<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
Commission file number: 33-67866
A I M MANAGEMENT GROUP INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 74-1881407
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
</TABLE>
11 Greenway Plaza, Suite 1919, Houston, Texas 77046
(Address of principal executive offices, including zip code)
(713) 626-1919
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---------- ----------
At October 31, 1996, there were 2,393,322 shares outstanding of the
Registrant's common stock, par value $0.0025 per share, and 1,037,100 shares
outstanding of the Registrant's Class B common stock, par value $0.0025 per
share.
<PAGE> 2
A I M MANAGEMENT GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 72,320 $ 42,148
Accounts receivable:
Due from dealers for sales of capital stock of affiliated
registered investment companies . . . . . . . . . . . . . . . . . . . . . 3,700 1,670
Management fees due from affiliated registered investment companies . . . . . . 21,979 15,949
Management fees due from managed accounts . . . . . . . . . . . . . . . . . . . 510 360
Other, primarily due from affiliated registered investment companies . . . . . 21,023 12,071
-------- --------
Total accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . 47,212 30,050
-------- --------
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,344 1,343
Investments:
Affiliated registered investment companies, at market . . . . . . . . . . . . . 8,745 6,787
Other equity investments, at market . . . . . . . . . . . . . . . . . . . . . . 1,786 1,041
-------- --------
Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,531 7,828
-------- --------
Furniture, equipment and leasehold improvements, at cost, less
accumulated depreciation and amortization of $18,656 in 1996
and $14,044 in 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,918 15,760
Acquisition and organization costs, net of accumulated amortization of
$14,538 in 1996 and $12,114 in 1995 . . . . . . . . . . . . . . . . . . . . . . 40,221 38,961
Financing costs, net of accumulated amortization of $6,451 in 1996
and $5,372 in 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,018 6,738
Deferred sales commissions, net of accumulated amortization of
$22,006 in 1996 and $15,872 in 1995 . . . . . . . . . . . . . . . . . . . . . . 30,193 39,073
Deferred charges and other assets . . . . . . . . . . . . . . . . . . . . . . . . . 19,798 15,754
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $252,555 $197,655
======== ========
</TABLE>
See accompanying notes to unaudited interim consolidated financial statements.
2
<PAGE> 3
A I M MANAGEMENT GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - CONTINUED
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities:
Payables to affiliated registered investment companies for sales of
their capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,696 $ 1,662
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . 22,835 20,752
Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,367 1,482
Federal and state income taxes payable . . . . . . . . . . . . . . . . . . . . 5,582 5,832
Deferred compensation payable . . . . . . . . . . . . . . . . . . . . . . . . . 36,397 31,831
Credit facility to finance deferred sales commissions . . . . . . . . . . . . . 33,646 43,921
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,250 110,000
Deferred income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,061 6,254
-------- --------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 204,834 221,734
-------- --------
Class B common stock of $.0025 par value per share subject to
Redemption Agreement, including a cumulative increase in the
Redemption Price since inception of $75,190 in 1996 and $24,590 in
1995: authorized, issued and outstanding 1,037,100 shares . . . . . . . 110,190 59,590
Stockholders' deficit:
Common stock of $.0025 par value per share:
authorized 4,240,000 shares in 1996 and 1995, issued and
outstanding 2,393,322 shares in 1996 and 2,243,800 shares
in 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 6
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 9,428 3,275
Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (72,335) (87,339)
Net unrealized appreciation of marketable equity
securities, net of applicable taxes . . . . . . . . . . . . . . . . 468 450
Translation loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (36) (61)
-------- --------
Total stockholders' deficit . . . . . . . . . . . . . . . . . . . . (62,469) (83,669)
-------- --------
Total liabilities and stockholders' deficit . . . . . . . . . . . . $252,555 $197,655
======== ========
</TABLE>
See accompanying notes to unaudited interim consolidated financial statements.
3
<PAGE> 4
A I M MANAGEMENT GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- --------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Management and advisory fees . . . . . . . . . . . . . . . . . . . . . . . $65,373 $40,238 $177,992 $100,789
Commission income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,372 18,311 40,135 30,993
Distribution fee income . . . . . . . . . . . . . . . . . . . . . . . . . . 10,471 7,283 29,662 18,017
Other operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . 12,647 7,244 32,293 20,738
--------- --------- ---------- ----------
Total operating revenues . . . . . . . . . . . . . . . . . . . . . . . 98,863 73,076 280,082 170,537
--------- --------- ---------- ----------
Compensation and related expenses . . . . . . . . . . . . . . . . . . . . . 28,707 23,567 85,259 56,859
Other administrative expenses . . . . . . . . . . . . . . . . . . . . . . . 19,152 11,539 53,460 31,649
Interest and amortization of debt issuance costs . . . . . . . . . . . . . 3,310 4,739 10,387 14,124
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . 4,522 4,379 13,131 13,099
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 821 636 2,556 1,591
--------- --------- ---------- ----------
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . 56,512 44,860 164,793 117,322
--------- --------- ---------- ----------
Income before taxes and extraordinary item. . . . . . . . . . . . . . . . . 42,351 28,216 115,289 53,215
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,326 10,592 41,962 20,073
--------- --------- ---------- ----------
Income before extraordinary item . . . . . . . . . . . . . . . . . . . . . 27,025 17,624 73,327 33,142
Extraordinary item - extinguishment of debt (less applicable income tax
of $289) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - 537 -
--------- --------- ---------- ----------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $27,025 $17,624 $72,790 $33,142
========= ========= ========== ==========
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $27,025 $17,624 $72,790 $33,142
Increase in Redemption Price of Class B
Common Stock (see Note 2) . . . . . . . . . . . . . . . . . . . . . . . (26,626) (8,677) (50,600) (8,677)
--------- --------- ---------- ----------
Net income applicable to common stock . . . . . . . . . . . . . . . . . . . $399 $8,947 $22,190 $24,465
========= ========= ========== ==========
Income before extraordinary item . . . . . . . . . . . . . . . . . . . $0.11 $2.54 $6.25 $7.05
Extraordinary item, net of tax . . . . . . . . . . . . . . . . . . . . - - (.15) -
--------- --------- ---------- ----------
Net Income applicable to common stock . . . . . . . . . . . . . . . . . . . $0.11 $2.54 $6.10 $7.05
========= ========= ========== ==========
Weighted average shares . . . . . . . . . . . . . . . . . . . . . . . . . . 3,670 3,517 3,638 3,468
========= ========= ========== ==========
</TABLE>
See accompanying notes to unaudited interim consolidated financial statements.
4
<PAGE> 5
A I M MANAGEMENT GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $72,790 $33,142
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 14,434 14,502
Deferred income tax . . . . . . . . . . . . . . . . . . . . . . . . . . (4,203) 283
Gain on sale of unconsolidated affiliate . . . . . . . . . . . . . . . . - (1,671)
Extraordinary item, net of tax . . . . . . . . . . . . . . . . . . . . . 537 -
Changes in assets and liabilities:
Increase in accounts receivable . . . . . . . . . . . . . . . . . . . . (17,162) (13,362)
Increase in prepaid expenses . . . . . . . . . . . . . . . . . . . . . . (1) (71)
Decrease (increase) in deferred sales commissions . . . . . . . . . . . 2,746 (16,351)
Increase in financing costs . . . . . . . . . . . . . . . . . . . . . . (889) (795)
Increase in deferred charges and other assets . . . . . . . . . . . . . (4,044) (2,455)
Increase in payables to affiliated registered investment companies . . . 2,034 2,440
Increase in accounts payable and accrued expenses . . . . . . . . . . . 2,083 6,595
Increase in interest payable . . . . . . . . . . . . . . . . . . . . . . 1,885 2,434
Increase in income taxes payable . . . . . . . . . . . . . . . . . . . . 5,816 8,290
Increase in deferred compensation payable . . . . . . . . . . . . . . . 4,566 5,305
--------- ---------
Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,802 5,144
--------- ---------
Net cash provided by operating activities . . . . . . . . . . . . 80,592 38,286
--------- ---------
Cash flows from investing activities:
Purchases of investments in affiliated registered
investment companies . . . . . . . . . . . . . . . . . . . . . . (2,676) (537)
Proceeds from sale of government security . . . . . . . . . . . . . . . . . . - 12,000
Proceeds from sale of unconsolidated affiliate . . . . . . . . . . . . . . . - 4,097
Acquisition costs paid . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,684) (11,764)
Purchases of furniture, equipment and leasehold improvements . . . . . . . . (13,770) (5,408)
--------- ---------
Net cash used in investing activities . . . . . . . . . . . . . . (20,130) (1,612)
--------- ---------
Cash flows from financing activities:
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . . - 15,767
Principal repayments and repurchases of long-term debt . . . . . . . . . . . (23,454) (14,045)
Payment of common stock dividends . . . . . . . . . . . . . . . . . . . . . . (7,213) (2,857)
Proceeds from exercise of options . . . . . . . . . . . . . . . . . . . . . . 377 1,572
--------- ---------
Net cash (used in) provided by financing activities . . . . . . . (30,290) 437
--------- ---------
Net increase in cash and cash equivalents . . . . . . . . . . . . 30,172 37,111
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . 42,148 25,534
--------- ---------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . $72,320 $62,645
========= =========
Supplemental cash flow disclosure:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,928 $10,024
Cash paid for taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $39,991 $11,549
</TABLE>
See accompanying notes to unaudited interim consolidated financial statements.
5
<PAGE> 6
A I M MANAGEMENT GROUP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(1) General
The consolidated financial statements of A I M Management Group Inc.
and its subsidiaries (collectively, the " Company ") have been prepared
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission and in accordance with generally accepted accounting
principles, and reflect all normal recurring adjustments which, in the opinion
of management, are necessary to present fairly the results of the interim
periods presented. These financial statements do not include all disclosures
associated with annual financial statements and, accordingly, should be read in
conjunction with the financial statements and notes contained in the Form 10-K
of A I M Management Group Inc. for the year ended December 31, 1995, File
Number 33-67866. Certain reclassifications have been made to conform prior
year amounts to the 1996 presentation.
(2) Class B Common Stock
In connection with the sale of the Class B Common Stock, the
purchasers received the right to sell the Company the shares of Class B Common
Stock (the " Put "). The Put may be exercised after August 20, 2000 if the
Company has not completed a public stock offering with net proceeds in excess
of $25 million (" Qualified Public Stock Offering ") prior thereto.
Pursuant to the Put, up to 345,700 shares of Class B Common Stock may be sold
to the Company in each of the 12-month periods ended August 20, 2001, 2002 and
2003, at a purchase price equal to an agreed upon formula price (" Redemption
Price "). Currently, both of the bank facility agreements and the indenture
for the Notes payable contain restrictions related to the purchase of Class B
Common Stock by the Company.
The Class B Common Stock is recorded at the higher of its original
selling price or the present value of the formula price in accordance with
Staff Accounting Bulletin #64 issued by the Securities and Exchange Commission.
The present value of the future formula price is based on the agreed upon
formula times the maximum number of shares which could be put to the Company in
2001, 2002 and 2003, discounted using the Company's cost of capital.
During the first nine months of 1996, the Company increased
stockholders' deficit by $50.6 million and increased the recorded value of the
Class B Common Stock by a pro rata portion of the present value of the Put
based on the estimated formula price at December 31, 1996 which exceeded the
original selling price. If the Company completes a Qualified Public Stock
Offering prior to August 20, 2000, increases in the value of the Put over the
selling price of $75.2 million as of September 30, 1996 as well as the original
selling price of $35 million of the Class B Common Stock will be restored to
stockholders' equity. In connection with the closing of the merger (as defined
below), the agreement pursuant to which the Put was established will be
terminated.
Periodic increases in the carrying amount of Class B Common Stock are
treated as dividends in the calculation of earnings per share. The current
increase in the value of the Put reduced earnings per share by approximately
$13.91 for the nine months ended September 30, 1996.
(3) Extraordinary Item
During the second quarter of 1996, the Company expensed, as an
extraordinary item, approximately $0.5 million net of tax, related to a premium
paid upon repurchase of an aggregate of approximately $12.8 million principal
amount of its senior notes and the related debt issuance costs.
(4) Subsequent Event
On November 4, 1996, the Company and INVESCO PLC, a company
incorporated under the laws of England, announced the execution of an agreement
and plan of merger pursuant to which A I M Management Group Inc. will be
merged with and into a direct wholly-owned subsidiary of INVESCO PLC. At
September 30, 1996, INVESCO PLC's assets under management were L58.5 billion
($91.8 billion), thus such merger (the "Merger") will form a group with
combined funds under management in excess of $140.0 billion. The Merger is
conditional on, among other things, approval by the shareholders of INVESCO PLC
and the Company and the shareholders of the AIM Funds and the mutual funds
managed by INVESCO PLC, and is expected to take place during the first quarter
of 1997.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
A I M Management Group Inc.'s largest sources of revenues are mutual
fund management and advisory fees, commission income earned from underwriting
and distributing retail mutual fund shares and distribution fee income. Other
sources of operating revenues include transfer agent fees, accounting service
fees and interest income. The term "Company," as used herein, unless the
context otherwise requires, refers to A I M Management Group Inc. and its
direct and indirect subsidiaries.
The Company sponsors, markets and provides investment advisory,
distribution and administrative services to the AIM Family of Funds, a family
of retail mutual funds that consists of 23 portfolios reflecting a broad range
of investment objectives and strategies. In addition, the Company manages and
distributes a retail mutual fund sold exclusively through a contractual plan
arrangement and co-sponsors a variable annuity product which gives investors
the ability to invest in nine separate portfolios. These specialized retail
fund products and the AIM Family of Funds are together herein referred to as
the "AIM Retail Funds."
Certain retail classes of shares of the AIM Retail Funds are sold with
a front-end sales charge ("Class A Shares"). Commission income earned by the
Company on sales of Class A Shares is based on the amount of such shares which
are sold, and is paid from the customer-funded sales charge less an applicable
concession to the selling dealer. The Company also earns a fee from several
insurance companies for services performed in connection with certain sales of
units of the variable annuity product. Certain AIM Retail Funds also offer
classes of shares which are sold without a front-end sales charge, but which
are generally subject to a contingent deferred sales charge ("CDSC") at the
time of their redemption ("Class B Shares"). The Company pays commissions at
the time of sale to financial intermediaries which sell Class B Shares.
The Company also sponsors and provides investment advisory and related
administrative services to a number of institutional mutual funds (or classes
of funds) sold to institutions such as banks, trust companies, insurance
companies and broker-dealers, acting for themselves or in a fiduciary or agency
capacity (collectively, the "AIM Institutional Funds--Registered Trademark--").
Sales of the AIM Institutional Funds--Registered Trademark-- do not generate
sales commission revenue to the Company. The AIM Retail Funds and the AIM
Institutional Funds--Registered Trademark-- are collectively referred to herein
as the "AIM Funds." The Company also provides investment advisory services to
individuals, corporations, pension plans and other private investment advisory
accounts (the "Managed Accounts"), provides investment sub-advisory services to
a Canadian mutual fund and one portfolio of an open-end registered investment
company that is offered to separate accounts of variable insurance companies
(collectively, the "Sub-Advised Funds") and manages an offshore investment
company domiciled in Ireland (the "Offshore Fund"). As of September 30, 1996,
total assets under the Company's management were approximately $57.1 billion.
Mutual fund management and advisory fees are based on the average
daily net assets of the AIM Funds. Such fees are accrued daily by each AIM
Fund and paid to the Company monthly. The Company's management and advisory
fees fluctuate due to changes in the total value of the net assets under
management. Variations in the level of assets under management result from
both sales and redemptions of AIM Fund shares and changes in the market value
of the investments of the AIM Funds.
From time to time, the Company may waive all or a portion of its
management fees or 12b-1 Plan (as hereinafter defined) service or distribution
fees and/or assume all or a portion of the operating expenses of an AIM Fund
for competitive reasons and in response to commitments made to the directors of
such fund. In some cases, the Company may waive all or a portion of its
management fees and 12b-1 Plan distribution fees for new funds or to reflect
economies of scale at higher asset levels. During the third quarter of 1996,
the Company waived approximately $2.8 million in management fees and assumed
approximately $0.1 million in operating expenses for certain AIM Funds. Such
waivers and assumptions were made for the sole purpose of reducing the
operating expenses of such AIM Funds and were not made for the purposes of
mitigating any losses from investments in derivative securities or other
portfolio securities. It is difficult to measure the effect such waivers and
assumptions had on the Company's results of operations because the Company
believes
7
<PAGE> 8
they enhance its ability to retain the assets under its management and to
attract additional investments in the AIM Funds. The Company currently is
unable to estimate to what extent, if any, it may terminate existing fee
waivers or cease assuming operating expenses in the future. It is not possible
to predict what effect, if any, the termination of arrangements regarding fee
waivers and assumptions of expenses may have on the future level of assets
under the Company's management.
Certain AIM Funds also pay service fees and distribution fees pursuant
to distribution plans ("12b-1 Plans") adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended. These distribution and service
fees are based on the value of the net assets of the applicable funds or
classes and are subject to certain limits imposed under rules of the National
Association of Securities Dealers, Inc. See "Capital Resources and Liquidity"
for a discussion of the Company's ability to sell the right to receive future
12b-1 Plan distribution fees and CDSCs attributable to certain Class B Shares.
Pursuant to administrative service agreements, the Company is reimbursed for
all or a portion of the expenses, including salary, general and administrative
and office lease expenses, incurred by the Company in providing certain
administrative services (such as fund accounting) to the AIM Funds. Fund
accounting reimbursements paid to the Company by an AIM Fund are based on the
Company's costs of providing such service. Transfer agent fees paid to the
Company by the AIM Retail Funds are based on the number of shareholder accounts
outstanding during a calendar month, and transfer agent fees paid by the AIM
Institutional Funds--Registered Trademark-- are based on the average daily net
assets in the institutional shareholder accounts.
The Company's largest expenses are compensation and related expenses
and other administrative expenses, which include expenses related to mutual
fund sales promotion.
8
<PAGE> 9
NET ASSETS UNDER MANAGEMENT AND ADMINISTRATION
The following table sets forth the Company's net assets under
management and administration at September 30, 1996 and 1995, and at December
31, 1995, 1994 and 1993.
NET ASSETS UNDER MANAGEMENT AND ADMINISTRATION
(in millions)
<TABLE>
<CAPTION>
September 30, December 31,
--------------------- ------------------------------------
1996 1995 1995 1994 1993
----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Retail:
Equity $38,671 $24,674 $26,461 $13,777 $ 12,056
Money Market 941 545 656 605 373
Fixed Income 3,572 2,449 2,784 1,859 1,887
Closed-End --- 68 68 64 68
-------- -------- ------- ------- -------
Total Retail 43,184 27,736 29,969 16,305 14,384
-------- -------- ------- ------- -------
Institutional:
Money Market 11,931 10,404 10,827 10,664 10,401
Other 440 347 383 221 257
-------- -------- ------- ------- -------
Total Institutional 12,371 10,751 11,210 10,885 10,658
-------- -------- ------- ------- -------
Managed Accounts 1,081 264 268 284 286
-------- -------- ------- ------- -------
Sub-Advised Funds 111 34 60 --- ---
-------- -------- ------- ------- --------
Offshore Fund 343 --- 39 --- ---
-------- -------- ------- ------- --------
Total Net Assets $ 57,090 $ 38,785 $41,546 $27,474 $ 25,328
======== ======== ======= ======= ========
</TABLE>
The net assets of the AIM Retail Funds increased to $43.2 billion at
September 30, 1996 from $30.0 billion at December 31, 1995 and $27.7 billion at
September 30, 1995. These increases of $13.2 billion, or 44.0%, and $15.5
billion, or 56.0%, respectively, were attributable to a number of factors,
including increases in the market value of the assets held in the AIM Retail
Funds' portfolios resulting from generally improving equity markets and
increased sales of AIM Retail Fund shares. Approximately 65.0% of the increase
in the assets of the Company's fixed income and equity funds from December 31,
1995 to September 30, 1996 was due to an increase in the net sales of such
funds and approximately 35.0% of such increase was primarily due to
appreciation in the value of the securities held in such funds' portfolios.
The increase in sales of the AIM Retail Funds during the nine months ended
September 30, 1996 was primarily due to the general increase in cash flows into
equity and fixed income mutual funds during the nine months ended September 30,
1996, strong performance of several of the AIM Retail Funds during recent
years, expansion of the Company's retail distribution system, and improved name
recognition of the AIM Family of Funds. The net assets of the AIM
Institutional Funds--Registered Trademark-- increased by 10.7% from December
31, 1995 to September 30, 1996, and by 14.8% from September 30, 1995 to
September 30, 1996. These increases were primarily due to increased sales of
such funds which were related to performance of certain of the AIM
Institutional Funds--Registered Trademark-- and changes in the interest rate
environment which increased cash flows into these funds, and the Company's
focus on new distribution channels for the shares of the AIM Institutional
Funds--Registered Trademark--. Total net assets under management increased by
$15.6 billion, or 37.6%, from December 31, 1995 to September 30, 1996, and by
$18.3 billion, or 47.2%, from September 30, 1995 to September 30, 1996.
9
<PAGE> 10
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Total Operating Revenues. Total operating revenues increased to $98.9
million for the third quarter of 1996 from $73.1 million for the third quarter
of 1995, and increased to $280.1 million for the nine months ended September
30, 1996 from $170.5 million for the nine months ended September 30, 1995.
These increases of $25.8 million, or 35.3%, and $109.6 million, or 64.3%,
respectively, were primarily due to an increase in the total amount of
management and advisory fees received from the AIM Retail Funds.
Management and Advisory Fees. Revenues from management and advisory
fees increased to $65.4 million for the third quarter of 1996 from $40.2
million for the third quarter of 1995, and increased to $178.0 million for the
nine months ended September 30, 1996 from $100.8 million for the nine months
ended September 30, 1995. These increases of $25.2 million, or 62.7%, and
$77.2 million, or 76.6%, respectively, were primarily due to growth in net
assets under management in the AIM Retail Funds, as discussed above.
Commission Income. Revenues from retained portions of AIM Retail Fund
sales commissions decreased to $10.4 million for the third quarter of 1996 from
$18.3 million for the third quarter of 1995. This decrease of $7.9 million, or
43.2%, was primarily due to a decrease in commissionable sales of Class A
Shares during the third quarter of 1996. Sales of Class A Shares decreased
30.0% to $2.1 billion for the third quarter of 1996 from $3.0 billion for the
third quarter of 1995, due primarily to the temporary reopening of AIM
Aggressive Growth Fund to new investors in July of 1995. The commission income
related to sales of Class A Shares of AIM Aggressive Growth Fund was $7.1
million for the third quarter of 1995, as compared to $0.4 million for the
third quarter of 1996. AIM Aggressive Growth Fund was subsequently closed to
new investors. Additionally, sales of Class A Shares decreased during the
third quarter of 1996 as compared to the first two quarters of 1996 in
connection with a general decrease in sales of equity and fixed income mutual
funds throughout the mutual fund industry during the third quarter of 1996.
Although revenues from retained portions of AIM Retail Fund sales commissions
decreased from the third quarter of 1995 to the third quarter of 1996, revenues
from retained portions of AIM Retail Fund sales commissions increased to $40.1
million for the nine months ended September 30, 1996 from $31.0 million for the
nine months ended September 30, 1995. This increase of $9.1 million, or 29.4%
was primarily due to an increase in commissionable sales of Class A Shares
during the nine months ended September 30, 1996. Sales of Class A Shares
increased 50.0% to $8.1 billion for the nine months ended September 30, 1996
from $5.4 billion for the nine months ended September 30, 1995, due primarily
to the general increase in cash flows into equity and fixed income mutual funds
during the nine months ended September 30, 1996, the strong performance of
several of the AIM Retail Funds during recent years, expansion of the Company's
retail distribution system, and improved name recognition of the AIM Family of
Funds.
Distribution Fee Income. Distribution fee income increased to $10.5
million for the third quarter of 1996 from $7.3 million for the third quarter
of 1995, and increased to $29.7 million for the nine months ended September 30,
1996 from $18.0 million for the nine months ended September 30, 1995. These
increases of $3.2 million, or 43.8%, and $11.7 million, or 65.0%,
respectively, were primarily due to appreciation of the assets attributable to
Class A Shares and Class B Shares and an increase in sales of Class A Shares
and Class B Shares during recent periods. Distribution fee income includes
both distribution fees and service fees received by the Company. The Company
retains service fees on Class A Shares sold in amounts of $1.0 million or more
and all Class B Shares for 12 months after the sale of such shares. Service
fees retained by the Company have increased in connection with appreciation of
the assets attributable to, and an increase in sales of, Class A Shares that
were sold in amounts of $1 million or more and all Class B Shares during recent
periods. Additionally, the Company receives distribution fees from certain
other Class A Shares. Such Class A Share distribution fees increased in
connection with appreciation of the assets attributable to, and an increase in
the sales of, such Class A Shares. Distribution fees related to sales of Class
B Shares on or after April 1, 1995 are not recognized as income by the Company
since the Company has sold these distribution fees to Citibank, N.A.
("Citibank"), as discussed below. See "Capital Resources and Liquidity."
During the nine months ended September 30, 1996, distribution fees in the
amount of $26.1 million related to Class B Shares sold since April 1, 1995 were
sold to Citibank and thus were not recognized as income by the Company. If the
Company had not sold such distribution fees to Citibank, the related
distribution fee income that would have
10
<PAGE> 11
been recognized by the Company generally would have been offset by the
amortization expense incurred by the Company. The Company retains distribution
fees related to sales of Class B Shares prior to April 1, 1995.
Other Operating Revenues. Other operating revenues increased to $12.6
million for the third quarter of 1996 from $7.2 million for the third quarter
of 1995, and increased to $32.3 million for the nine months ended September 30,
1996 from $20.7 million for the nine months ended September 30, 1995. These
increases of $5.4 million, or 75.0%, and $11.6 million, or 56.0%, respectively,
were primarily due to an increase in transfer agent fees during the third
quarter of 1996 and the nine months ended September 30, 1996. Transfer agent
fees increased to $8.9 million for the third quarter of 1996 from $5.2 million
for the third quarter of 1995, and increased to $23.9 million for the nine
months ended September 30, 1996 from $13.8 million for the nine months ended
September 30, 1995. These increases of 71.2% and 73.2%, respectively, were
primarily due to an increase in the number of shareholder accounts in the AIM
Retail Funds.
Total Operating Expenses. Total operating expenses increased to $56.5
million for the third quarter of 1996 from $44.9 million for the third quarter
of 1995, and increased to $164.8 million for the nine months ended September
30, 1996 from $117.3 million for the nine months ended September 30, 1995.
These increases of $11.6 million, or 25.8%, and $47.5 million, or 40.5%,
respectively, were primarily due to increases in compensation and related
expenses and other administrative expenses for the third quarter of 1996 and
the nine months ended September 30, 1996.
Compensation and Related Expenses. Compensation and related expenses
increased to $28.7 million for the third quarter of 1996 from $23.6 million for
the third quarter of 1995, and increased to $85.3 million for the nine months
ended September 30, 1996 from $56.9 million for the nine months ended September
30, 1995. These increases of 21.6% and 49.9%, respectively, were primarily due
to (i) growth in the size of the Company's operations due to increases in the
net assets managed by the Company and (ii) an increase in the amount recorded
as bonus expense under the Company's incentive compensation plan relating to
increases in the Company's income and a change in the timing of the payments of
awards under such plan.
Other Administrative Expenses. Other administrative expenses
increased to $19.2 million for the third quarter of 1996 from $11.5 million for
the third quarter of 1995, and increased to $53.5 million for the nine months
ended September 30, 1996 from $31.6 million for the nine months ended September
30, 1995. These increases of 67.0% and 69.3%, respectively, were primarily due
to an increase in business promotional costs related to the Company's expansion
of its retail distribution system, an increase in printing expenses associated
with the Company's mutual fund distribution activities and an increase in the
aggregate amount of concessions paid to dealers due to an increase in sales of
Class A Shares in the amount of $1 million or more.
Net Income. Net income increased to $27.0 million for the third
quarter of 1996 from $17.6 million for the third quarter of 1995, and increased
to $72.8 million for the nine months ended September 30, 1996 from $33.1
million for the nine months ended September 30, 1995. These increases of $9.4
million, or 53.4%, and $39.7 million, or 119.9%, respectively, were due to the
changes in the Company's revenues and expenses discussed above.
CAPITAL RESOURCES AND LIQUIDITY
Net increase in cash and cash equivalents was $30.2 million during the
nine months ended September 30, 1996. At September 30, 1996, the Company had
liquid assets of $129.6 million, including $72.3 million in unrestricted cash
and cash equivalents. Payables and accrued expenses due within 12 months
totaled $58.7 million at September 30, 1996.
Net cash provided by operating activities was $80.6 million during the
nine months ended September 30, 1996, which represented a 110.4% increase from
$38.3 million net cash provided by operating activities during the nine months
ended September 30, 1995. The increase was primarily due to the increase in
the Company's net income during the nine months ended September 30, 1996, as
discussed above, and a decrease in deferred sales commissions paid by the
Company due to the Company's utilization of the Program (as defined below) to
fund the payment of certain B Share Commissions (as defined below).
11
<PAGE> 12
Net cash used in investing activities was $20.1 million during the
nine months ended September 30, 1996, which represented a substantial increase
over the $1.6 million net cash used in investing activities during the nine
months ended September 30, 1995. This difference was primarily due to the
Company's increased capital expenditures and its investment in an affiliated
investment company during the nine months ended September 30, 1996, as compared
to the Company's receipt of cash from the sale of a government security and the
sale of an unconsolidated affiliate which increased cash provided from
investing activities during the nine months ended September 30, 1995. The cash
received by the Company during the nine months ended September 30, 1995 was
partially offset by the Company's payment of deferred acquisition costs during
the third quarter of 1995. The Company spent approximately $13.8 million
during the nine months ended September 30, 1996 on capital expenditures
relating primarily to office expansion and purchases of computer equipment.
The Company leases all of its operating facilities.
Net cash used in financing activities was $30.3 million during the
nine months ended September 30, 1996, which represented a substantial change
from the $0.4 million net cash provided by financing activities during the nine
months ended September 30, 1995. This difference was primarily due to the
Company's repayment of $23.5 million in long-term debt, including its
repurchase of an aggregate of approximately $12.8 million of the Notes (as
defined below), during the nine months ended September 30, 1996, as compared to
its borrowings of a net amount of approximately $1.7 million in long-term debt
during the nine months ended September 30, 1995. The Company ceased borrowing
under the Bank Facility (as defined below) to finance the payment of B Share
Commissions beginning in the second quarter of 1995, as discussed below. The
Company funded payments of B Share Commissions from April 1, 1995 through
September 30, 1996 under the Program (as defined below).
Cash paid for taxes increased by $28.5 million, or 247.8%, from the
nine months ended September 30, 1995 to the nine months ended September 30,
1996. This increase was primarily due to the increase in the Company's net
income and the Company's use of the Program to fund B Share Commissions during
the nine months ended September 30, 1996, as compared to the Company's use of
the Bank Facility to finance B Share Commissions during the first quarter of
1995, and the Program to fund B Share Commissions during the second and third
quarter of 1995.
Outstanding borrowings under the Company's credit facilities and the
9% Senior Secured Notes due 2003 (the "Notes") issued by the Company in 1993 in
connection with the recapitalization totaled $130.9 million at September 30,
1996. This amount includes approximately $97.2 million of outstanding Notes
which bear interest at a rate of 9% per annum. Such interest is payable in
semiannual installments of approximately $4.4 million. Effective June 26,
1996, the security interests securing the Notes were released, as discussed
below.
Currently, the Company has two methods available to fund the payment
of sales commissions to financial intermediaries who sell Class B Shares ("B
Share Commissions"): the Program (as defined below) and the B Share Facility
(as defined below).
Program. In May 1995, the Company entered into agreements
establishing a program (the "Program") with Citibank to provide additional
funding for payment of B Share Commissions once amounts available to fund such
commissions under Tranche C (as defined below) of the Bank Facility had been
substantially utilized. Pursuant to the Program, during the second quarter of
1995, the Company began selling to Citibank the right to receive future
distribution fees under the 12b-1 Plans and CDSCs (the "Fees") attributable to
certain Class B Shares sold on or after April 1, 1995 for a purchase price
equal to a percentage of the price at which each Class B Share is sold. The
Program has been amended several times since May 1995 to increase the total
amount of financing for B Share Commissions payable by the Company. The amount
of financing under the Program can be further increased from time to time in
connection with securitization transactions closed by Citibank. Future
increases in the amount of financing under the Program will depend upon the
amount of each securitization transaction closed by Citibank. As of September
30, 1996, the total amount of the Program was approximately $364 million, of
which approximately $137.4 million remained available to the Company. The
remaining $137.4 million would fund B Share Commissions on the sale of
approximately $3.4 billion of Class B Shares. In September 1996, the Company
received approximately $11.2 million from Citibank for the sale of Fees under
the Program. The Company intends to continue utilizing the Program to finance
the payment
12
<PAGE> 13
of B Share Commissions for the near future; however, as discussed below, it may
fund the payment of such commissions under the B Share Facility.
B Share Facility. On June 26, 1996, the Company entered into
agreements establishing a credit facility (the "B Share Facility") with
Citibank and other financial institutions to provide a method of financing the
payment of B Share Commissions as an alternative to the Program. The aggregate
amount of financing available under the B Share Facility is $200.0 million.
The Company may increase such amount to $250.0 million if certain conditions
are met. On June 27, 1996, approximately $37.0 million under the B Share
Facility was used to repay Tranche C under the Bank Facility in its entirety.
The B Share Facility is secured only by the Fees attributable to Class B Shares
which have not been sold under the Program. The terms of the B Share Facility
provide that the Company must prepay each month an amount equal to the 12b-1
Plan distribution fees for certain Class B Shares and the CDSCs paid by
shareholders for early redemption of certain Class B Shares. Such mandatory
prepayments are credited toward the amount required to be paid by the Company
if the outstanding principal balance under the B Share Facility exceeds a
computed amount.
As of September 30, 1996 approximately $44.7 million was available as
a series of term loans to the Company for working capital purposes ("Tranche
A") under a credit facility entered into by the Company in August 1993 (the
"Bank Facility"). The Company's borrowings under the Bank Facility to finance
the payment of B Share Commissions ("Tranche C") were fully utilized by the
Company prior to March 31, 1995. Effective June 26, 1996, the Credit Facility
was amended to provide that the security interests securing the amounts
borrowed under Tranche A of the Bank Facility were released. In connection
with the release of such security interests, the security interests securing
the Notes were also released effective June 26, 1996, as provided in the
Indenture. On June 27, 1996, Tranche C was repaid in full with proceeds from
the B Share Facility.
B Share Commissions that are financed under the B Share Facility are
capitalized and amortized over a period of six years (the period of time during
which the investor is subject to a CDSC at the time of redemption of Class B
Shares) for accounting purposes and are currently expensed for tax purposes.
CDSC payments received by the Company related to Class B Shares sold before
April 1, 1995 currently reduce unamortized B Share Commissions. A CDSC paid to
the Company is generally greater than the related unamortized portion of the B
Share Commission.
Stockholders' deficit decreased 25.3% to $62.5 million at September
30, 1996 from $83.7 million at December 31, 1995. The decrease in
stockholders' deficit was primarily due to the increase in the Company's net
income discussed above. Stockholders' deficit would have decreased further if
not for the Company's accounting treatment of the Put (as defined below) owned
by TA Associates, Inc. In connection with its purchase of the Company's Class
B Common Stock, par value $0.0025 per share (the "Class B Common"), TA
Associates, Inc. received the right to sell to the Company the shares of Class
B Common (the "Put") after August 20, 2000 if the Company has not completed a
public stock offering with net proceeds in excess of $25.0 million (a
"Qualified Public Stock Offering") prior thereto. Pursuant to the Put, up to
345,700 shares of Class B Common may be sold to the Company in each of the
12-month periods ended August 20, 2001, 2002 and 2003 at a purchase price equal
to an agreed upon formula price (the "Redemption Price"). Currently, the Bank
Facility, the B Share Facility and the Indenture contain restrictions related
to the purchase of Class B Common by the Company. The Class B Common is
recorded at the higher of its original selling price or the present value of
the formula price, which is based on an agreed upon formula. During the nine
months ended September 30, 1996, the Company increased stockholders' deficit by
$50.6 million and increased the recorded value of the Class B Common by a pro
rata portion of the present value of the Put based on the estimated formula
price at December 31, 1996 which exceeded the original selling price. If the
Company completes a Qualified Public Stock Offering prior to August 20, 2000,
increases in the value of the Put over the selling price of $75.2 million as of
September 30, 1996 as well as the original selling price of the Class B Common
of $35 million will be restored to stockholders' equity. In connection with
the closing of the Merger (as defined below), the agreement pursuant to which
the Put was established will be terminated.
The Company has several subsidiaries which are registered in various
jurisdictions as broker-dealers or investment managers. At September 30, 1996,
the Company's ability to obtain dividends from such
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<PAGE> 14
subsidiaries was limited by net capital requirements in the aggregate amount of
$0.8 million designed to ensure the liquidity of such subsidiaries.
SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management")
and INVESCO PLC, a company incorporated under the laws of England ("INVESCO"),
announced the execution of an agreement and plan of merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO. The Merger is conditional on, among other things, approval by the
shareholders of INVESCO and AIM Management and the shareholders of the AIM
Funds and the mutual funds managed by INVESCO, and is expected to take place
during the first quarter of 1997. The Merger, which values AIM Management at
$1.6 billion, will be effected by the purchase by INVESCO of all the issued
share capital of AIM Management. The consideration for such share capital
will be satisfied principally by issuing to the shareholders of AIM Management
290 million new ordinary shares of INVESCO valued at approximately $1.1
billion. The balance of the consideration will be payable in cash which
INVESCO intends to raise partly from new bank debt and partly from the proceeds
of a proposed one-for-five rights issue.
INVESCO, one of the world's largest independent investment management
groups, has a major presence in the institutional investment management and
retail mutual fund businesses in the United States and Europe, and a growing
presence in the Pacific region. At September 30, 1996, INVESCO's assets under
management were L58.5 billion ($91.8 billion), thus such merger (the
"Merger") will form a group with combined funds under management in excess of
$140.0 billion. The businesses of INVESCO and the various subsidiaries of AIM
Management will continue to operate under their existing names after the Merger.
The holding company, the shares of which are listed on the London Stock Exchange
and the American Depositary Shares of which are listed on the New York Stock
Exchange, will be renamed AMVESCO PLC.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A claim, Saltzberg v. AIM Equity Funds, Inc., et al., Case No.
H96-3657 (S.D. Tex. filed Oct. 25, 1996), has recently been brought against
certain subsidiaries of the Company. The claim was instituted under section
36(b) of the Investment Company Act of 1940 and seeks to recover damages
allegedly suffered by the fund in connection with fees paid for marketing and
shareholder services after the fund was closed to new investors. The Company
is investigating whether there is any basis at all for this claim and intends
to defend itself vigorously.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
14
<PAGE> 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
10.1 Amendment No. 4, Third Facility Amendment, dated as
of September 30, 1996, among the Company, as seller
and as servicer, A I M Distributors, Inc., Citibank,
N.A., as purchaser and Citicorp North America, Inc.,
as consented and agreed to by A I M Advisors, Inc.
and Citibank, N.A., as administrative agent under the
B Share Collateral Agreement, to the Purchase and
Sale Agreement, dated May 2, 1995, among the Company,
Citibank, N.A. and Citicorp North America, Inc. (the
"Purchase and Sale Agreement").
11 Statement regarding computation of earnings per share.
27 Financial Data Schedule.
28 U.S. Press Release for INVESCO PLC and A I M
Management Group Inc. issued on November 4, 1996.
b. Reports on Form 8-K
A report on Form 8-K was filed on July 2, 1996 to report the
release of the security interests securing the Notes in
connection with the release of the security interests securing
amounts payable under Tranche A of the Bank Facility.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized on November 11, 1996.
A I M MANAGEMENT GROUP INC.
/s/ Charles T. Bauer
-----------------------------------
Charles T. Bauer
Chairman and Chief Executive Officer
/s/ John J. Arthur
----------------------------------
John J. Arthur
Vice President and Treasurer
(Chief Accounting Officer)
16
<PAGE> 17
EXHIBIT INDEX
Exhibit
Number
-------
10.1 Amendment No. 4, Third Facility Amendment, dated as
of September 30, 1996, among the Company, as seller
and as servicer, A I M Distributors, Inc., Citibank,
N.A., as purchaser and Citicorp North America, Inc.,
as consented and agreed to by A I M Advisors, Inc.
and Citibank, N.A., as administrative agent under the
B Share Collateral Agreement, to the Purchase and
Sale Agreement, dated May 2, 1995, among the Company,
Citibank, N.A. and Citicorp North America, Inc. (the
"Purchase and Sale Agreement").
11 Statement regarding computation of earnings per
share.
27 Financial Data Schedule.
28 U.S. Press Release for INVESCO PLC and A I M
Management Group, Inc. issued on November 4, 1996.
<PAGE> 1
EXHIBIT 10.1
THIRD FACILITY AMENDMENT
THIRD FACILITY AMENDMENT dated as of September 30, 1996 (the
"Amendment") among A I M MANAGEMENT GROUP INC., as Seller (the "Seller") and as
servicer (the "Servicer") A I M DISTRIBUTORS, INC. (the "Distributor"),
CITIBANK, N.A., as purchaser (the "Purchaser") and CITICORP NORTH AMERICA, INC.
(the "Program Agent"), as consented and agreed to by A I M ADVISORS, INC. (the
"Advisor") and CITIBANK, N.A., as administrative agent under the B Share
Collateral Agreement (as defined in the Purchase Agreement defined below) (the
"Administrative Agent").
W I T N E S S E T H
WHEREAS, the Purchaser, the Program Agent and the Seller have entered
into that certain Purchase and Sale Agreement dated as of May 2, 1995 (as
amended and supplemented, the "Purchase Agreement");
WHEREAS, the Distributor, the Purchaser and the Program Agent have
entered into that certain Distributor Undertaking dated as of May 2, 1995 (as
amended and supplemented, the "Distributor Undertaking"); and
WHEREAS, the parties to this Amendment desire to amend the Purchase
Agreement, and the Distributor Undertaking in order to, among other things, add
each of the AIM Blue Chip Fund and the AIM Capital Development Fund as a "Fund"
under the Program Documents;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants herein contained, the parties hereto agree as follows:
Section 1. Defined Terms
"Amendment Effective Date" means the later to occur of (i) the day on
which the Program Agent shall have executed and delivered one or more
counterparts of this Amendment and shall have received one or more counterparts
of this Amendment executed by each of the parties hereto, and (ii) the
conditions precedent set forth in Section 5 hereof shall have been fulfilled.
<PAGE> 2
Unless otherwise defined herein, the capitalized terms used herein
shall have the meanings assigned to such terms in the Purchase Agreement.
Section 2. Amendments to the Purchase Agreement.
(a) Section 1.01 of the Purchase Agreement is hereby amended by
replacing the definition of "Unamortized Aggregate Purchase Price" set forth
therein with the following definition:
"Unamortized Aggregate Purchase Price" shall mean, in respect of the
Purchased Receivables as of any date of determination, an amount equal
to the aggregate Purchase Prices paid by the Purchaser under this
Agreement in respect of all Purchased Receivables, less the sum of (i)
the portions of the aggregate amounts paid by each Company and on
behalf of the holders of Shares in respect of Contingent Deferred
Sales Charges and Asset Based Sales Charges to the Collection Account
relating to Purchased Receivables which have not been conveyed by the
Purchaser in connection with a Take-out Transaction for which a
Take-out Notice has been executed and which have been allocated and
distributed to Citibank pursuant to the documentation entered into in
connection with a Take-out Transaction through such date of
determination which exceeds the accrued and unpaid Purchaser's Assumed
Yield, and (ii) the sum of each Take-out Adjustment Amount in respect
of each Take-out Transaction specified in one or more Take-out
Notices which have been acknowledged by the Seller, the Distributor
and the Advisor and returned to the Program Agent on or prior to such
date of determination."
(b) The Purchase Agreement is hereby further amended by replacing
Schedule II attached thereto with Annex A hereto.
2
<PAGE> 3
Section 3. Amendments to the Distributor Undertaking.
(a) Section 3.01 of the Distributor Undertaking is hereby amended by
replacing the period at the end of Section 3.01(x) with "; and" and by adding
the following new section at the end of Section 3.01:
"(y) maintain its net capital (as defined by GAAP) at such levels as
are required by Applicable Law;"
(b) Section 3.02 of the Distributor Undertaking is hereby amended by
replacing Section 3.02(g) with the following language:
"(g) [Intentionally omitted];"
Section 4. Addition of Additional Funds.
On and as of the Amendment Effective Date, (i) AIM Blue Chip Fund and
AIM Capital Development Fund (each an "Additional Fund"), each a series of AIM
Equity Funds, Inc., shall each become a "Fund" under and for all purposes of
the Purchase Agreement, the Servicing Agreement, the Transfer Agreement, the
Advisor Undertaking, the Distributor Undertaking and the other Program
Documents, (ii) the Servicing Agreement, the Advisor Undertaking, the
Distributor Undertaking and the other Program Documents shall be deemed to be
supplemented to reflect the addition of such Additional Funds, (iii) Annexes B,
C, D and E to this Amendment shall be deemed to be made a part of Exhibits C
and D to the Purchase Agreement and Exhibits A and B to the Advisor
Undertaking, respectively, and (iv) any reference in the Purchase Agreement and
the Advisor Undertaking to the effectiveness on the date of the Purchase
Agreement of, or any change or modification since the date of the Purchase
Agreement of, or any change or modification since the date of the Purchase
Agreement to the Underwriting Agreement, the Distribution Plan, the Advisory
Agreement, the Prospectus, the Contingent Deferred Sales Charge arrangement or
Fundamental Investment Objectives and Policies in respect of any Additional
Fund shall be deemed to refer to the effectiveness thereof on, and any change
or modification thereof since, the Amendment Effective Date.
3
<PAGE> 4
Section 5. Conditions Precedent to Effectiveness of this
Amendment.
The occurrence of the Amendment Effective Date shall be subject to the
fulfillment of each of the following conditions precedent:
(a) this Amendment shall have been duly executed by the parties hereto
and shall be in full force and effect, and the Program Agent shall have
received a fully executed copy of this Amendment;
(b) immediately after giving effect to this Amendment, there shall
exist no Event of Termination (or event which, with the passage of time or
notice, or both, would constitute an Event of Termination);
(c) the Program Agent shall have received such opinions of counsel as
it shall have reasonably requested each dated reasonably near the Amendment
Effective Date and in form, scope and substance reasonably satisfactory to the
Program Agent;
(d) the Underwriting Agreement, the Distribution Plan and the
Prospectus relating to each Additional Fund in the forms of Annex B, Annex C
and Annex D hereto, shall be in full force and effect;
(e) the Program Agent shall have received time stamped receipt copies
of the UCC-3 amendments to financing statements originally filed in respect of
the Receivables relating to each Fund pursuant to the Purchase Agreement in
order to perfect the ownership interest of the Purchaser in the Purchased
Receivables relating to each Additional Fund;
(f) the Program Agent shall have received certified copies of requests
for information (Form UCC-11) (or a similar search report certified by a party
acceptable to the Program Agent), dated reasonably near the Amendment Effective
Date, listing all effective financing statements (including those referred to
in Section 5(e) above which name the Distributor or the Seller (under their
present names or any previous names), as debtor and which are filed in the
jurisdictions in which filings were required to be made pursuant to Section
5(e) above, together with copies of such financing statements (none of which,
except for the financing statements referred to in Section 5(e) above,
4
<PAGE> 5
shall indicate any Adverse Claim on any Receivables relating to the Additional
Fund); and
(g) the Irrevocable Payment Instruction relating to AIM Equity Funds,
Inc. shall have been amended to reflect the addition of the Additional Funds
and such Irrevocable Payment Instruction as so amended shall be in full force
and effect.
Section 6. Execution in Counterparts.
This Amendment may be executed in any number of counterparts and by
different parties hereto on separate counterparts, each of which counterparts,
when so executed and delivered, shall be deemed to be an original, and all of
which counterparts, when taken together, shall constitute but one and the same
amendment.
Section 7. Governing Law.
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
Section 8. Severability of Provisions.
Any provision of this Amendment which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.
Section 9. Captions.
The captions in this Amendment are for convenience of reference only
and shall not define or limit any of the terms or provisions hereof.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date first above written.
A I M MANAGEMENT GROUP INC., as
Seller and Servicer
By: /s/ ROBERT H. GRAHAM
----------------------
Authorized Signatory
A I M DISTRIBUTORS, INC.
By: /s/ ROBERT H. GRAHAM
----------------------
Authorized Signatory
CITIBANK, N.A.,
as Purchaser
By: /s/ ARTHUR B. BOVINO
----------------------
Authorized Signatory
CITICORP NORTH AMERICA, INC.,
as Program Agent
By: /s/ ARTHUR B. BOVINO
----------------------
Authorized Signatory
Consented and Agreed to
as of the Date First
Written Above:
A I M ADVISORS, INC.
By: /s/ ROBERT H. GRAHAM
----------------------
Authorized Signatory
CITIBANK, N.A.,
as Administrative Agent
By: /s/ ARTHUR B. BOVINO
----------------------
Authorized Signatory
6
<PAGE> 7
SCHEDULE II ANNEX A
COMPANY: AIM FUNDS GROUP
- -------
<TABLE>
<CAPTION>
SHARES PURCHASE PRICE
FUNDS Class B Shares PERCENTAGE
----- -------------- --------------
<S> <C> <C> <C>
1. AIM Balanced Fund Class B 4.00%
2. AIM Intermediate
Government Fund Class B 4.00%
3. AIM Growth Fund Class B 4.00%
4. AIM High Yield Fund Class B 4.00%
5. AIM Income Fund Class B 4.00%
6. AIM Money Market Fund Class B 4.00%
7. AIM Municipal Bond Fund Class B 4.00%
8. AIM Global Utilities Fund Class B 4.00%
9. AIM Value Fund Class B 4.00%
</TABLE>
COMPANY: AIM INTERNATIONAL FUNDS, INC.
<TABLE>
<CAPTION>
SHARES PURCHASE PRICE
FUNDS CLASS B SHARES PERCENTAGE
----- -------------- --------------
<S> <C> <C> <C>
1. AIM International Equity Class B 4.00%
Fund
2. AIM Global Aggressive Class B 4.00%
Growth Fund
3. AIM Global Growth Fund Class B 4.00%
4. AIM Global Income Fund Class B 4.00%
</TABLE>
COMPANY: AIM EQUITY FUNDS, INC.
<TABLE>
<CAPTION>
SHARES PURCHASE PRICE
FUNDS CLASS B SHARES PERCENTAGE
----- -------------- --------------
<S> <C> <C> <C>
1. AIM Charter Fund Class B 4.00%
2. AIM Weingarten Fund Class B 4.00%
3. AIM Blue Chip Class B 4.00%
4. AIM Capital Development Fund Class B 4.00%
</TABLE>
<PAGE> 1
Exhibit 11
A I M MANAGEMENT GROUP INC. AND SUBSIDIARIES
Computation of Earnings Per Share
(unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Computation of Earnings per Common Share:
Income before extraordinary item . . . . . . . . . . . . . . $27,025 $17,624 $73,327 $33,142
Extraordinary item - extinguishment of debt
(less) applicable income tax of $289) . . . . . . . . . . - - 537
------- ------- ------- -------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $27,025 $17,624 $72,790 $33,142
Less increase in the Redemption Price of the
Class B Common Stock . . . . . . . . . . . . . . . . . . . (26,626) (8,677) (50,600) (8,677)
------- ------- ------- -------
Net income applicable to common stock . . . . . . . . . . . . $399 $8,947 $22,190 $24,465
------- ------- ------- -------
Computation of Weighted Average Common Shares:
Weighted average common shares outstanding . . . . . . . . . 3,367 3,237 3,339 3,198
Common shares issuable upon exercise of
warrants and options . . . . . . . . . . . . . . . . . . . 477 567 477 567
Less shares assumed repurchased with proceeds . . . . . . . . (174) (287) (178) (297)
------- ------- ------- -------
3,670 3,517 3,638 3,468
------- ------- ------- -------
Income before extraordinary item . . . . . . . . . . . . . . $ 0.11 $ 2.54 $ 6.25 $ 7.05
Extraordinary item . . . . . . . . . . . . . . . . . . . . . - - (.15) -
------- ------- ------- -------
NET INCOME APPLICABLE TO COMMON STOCK . . . . . . . . . . . . . . $ 0.11 $ 2.54 $ 6.10 $ 7.05
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 72,320
<SECURITIES> 8,745
<RECEIVABLES> 47,212
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 129,621
<PP&E> 43,574
<DEPRECIATION> 18,656
<TOTAL-ASSETS> 252,555
<CURRENT-LIABILITIES> 58,689
<BONDS> 130,896
110,190
0
<COMMON> 6
<OTHER-SE> (62,475)
<TOTAL-LIABILITY-AND-EQUITY> 252,555
<SALES> 0
<TOTAL-REVENUES> 280,082
<CGS> 0
<TOTAL-COSTS> 122,291
<OTHER-EXPENSES> 32,115
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,387
<INCOME-PRETAX> 115,289
<INCOME-TAX> 41,962
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 537
<CHANGES> 0
<NET-INCOME> 72,790
<EPS-PRIMARY> 6.10
<EPS-DILUTED> 6.10
</TABLE>
<PAGE> 1
EXHIBIT 28
FOR IMMEDIATE RELEASE
- ---------------------
FOR: INVESCO PLC Contact: Hubert L. Harris/INVESCO
A I M Management Group Inc. (404) 892-0896
Ivy McLemore/AIM
(713) 214-1904
Jim Marren/Powell Tate
(212) 521-5210
INVESCO AND A I M MANAGEMENT GROUP
AGREE TO STRATEGIC MERGER,
CREATING MAJOR NEW INDEPENDENT INVESTMENT MANAGER
--------------------------------------------
COMPANY TO HAVE $150 BILLION IN TOTAL ASSETS UNDER MANAGEMENT
--------------------------------------------
LONDON, NOVEMBER 4, 1996 -- INVESCO PLC (LSE: INM AND NYSE: IVC), one
of the largest independent investment management groups, and privately-held
A I M Management Group Inc., one of the U.S.'s largest and fastest growing
mutual fund managers, announced today that they have signed an agreement to
merge, creating one of the largest independent investment management businesses
in the world. This merger of equals is expected to create a company that will
be a leader in the global investment management industry.
The businesses of INVESCO and AIM will continue to operate under their
existing names after the merger. The listed holding company will be renamed
AMVESCO PLC.
The merger values of AIM at approximately $1.6 billion (L1 billion)
and is expected to be complete in February 1997.
THE NEW COMPANY: AMVESCO
As a combined organization, AMVESCO will have:
o Approximately $150 billion in assets under management
o Pro forma combined revenue and net income for the nine months
ended Sept. 30, 1996 of L355 million ($568 million) and L70
million ($112 million)
-more-
<PAGE> 2
-2-
o A major global presence with a broad array of products across
multiple distribution channels
o Ownership by existing AIM shareholders of approximately 45
percent of the enlarged group, with substantial restrictions
on sales of shares.
The merger brings together two investment management leaders with
complementary strengths: INVESCO PLC's strong franchise in the institutional
and international arenas and AIM's strong investment performance and sales
record in domestic mutual fund management; INVESCO's directly marketed no-load
mutual fund family and AIM's mutual fund family marketed through more than
120,000 financial consultants in the U.S.
BENEFITS OF THE TRANSACTION
As a result of the merger:
o INVESCO will gain immediate access to one of the most
successful distribution networks in the U.S.
o INVESCO will be able to introduce to its institutional clients
products based on AIM's "earnings momentum" style
o AIM will be able to offer a much broader range of investment
products, encompassing value and international funds
o AIM obtains the benefit of the INVESCO global network
o AIM will be able to utilize INVESCO's established capabilities
in the defined contribution market
"AMVESCO will be a major investment management company with the scale
necessary for success as a financially strong and independent business,
operating in an increasingly concentrated industry," said Charles W. Brady,
INVESCO's chairman and chief executive officer.
"AMVESCO will have a broad product range which, combined with an
expanded U.S. distribution capability and a global infrastructure, offers
particularly exciting prospects for future growth," he said.
-more-
<PAGE> 3
-3-
"The synergies of this combination are truly compelling," said Charles
T. Bauer, AIM's chairman and chief executive officer. "AMVESCO will have the
kind of global reach that will be essential to preserve a strong competitive
edge in our industry as we enter the next century.
"In addition, AIM and INVESCO have prided themselves on their
independence," he said. "This strategic merger will strengthen both companies
and at the same time preserve our independent cultures, which have been so
essential to our success."
NEW COMPANY MANAGEMENT, STRUCTURE
Mr. Brady, 61, will be chairman and chief executive officer of AMVESCO
and Mr. Bauer, 77, will be vice chairman. In addition to Mr. Brady, the board
of AMVESCO will consist of eight executive directors, four of whom will be
existing INVESCO directors and four of whom will be existing AIM directors, and
six non-executive directors, three to be selected by INVESCO and three to be
selected by AIM.
AMVESCO will consist of two major complementary businesses, one
comprising its U.S. institutional and international businesses, and the other
comprising its U.S. retail businesses. Each of these two businesses will be
directed by a separate management committee.
Mr. Brady will head the management committee for AMVESCO's
institutional and international businesses. Robert Graham, 49, currently
president and chief operating officer of AIM, will head the management
committee directing the North American retail businesses.
No changes are planned in the way the existing INVESCO and AIM
businesses are operated. The two companies anticipate no reductions in
workforce following the merger.
"We believe we now have a direct competitive advantage in serving both
the no-load investor and the financial consultant, through the separately
operated INVESCO and AIM fund groups," said Mr. Graham. "AMVESCO will be
particularly well positioned to achieve a high degree of penetration in the
fast growing U.S. defined contribution pension plan market."
-more-
<PAGE> 4
-4-
BACKGROUND: INVESCO
INVESCO is one of the largest independent global investment management
groups with over $91 billion (L58 billion) of assets under management, offering
a broad range of investment products and global management capabilities to
institutional clients and individual investors in the United States, Europe and
the Pacific region.
INVESCO has a strong global defined benefit pension business and
maintains full coverage of the U.S. defined contribution market, including plan
administration and investment management. The company is one of the largest
independent managers of institutional tax exempt funds in the U.S. and of
401(k)/457 plan assets in the U.S.
BACKGROUND: AIM
AIM was founded in 1976 by Mr. Bauer, Mr. Graham, and Gary Crum, who
currently serves as president of A I M Capital Management, Inc. As of Sept.
30, 1996, AIM was ranked by Strategic Insight, Inc. as the 13th largest mutual
fund management group in the U.S., based on net assets under management, with a
full range of equity, fixed-income, and money market funds including an
international equity fund and five global funds. AIM's assets under management
increased from $25.3 billion in 1993 to $57.1 billion on Sept. 30, 1996, a 34.5
percent compound growth rate. During this period, net sales accounted for 66
percent of AIM's asset growth.
The AIM Family of Funds--Registered Trademark-- includes 33 retail
funds and nine institutional money market portfolios. AIM's retail funds are
distributed nationwide primarily through national, regional, independent and
bank- affiliated financial consultants. Its institutional portfolios are among
the nation's largest fixed income funds.
AIM has over 3 million shareholder accounts and over 1,200 employees.
In addition to its headquarters in Houston, AIM has offices in Austin, Texas
and London.
-more-
<PAGE> 5
-5-
THE MERGER TRANSACTION
The merger, which is conditional on, among other things, approval by
the shareholders of both INVESCO and AIM as well as the holders of INVESCO and
AIM mutual funds and institutional clients, will be effected by the purchase by
INVESCO of all the issued share capital of AIM.
The consideration will be satisfied principally by issuing to the
shareholders of AIM 290 million new ordinary shares of INVESCO valued at
approximately $1.1 billion. The balance of the consideration will be payable
in cash which INVESCO intends to raise partly from new bank debt and partly
from the proceeds of a proposed one-for-five rights issue. Further details of
the fund raising will be announced in due course.
The merger will be broadly neutral to the earnings per share of
INVESCO (to be renamed AMVESCO) in the 1997 period.
INVESCO is being advised by BT Wolfensohn; AIM is being advised by
Liquid Distribution Systems, Inc. and Merrill Lynch & Co.
* * *
