the Short-Short Gain Test.
However, income that is attributable to realized market appreciation will be
treated as gross income from the sale or other disposition of securities for
this purpose.
In general, gain or loss recognized by the Fund on the disposition of
an asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by the Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation. In
addition, if the Fund purchases a debt obligation that was originally issued at
a discount, the Fund is generally required to include in gross income each year
the portion of the original issue discount which accrues during such year.
In general, for purposes of determining whether capital gain or loss
recognized by the Fund on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if (i) the asset is
used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset so
used, (ii) the asset is otherwise held by the Fund as part of a
19
<PAGE> 52
"straddle" (which term generally excludes a situation where the asset is stock
and the Fund grants a "qualified covered call option" with respect thereto) or
(iii) the asset is stock and the Fund grants an in-the-money qualified covered
call option with respect thereto. However, for purposes of the Short-Short
Gain Test, the holding period of the asset disposed of may be reduced only in
the case of clause (i) above. In addition, the Fund may be required to defer
the recognition of a loss on the disposition of an asset held as part of a
straddle to the extent of any unrecognized gain on the offsetting position.
Any gain recognized by the Fund on the lapse of, or any gain or loss
recognized by the Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the holding period of an option written
by the Fund will commence on the date it is written and end on the date it
lapses or the date a closing transaction is entered into. Accordingly, the
Fund may be limited in its ability to write options which expire within three
months and to enter into closing transactions at a gain within three months of
the writing of options.
Transactions that may be engaged in by the Fund (such as regulated
futures contracts and options on stock indexes and futures contracts) will be
subject to special tax treatment as "Section 1256 contracts." Section 1256
contracts are treated as if they are sold for their fair market value on the
last business day of the taxable year, regardless of whether a taxpayer's
obligations (or rights) under such contracts have terminated (by delivery,
exercise, entering into a closing transaction or otherwise) as of such date.
Any gain or loss recognized as a consequence of the year-end deemed
disposition of Section 1256 contracts is taken into account for the taxable
year together with any other gain or loss that was previously recognized upon
the termination of Section 1256 contracts during that taxable year. Any
capital gain or loss for the taxable year (including any capital gain or loss
arising as a consequence of the year-end deemed sale of such contracts) is
treated as 60% long-term capital gain or loss and 40% short-term capital gain
or loss. The Fund may elect not to have this special tax treatment apply to
Section 1256 contracts that are part of a "mixed straddle" with other
investments of the Fund that are not Section 1256 contracts. The Internal
Revenue Service ("IRS") has held in several private rulings that gains arising
from Section 1256 contracts will be treated for purposes of the Short-Short
Gain Test as being derived from securities held not less than three months if
the gains arise as a result of a constructive sale under Code Section 1256.
The Fund may enter into notional principal contracts, including
interest rate swaps, caps, floors and collars. Under Treasury regulations, in
general, the net income or deduction from a notional principal contract for a
taxable year is included in or deducted from gross income for that taxable
year. The net income or deduction from a notional principal contract for a
taxable year equals the total of all of the periodic payments (generally,
payments that are payable or receivable at fixed periodic intervals of one year
or less during the entire term of the contract) that are recognized from that
contract for the taxable year and all of the non-periodic payments (including
premiums for caps, floors and collars), even if paid in periodic installments,
that are recognized from that contract for the taxable year. A periodic
payment is recognized ratably over the period to which it relates. In general,
a non-periodic payment must be recognized over the term of the notional
principal contract in a manner that reflects the economic substance of the
contract. A non-periodic payment that relates to an interest rate swap, cap,
floor or collar shall be recognized over the term of the contract by allocating
it in accordance with the values of a series of cash-settled forward or option
contracts that reflect the specified index and notional principal amount upon
which the notional principal contract is based (or, in the case of a swap or of
a cap or floor that hedges a debt instrument, under alternative methods
contained in the regulations and, in the case of other notional principal
contracts, under alternative methods that the IRS may provide in a revenue
procedure).
Treasury regulations permit a regulated investment company, in
determining its investment company taxable income and net capital gain (i.e.,
the excess of net long-term capital gain over net short-term capital loss) for
any taxable year, to elect (unless it has made a taxable year election for
excise tax purposes as discussed below) to treat all or part of any net capital
loss, any net long-term capital loss or any net foreign currency loss incurred
after October 31 as if it had been incurred in the succeeding year.
20
<PAGE> 53
In addition to satisfying the requirement described above, the Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the
Fund's taxable year, at least 50% of the value of the Fund's assets must
consist of cash and cash items, U.S. Government securities, securities of other
regulated investment companies, and securities of other issuers (as to which
the Fund has not invested more than 5% of the value of the Fund's total assets
in securities of such issuer and as to which the Fund does not hold more than
10% of the outstanding voting securities of such issuer), and no more than 25%
of the value of its total assets may be invested in the securities of any one
issuer (other than U.S. Government securities and securities of other regulated
investment companies), or in two or more issuers which the Fund controls and
which are engaged in the same or similar trades or businesses.
If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the Fund's current and accumulated earnings
and profits. Such distributions generally will be eligible for the dividends
received deduction in the case of corporate shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on regulated investment
companies that fail to distribute in each calendar year an amount equal to 98%
of ordinary taxable income for the calendar year and 98% of capital gain net
income for the one year period ended on October 31 of such calendar year (or,
at the election of a regulated investment company having a taxable year ending
November 30 or December 31, for its taxable year (a "taxable year election")).
The balance of such income must be distributed during the next calendar year.
For the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable
year ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall
(1) reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year and (2) exclude
Section 988 foreign currency gains and losses incurred after October 31 of any
year (or after the end of its taxable year if it has made a taxable year
election) in determining the amount of ordinary taxable income for the current
calendar year (and, instead, include such gains and losses in determining
ordinary taxable income for the succeeding calendar year).
The Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax.
However, investors should note that the Fund may in certain circumstances be
required to liquidate portfolio investments to make sufficient distributions to
avoid excise tax liability.
FUND DISTRIBUTIONS
The Fund anticipates distributing substantially all of its investment
company taxable income and short-term capital gains for each taxable year.
Such distributions will be taxable to shareholders as ordinary income and
treated as dividends for federal income tax purposes, but they will not qualify
for the 70% dividends received deduction for corporations.
The Fund may either retain or distribute to shareholders its net
long-term capital gain for each taxable year. The Fund currently intends to
distribute any such amounts. If net capital gain is distributed and designated
as a capital gain dividend, it will be taxable to shareholders as long-term
capital gain, regardless of the length of time the shareholder has held his
shares or whether such gain was recognized by the Fund prior to the date on
which the shareholder acquired his shares. Conversely, if the Fund elects to
retain its net capital gain, the Fund will be taxed thereon (except to the
extent of any available capital loss carryovers) at the 35% corporate tax rate.
If the Fund elects to retain net capital gain, it is expected that the Fund
also will elect to have shareholders treated as if each received a distribution
of its pro rata share of such gain, with the
21
<PAGE> 54
result that each shareholder will be required to report its pro rata share of
such gain on its tax return as long-term capital gain, will receive a
refundable tax credit for its pro rata share of tax paid by the Fund on the
gain, and will increase the tax basis for its shares by an amount equal to the
deemed distribution less the tax credit.
Distributions by the Fund that do not constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital to
the extent of (and in reduction of) the shareholder's tax basis in his shares;
any excess will be treated as gain from the sale of his shares, as discussed
below.
Distributions by the Fund will be treated in the manner described
above regardless of whether such distributions are paid in cash or reinvested
in additional shares of the Fund (or any other fund in The AIM Family of
Funds--Registered Trademark--). Shareholders receiving a distribution in the
form of additional shares will be treated as receiving a distribution in an
amount equal to the fair market value of the shares received, determined as of
the reinvestment date. In addition, if the net asset value at the time a
shareholder purchases shares of the Fund reflects undistributed net investment
income or recognized capital gain net income, or unrealized appreciation in the
value of the assets of the Fund, distributions of such amounts will be taxable
to the shareholder in the manner described above, although such distributions
economically constitute a return of capital to the shareholder.
Ordinarily, shareholders are required to take distributions by the
Fund into account in the year in which the distributions are made. However,
dividends declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made in certain cases)
during the year.
The Fund is required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends, and
the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding by the Internal Revenue Service for
failure to report the receipt of interest or dividend income properly, or (3)
who has failed to certify to the Fund that it is not subject to backup
withholding or that it is a corporation or other "exempt recipient."
SALE OR REDEMPTION OF FUND SHARES
A shareholder will recognize gain or loss on the sale or redemption of
shares of the Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
In general, any gain or loss arising from (or treated as arising from) the sale
or redemption of shares of the Fund will be considered capital gain or loss and
will be long-term capital gain or loss if the shares were held for longer than
one year. However, any capital loss arising from the sale or redemption of
shares held for six months or less will be treated as a long-term capital loss
to the extent of the amount of capital gain dividends received on such shares.
For this purpose, the special holding period rules of Code Section 246(c)(3)
and (4) generally will apply in determining the holding period of shares.
Long-term capital gains of non-corporate taxpayers are currently taxed at a
maximum rate 11.6% lower than the maximum rate applicable to ordinary income.
Capital losses in any year are deductible only to the extent of capital gains
plus, in the case of a noncorporate taxpayer, $3,000 of ordinary income.
If a shareholder (i) incurs a sales load in acquiring shares of the
Fund, (ii) disposes of such shares less than 91 days after they are acquired
and (iii) subsequently acquires shares of the same or another fund at a reduced
sales load pursuant to a right to reinvest at such reduced sales load acquired
in connection with the acquisition of the shares disposed of, then the sales
load on the shares disposed of (to the extent of the reduction in the sales
load on the shares subsequently acquired) shall not be taken into account in
determining gain or loss on the shares disposed of but shall be treated as
incurred on the acquisition of the shares subsequently acquired.
22
<PAGE> 55
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, foreign trust or estate, foreign corporation, or
foreign partnership ("foreign shareholder"), depends on whether the income from
the Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
If the income from the Fund is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, ordinary income
dividends and return of capital distributions (other than capital gains
dividends) will be subject to U.S. withholding tax at the rate of 30% (or lower
treaty rate) upon the gross amount of the distribution. Such a foreign
shareholder would generally be exempt from U.S. federal income tax on gains
realized on the sale or redemption of shares of the Fund, capital gain
dividends and amounts retained by the Fund that are designated as undistributed
net capital gains.
If the income from the Fund is effectively connected with a U.S. trade
or business carried on by a foreign shareholder, then ordinary income
dividends, capital gain dividends and any gains realized upon the sale or
redemption of shares of the Fund will be subject to U.S. federal income tax at
the rates applicable to U.S. citizens or domestic corporations.
In the case of foreign non-corporate shareholders, the Fund may be
required to withhold U.S. federal income tax at a rate of 31% on distributions
that are otherwise exempt from withholding tax (or taxable at a reduced treaty
rate) unless such shareholders furnish the Fund with proper notification of
their foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisors with
respect to the particular tax consequences to them of an investment in the
Fund, including the applicability of foreign taxes.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS
The foregoing general discussion of U.S. federal income tax
consequences is based on the Code and regulations issued thereunder as in
effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court decisions may significantly
change the conclusions expressed herein, and any such changes or decisions may
have a retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and
capital gain dividends from regulated investment companies often differ from
the rules for U.S. federal income taxation described above. The tax treatment
of foreign investors may also differ from the treatment for U.S. investors
described above. Shareholders are urged to consult their tax advisors as to
the consequences of these and other state and local tax rules affecting
investments in the Fund.
DESCRIPTION OF FUND SHARES
Each share of the Fund is entitled to one vote, to participate equally
in dividends and distributions declared with respect to shares of the Fund and,
upon liquidation of the Fund, to participate in its proportionate share of the
net assets remaining after satisfaction of outstanding liabilities. Shares of
the Fund are fully paid, non-assessable and fully transferable when issued and
have no preemptive, conversion or exchange rights. Fractional shares have
proportionately the same rights, including voting rights, as are provided for a
full share.
23
<PAGE> 56
MISCELLANEOUS INFORMATION
AUDIT REPORTS
The Board of Trustees will issue to the shareholders at least
semi-annually the Fund's financial statement. Financial statements, audited by
independent auditors, will be issued annually. The firm of KPMG Peat Marwick
LLP, 700 Louisiana, NationsBank Building, Houston, Texas 77002, currently
serves as the auditors of the Fund.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered
hereby is being passed upon by Ballard Spahr Andrews & Ingersoll, 1735 Market
Street, Philadelphia, Pennsylvania.
CUSTODIAN AND TRANSFER AGENT
The Bank of New York (the "Custodian"), 90 Washington Street, 11th
Floor, New York, New York 10286, is custodian of all securities and cash of the
Fund. The custodian attends to the collection of principal and income, pays
and collects all monies for securities bought and sold by the Fund, and
performs certain other ministerial duties. A I M Fund Services, Inc. (the
"Transfer Agent"), P.O. Box 4739, Houston, Texas 77210-4739, is transfer and
dividend disbursing agent for the Retail Class. The Fund pays the Custodian
and the Transfer Agent such compensation as may be agreed upon from time to
time.
Texas Commerce Bank National Association, 712 Main, Houston, Texas
77002, serves as Sub-Custodian for retail purchases of the AIM Funds.
PRINCIPAL HOLDERS OF SECURITIES
As of November 1, 1996, the trustees and officers of the Trust as a
group owned less than 1% of the outstanding shares of any class of the Trust.
RETAIL CLASS:
To the best of the Trust's knowledge, the names and addresses of the
holders of 5% or more of the outstanding shares of the Retail Class, as of
November 1, 1996 and the percent of outstanding shares owned by such
shareholders are as follows:
24
<PAGE> 57
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address Owned of and
of Record Owner Record Only* Beneficially
--------------- ----------- ------------
<S> <C> <C>
Merrill Lynch Pierce Fenner & Smith -0- 16.55%
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246
Bob & Co 9.32% -0-
c/o Bank of Boston
Attn: Mutual Funds
P. O. Box 1809
Boston, MA 02105
BHC Securities Inc. -0- 5.12%
FBO CB Clients
Trade House Account
2005 Market Street
Philadelphia, PA 19103
</TABLE>
INSTITUTIONAL CLASS:
To the best of the Trust's knowledge, the names and addresses of the
holders of 5% or more of the outstanding shares of the Institutional Class, as
of November 1, 1996 and the percent of outstanding shares owned by such
shareholders are as follows:
<TABLE>
<CAPTION>
Percent
Name and Address Owned of
of Record Owner Record Only*
--------------- ------------
<S> <C>
Frost National Bank 73.04%**
P. O. Box 1600
San Antonio, TX 78296
Mississippi Treasury Dept. 7.84%
P. O. Box 138
Jackson, MS 39205
</TABLE>
- --------------------------
* The Trust has no knowledge as to whether all or any portion of the
shares owned of record are also owned beneficially.
** A shareholder who holds more than 25% of the outstanding shares of a
class may be presumed to be in "control" of such class of shares, as
defined in the 1940 Act.
25
<PAGE> 58
FINANCIAL STATEMENTS
FS
<PAGE> 59
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Investment Securities Funds
We have audited the accompanying statement of assets and liabilities of the
Limited Maturity Treasury Portfolio (a series of AIM Investment Securities
Funds), including the schedule of investments, as of July 31, 1996, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the years in the two-year period then ended,
and the financial highlights for each of the years in the two-year period then
ended, the eleven months ended July 31, 1994, each of the years in the five-year
period ended August 31, 1993 and the period December 15, 1987 (date operations
commenced) through August 31, 1988. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1996, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Limited Maturity Treasury Portfolio as of July 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the two-year period then ended, the eleven months ended
July 31, 1994, each of the years in the five-year period ended August 31, 1993
and the period December 15, 1987 (date operations commenced) through August 31,
1988, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
August 23, 1996
Houston, Texas
FS-1
<PAGE> 60
Financials
SCHEDULE OF INVESTMENTS
July 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
MATURITY (000s) VALUE
<S> <C> <C> <C>
U.S. TREASURY SECURITIES
U.S. TREASURY NOTES-98.82%
6.00% 08/31/97 $ 41,475 $ 41,494,908
- ------------------------------------------------------------------------------------------------
5.75% 09/30/97 41,360 41,262,804
- ------------------------------------------------------------------------------------------------
5.625% 10/31/97 42,175 41,988,165
- ------------------------------------------------------------------------------------------------
5.375% 11/30/97 41,585 41,230,280
- ------------------------------------------------------------------------------------------------
5.25% 12/31/97 41,850 41,405,553
- ------------------------------------------------------------------------------------------------
5.00% 01/31/98 41,610 40,966,293
- ------------------------------------------------------------------------------------------------
5.125% 02/28/98 41,525 40,905,032
- ------------------------------------------------------------------------------------------------
6.125% 03/31/98 41,825 41,822,909
- ------------------------------------------------------------------------------------------------
5.875% 04/30/98 41,400 41,211,216
- ------------------------------------------------------------------------------------------------
6.00% 05/31/98 41,500 41,370,935
- ------------------------------------------------------------------------------------------------
6.25% 06/30/98 41,330 41,381,249
- ------------------------------------------------------------------------------------------------
6.25% 07/31/98 41,500 41,539,010
- ------------------------------------------------------------------------------------------------
Total U.S. Treasury Securities 496,578,354
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-98.82% 496,578,354
- ------------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.18% 5,937,451
- ------------------------------------------------------------------------------------------------
NET ASSETS-100.00% $502,515,805
================================================================================================
</TABLE>
See Notes to Financial Statements.
FS-2
<PAGE> 61
Financials
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $498,859,636) $ 496,578,354
- -----------------------------------------------------------------------------------------
Cash 287
- -----------------------------------------------------------------------------------------
Receivables for:
Fund shares sold 2,978,883
- -----------------------------------------------------------------------------------------
Interest 5,958,137
- -----------------------------------------------------------------------------------------
Investment in deferred compensation plan 14,009
- -----------------------------------------------------------------------------------------
Other assets 135,367
- -----------------------------------------------------------------------------------------
Total assets 505,665,037
- -----------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Fund shares reacquired 1,889,916
- -----------------------------------------------------------------------------------------
Dividends 1,015,880
- -----------------------------------------------------------------------------------------
Deferred compensation 14,009
- -----------------------------------------------------------------------------------------
Accrued advisory fees 83,900
- -----------------------------------------------------------------------------------------
Accrued distribution fees 45,194
- -----------------------------------------------------------------------------------------
Accrued transfer agent fees 33,086
- -----------------------------------------------------------------------------------------
Accrued operating expenses 67,247
- -----------------------------------------------------------------------------------------
Total liabilities 3,149,232
- -----------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $ 502,515,805
=========================================================================================
</TABLE>
<TABLE>
<CAPTION>
INSTITUTIONAL AIM
SHARES SHARES FUND
<S> <C> <C> <C>
NET ASSETS: $143,467,539 $359,048,266 $502,515,805
=========================================================================================
Shares outstanding, $0.01 par value
per share 14,388,919 36,010,350 50,399,269
=========================================================================================
NET ASSET VALUE AND REDEMPTION PRICE
PER SHARE $ 9.97
=========================================================================================
OFFERING PRICE PER SHARE:
(Net asset value of $9.97
divided by 99.00%) $ 10.07
=========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-3
<PAGE> 62
Financials
STATEMENT OF OPERATIONS
For the year ended July 31, 1996
<TABLE>
<CAPTION>
INSTITUTIONAL AIM
SHARES SHARES FUND
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 8,467,903 $ 19,481,627 $ 27,949,530
- ---------------------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 283,049 650,158 933,207
- ---------------------------------------------------------------------------------------------------
Administrative service fees 18,681 42,176 60,857
- ---------------------------------------------------------------------------------------------------
Custodian fees 6,923 29,591 36,514
- ---------------------------------------------------------------------------------------------------
Transfer agent fees 10,350 255,502 265,852
- ---------------------------------------------------------------------------------------------------
Trustees' fees and expenses 2,802 6,544 9,346
- ---------------------------------------------------------------------------------------------------
Distribution fees -- 488,557 488,557
- ---------------------------------------------------------------------------------------------------
Other 61,928 275,898 337,826
- ---------------------------------------------------------------------------------------------------
Total expenses 383,733 1,748,426 2,132,159
- ---------------------------------------------------------------------------------------------------
Net investment income $ 8,084,170 $ 17,733,201 25,817,371
- ---------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on sales of investment securities 3,022,827
- ---------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment securities (6,292,910)
- ---------------------------------------------------------------------------------------------------
Net gain (loss) on investment securities (3,270,083)
- ---------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 22,547,288
===================================================================================================
</TABLE>
See Notes to Financial Statements.
FS-4
<PAGE> 63
Financials
STATEMENT OF CHANGES IN NET ASSETS
For the years ended July 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 25,817,371 $ 22,353,697
- --------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities 3,022,827 (7,239,070)
- --------------------------------------------------------------------------------------------
Net unrealized (depreciation) appreciation of investment
securities (6,292,910) 9,384,912
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 22,547,288 24,499,539
- --------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Institutional Shares (8,084,170) (7,065,914)
- --------------------------------------------------------------------------------------------
AIM Shares (17,733,201) (15,287,783)
- --------------------------------------------------------------------------------------------
SHARE TRANSACTIONS-NET:
Institutional Shares 14,818,211 (6,229,532)
- --------------------------------------------------------------------------------------------
AIM Shares 86,957,303 (56,819,839)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 98,505,431 (60,903,529)
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 404,010,374 464,913,903
- --------------------------------------------------------------------------------------------
End of period $502,515,805 $404,010,374
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $511,800,420 $410,024,906
- --------------------------------------------------------------------------------------------
Undistributed realized gain (loss) on sales of investment
securities (7,003,333) (10,026,160)
- --------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (2,281,282) 4,011,628
- --------------------------------------------------------------------------------------------
$502,515,805 $404,010,374
============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-5
<PAGE> 64
Financials
NOTES TO FINANCIAL STATEMENTS
July 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Investment Securities Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company. The Trust is organized as a Delaware business
trust consisting of one portfolio, the Limited Maturity Treasury Portfolio (the
"Fund"). The investment objective of the Fund is to seek liquidity with minimum
fluctuation in principal value and, consistent with this investment objective,
the highest total return achievable. The Fund currently offers two different
classes of shares: the AIM Limited Maturity Treasury Shares (the "AIM Shares")
and the Institutional Shares. Matters affecting each class are voted on
exclusively by such shareholders.
The following is a summary of the significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of these financial statements and
the reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
A. Security Valuations--Debt obligations that are issued or guaranteed by the
U.S. Treasury are valued on the basis of prices provided by an independent
pricing service. Prices provided by the pricing service may be determined
without exclusive reliance on quoted prices, and may reflect appropriate
factors such as yield, type of issue, coupon rate and maturity date.
Securities for which market prices are not provided by the pricing service
are valued at the mean between last bid and asked prices based upon quotes
furnished by independent sources. Securities for which market quotations are
not readily available or are questionable are valued at fair value as
determined in good faith by or under the supervision of the Trust's officers
in a manner specifically authorized by the Board of Trustees. Securities with
a remaining maturity of 60 days or less are valued at amortized cost which
approximates market value.
B. Securities Transactions and Investment Income--Securities transactions are
accounted for on a trade date basis. Interest income, adjusted for
amortization of discounts on investments, is earned from settlement date and
is recorded on the accrual basis. It is the policy of the Fund not to
amortize bond premiums for financial reporting purposes. Interest income is
allocated to each class daily, based upon each class' pro-rata share of the
total shares of the Fund outstanding. Realized gains and losses from
securities transactions are recorded on the identified cost basis.
C. Dividends and Distributions to Shareholders--It is the policy of the Fund to
declare daily dividends from net investment income. Such dividends are paid
monthly. Distributions from net realized capital gains, if any, are recorded
on ex-dividend date and are paid annually.
D. Federal Income Taxes--The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements. The Fund has a capital loss carryforward (which may
be carried forward to offset future taxable capital gains, if any) of
$6,725,562, which expires, if not previously utilized, through the year 2004.
E. Expenses--Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to more than
one class, e.g., advisory fees, are allocated between them.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM") with respect to the Fund. Under the terms of the master
investment advisory agreement, the Fund pays AIM an advisory fee at the annual
rate of 0.20% of the first $500 million of the Fund's average daily net assets
plus 0.175% of the Fund's average daily net assets in excess of $500 million.
This agreement requires AIM to reduce its fee or, if necessary, make payments to
the extent required to satisfy any expense limitations imposed by the securities
laws or regulations thereunder of any state in which the Fund shares are
qualified for sale.
FS-6
<PAGE> 65
Financials
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES-(continued)
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended July 31, 1996, the Fund
reimbursed AIM $60,857 for such services.
The Fund, pursuant to a transfer agent and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the AIM Shares. During the year ended July 31, 1996, AFS
was paid $160,400 for such services. During the year ended July 31, 1996, the
Fund paid A I M Institutional Fund Services, Inc. ("AIFS") $10,350 pursuant to a
transfer agency and shareholder services agreement with respect to the
Institutional Shares.
The Trust has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the AIM
Shares and a master distribution agreement with Fund Management Company ("FMC")
to serve as the distributor for the Institutional Shares. The Trust has adopted
a Plan pursuant to Rule 12b-1 under the 1940 Act (the "Plan") with respect to
the AIM Shares. The Fund pays AIM Distributors compensation at an annual rate of
0.15% of the average net assets attributable to the AIM Shares. The Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and provides periodic payments to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own AIM Shares of the Fund. Any amounts not paid as a
service fee under such Plan would constitute an asset-based sales charge. The
Plan also imposes a cap on the total amount of sales charges, including
asset-based sales charges, that may be paid by the Fund. During the year ended
July 31, 1996, the AIM Shares paid AIM Distributors $488,557 as compensation
under the Plan.
AIM Distributors received commissions of $193,686 during the year ended July
31, 1996 from sales of AIM Shares. Such commissions are not an expense of the
Fund. They are deducted from, and are not included in, proceeds from sales of
AIM shares. Certain officers and trustees of the Trust are officers and
directors of AIM, AIM Distributors, FMC, AFS and AIFS.
During the year ended July 31, 1996, the Fund paid legal fees of $4,141 for
services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the Board
of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank d/b/a Chemical Bank. The Fund
may borrow up to the lesser of (i) $325,000,000 or (ii) the limits set by its
prospectus for borrowings. The Fund and other funds advised by AIM which are
parties to the line of credit may borrow on a first come, first served basis.
Interest on borrowings under the line of credit is payable on maturity or
prepayment date. During the year ended July 31, 1996, the Fund did not borrow
under the line of credit agreement. The funds which are party to the line of
credit are charged a commitment fee of 0.08% on the unused balance of the
committed line. The commitment fee is allocated among the funds based on their
respective average net assets for the period. Prior to an amendment of the line
of credit on July 19, 1996, the Fund was limited to borrowing $6,700,000.
NOTE 4-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended July 31, 1996 was
$648,234,412 and $546,804,207, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis as, of July 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $ --
- ----------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,558,630)
- ----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities $ (2,558,630)
============================================================================
</TABLE>
Cost of investments for tax purposes is $499,136,984.
FS-7
<PAGE> 66
Financials
NOTE 5-TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 6-SHARE INFORMATION
Changes in the AIM Shares outstanding during the years ended July 31, 1996 and
1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C> <C> <C>
---------------------------- ----------------------------
Shares Amount Shares Amount
----------- ------------- ----------- -------------
Sold 25,131,827 $ 252,267,687 15,641,151 $ 155,346,148
- -------------------------------------------------------------------------------- ----------------------------
Issued as reinvestment of dividends 1,451,553 14,553,507 1,083,758 10,758,338
- -------------------------------------------------------------------------------- ----------------------------
Reacquired (17,942,356) (179,863,891) (22,488,544) (222,924,325)
- -------------------------------------------------------------------------------- ----------------------------
8,641,024 $ 86,957,303 (5,763,635) $ (56,819,839)
================================================================================ ============================
</TABLE>
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share of AIM Shares
outstanding during each of the years in the two-year period ended July 31, 1996,
the eleven months ended July 31, 1994, each of the years in the five-year period
ended August 31, 1993 and the period December 15, 1987 (date operations
commenced) through August 31, 1988.
<TABLE>
<CAPTION>
JULY 31, AUGUST 31,
------------------------------- ----------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 10.03 $ 9.96 $ 10.24 $ 10.21 $ 10.01 $ 9.79 $ 9.78 $ 9.80 $ 9.92
- ------------------------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Income from investment
operations:
Net investment income 0.55 0.54 0.35 0.42 0.58 0.72 0.77 0.84 0.52
- ------------------------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Net gains (losses) on
securities (both
realized
and unrealized) (0.06) 0.07 (0.20) 0.05 0.29 0.22 0.01 (0.02) (0.12)
- ------------------------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Total from investment
operations 0.49 0.61 0.15 0.47 0.87 0.94 0.78 0.82 0.40
- ------------------------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Less distributions:
Dividends from net
investment income (0.55) (0.54) (0.35) (0.42) (0.58) (0.72) (0.77) (0.84) (0.52)
- ------------------------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Distributions from net
realized capital
gains -- -- (0.08) (0.02) (0.09) -- -- -- --
- ------------------------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Total distributions (0.55) (0.54) (0.43) (0.44) (0.67) (0.72) (0.77) (0.84) (0.52)
- ------------------------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Net asset value, end of
period $ 9.97 $ 10.03 $ 9.96 $ 10.24 $ 10.21 $ 10.01 $ 9.79 $ 9.78 $ 9.80
========================= ======== ======== ======== ======== ======== ======== ======= ======= =======
Total return(a) 4.98% 6.36% 1.52% 4.65% 8.93% 9.95% 8.32% 8.71% 4.11%
========================= ======== ======== ======== ======== ======== ======== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $359,048 $274,480 $329,942 $348,937 $260,454 $131,880 $79,871 $70,781 $62,342
========================= ======== ======== ======== ======== ======== ======== ======= ======= =======
Ratio of expenses to
average net assets 0.54%(b) 0.51% 0.47%(c) 0.46% 0.48% 0.54% 0.50%(d) 0.45%(e) 0.35%(c)(e)
========================= ======== ======== ======== ======== ======== ======== ======= ======= =======
Ratio of net investment
income to average net
assets 5.45%(b) 5.44% 3.75%(c) 4.07% 5.60% 7.25% 7.90%(d) 8.59%(e) 7.02%(c)(e)
========================= ======== ======== ======== ======== ======== ======== ======= ======= =======
Portfolio turnover rate 117.09% 120.01% 120.40% 122.99% 119.62% 214.74% 192.46% 219.53% 140.83%
========================= ======== ======== ======== ======== ======== ======== ======= ======= =======
Borrowings for the
period:
Amount of debt
outstanding at end of
period
(000s omitted) -- -- -- -- -- -- -- $ 9,943 $19,232
- ------------------------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Average amount of debt
outstanding during
the period
(000s omitted)(f) -- -- -- -- -- -- $ 5,101 $14,301 $ 4,110
- ------------------------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Average number of
shares outstanding
during the period
(000s omitted)(f) 32,350 28,337 34,101 30,416 18,378 10,559 7,389 7,295 2,429
- ------------------------- -------- -------- -------- -------- -------- -------- ------- ------- -------
Average amount of debt
per share during the
period -- -- -- -- -- -- $ 0.69 $ 1.96 $ 1.69
- ------------------------- -------- -------- -------- -------- -------- -------- ------- ------- -------
</TABLE>
(a) Does not deduct sales charges and for periods less than one year, total
return is not annualized.
(b) Ratios are based on average net assets of $325,704,724.
(c) Annualized.
(d) After waiver of advisory fees.
(e) After waiver of advisory fees and expense reimbursements.
(f) Averages computed on a daily basis.
FS-8
