<PAGE> 1
As filed with the Securities and Exchange Commission on March 27, 2000
1933 Act Registration No. 2-25469
--------
1940 Act Registration No. 811-1424
--------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---
Pre-Effective Amendment No.
Post-Effective Amendment No. 64 X
----- ---
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 64 X
------ ---
(Check appropriate box or boxes.)
AIM EQUITY FUNDS
----------------
(Exact Name of Registrant as Specified in Charter)
11 Greenway Plaza, Suite 100, Houston, TX 77046
-----------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (713) 626-1919
-----------------
Charles T. Bauer
11 Greenway Plaza, Suite 100, Houston, TX 77046
-----------------------------------------------------
(Name and Address of Agent for Service)
Copy to:
Lisa A. Moss, Esquire Martha J. Hays, Esquire
A I M Advisors, Inc. Ballard Spahr Andrews & Ingersoll, LLP
11 Greenway Plaza, Suite 100 1735 Market Street, 51st Floor
Houston, Texas 77046-1173 Philadelphia, Pennsylvania 19103-7599
Approximate Date of Proposed Public Offering: As soon as practicable
after the effective date of
this Amendment.
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
- ----
on (date) pursuant to paragraph (b)
- ----
60 days after filing pursuant to paragraph (a)(1)
- ----
X on May 26, 2000 pursuant to paragraph (a)(1)
- ----
75 days after filing pursuant to paragraph (a)(2)
- ----
on (date) pursuant to paragraph (a)(2) of rule 485.
- ----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
- ---- previously filed post-effective amendment.
Title of Securities Being Registered: Common Stock
THE REGISTRANT IS THE SUCCESSOR ISSUER TO AIM EQUITY FUNDS, INC. (THE
"PREDECESSOR FUND"). PURSUANT TO RULE 414 UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, BY FILING THIS POST-EFFECTIVE AMENDMENT TO CURRENTLY EFFECTIVE
REGISTRATION STATEMENT NO.2-25469 OF THE PREDECESSOR FUND, THE REGISTRANT
EXPRESSLY ADOPTS THE REGISTRATION STATEMENT OF THE PREDECESSOR FUND AS ITS OWN
REGISTRATION STATEMENT FOR ALL PURPOSES OF THE SECURITIES ACT AND THE
SECURITIES EXCHANGE ACT OF 1934.
<PAGE> 2
AIM AGGRESSIVE GROWTH FUND
-------------------------------------------------------------------------
AIM Aggressive Growth Fund seeks to provide long-term growth of capital.
AIM--Registered Trademark--
PROSPECTUS
MAY 26, 2000
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 3
--------------------------
AIM AGGRESSIVE GROWTH FUND
--------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
Future Fund Closure 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con
Disciplina and Invest with Discipline are registered service marks and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 4
--------------------------
AIM AGGRESSIVE GROWTH FUND
--------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to achieve long-term growth of capital. The
investment objective of the fund may be changed by the Board of Trustees without
shareholder approval.
The fund seeks to meet its objective by investing primarily in common stocks
of companies whose earnings the fund's portfolio managers expect to grow more
than 15% per year. The fund will invest in securities of small- and medium-sized
growth companies. The portfolio managers focus on companies they believe are
likely to benefit from new or innovative products, services or processes as well
as those that have experienced above-average, long-term growth in earnings and
have excellent prospects for future growth. The portfolio managers consider
whether to sell a particular security when any of those factors materially
changes. The fund may also invest up to 25% of its total assets in foreign
securities. Any percentage limitations with respect to assets of the fund are
applied at the time of purchase.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, the
fund may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions and market liquidity. This is
especially true with respect to equity securities of smaller companies, whose
prices may go up and down more than equity securities of larger,
more-established companies. Also, since equity securities of smaller companies
may not be traded as often as equity securities of larger, more-established
companies, it may be difficult or impossible for the fund to sell securities at
a desirable price.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 5
--------------------------
AIM AGGRESSIVE GROWTH FUND
--------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
<S> <C>
1990 ........................................... -6.50%
1991 ........................................... 63.90%
1992 ........................................... 21.34%
1993 ........................................... 32.03%
1994 ........................................... 17.18%
1995 ........................................... 41.51%
1996 ........................................... 14.34%
1997 ........................................... 12.24%
1998 ........................................... 4.99%
1999 ........................................... 44.98%
</TABLE>
The Class A shares' year-to-date total return as of March 31, 2000
was [ ]%.
During the periods shown in the bar chart, the highest quarterly return was
31.35% (quarter ended December 31, 1999) and the lowest quarterly return was
- -25.81% (quarter ended September 30, 1990).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------------------
(for the periods ended 5 10 SINCE INCEPTION
December 31, 1999) 1 YEAR YEARS YEARS INCEPTION DATE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 37.01% 21.17% 22.35% 17.01% 05/01/84
Class B -- -- -- -- 03/01/99
Class C -- -- -- -- 03/01/99
Russell 2000--Registered
Trademark-- Index(1) 21.26 16.69 13.40 12.63(2) 04/30/84(2)
- --------------------------------------------------------------------------------------------
</TABLE>
(1) The Russell 2000--Registered Trademark-- Index is a widely recognized,
unmanaged index of common stocks that measures the performance of the 2,000
smallest companies in the Russell 3000--Registered Trademark--Index, which
measures the performance of the 3,000 largest U.S. companies based on total
market capitalization.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
2
<PAGE> 6
--------------------------
AIM AGGRESSIVE GROWTH FUND
--------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- -------------------------------------------------------
(fees paid directly
from your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------
(expenses that are
deducted from
fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.63% 0.63% 0.63%
Distribution and/or
Service (12b-1) Fees 0.25 1.00 1.00
Other Expenses 0.21 0.45 0.45
Total Annual Fund
Operating Expenses 1.09 2.08 2.08
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $655 $878 $1,118 $1,806
Class B 711 952 1,319 2,157
Class C 311 652 1,119 2,410
- -------------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $655 $878 $1,118 $1,806
Class B 211 652 1,119 2,157
Class C 211 652 1,119 2,410
- -------------------------------------------------------
</TABLE>
3
<PAGE> 7
--------------------------
AIM AGGRESSIVE GROWTH FUND
--------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor. The
advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
The advisor supervises all aspects of the fund's operations and provides
investment advisory services to the fund, including obtaining and evaluating
economic, statistical and financial information to formulate and implement
investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 120
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.63% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc. a wholly owned subsidiary of the advisor, are
- - Ryan E. Crane, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1994.
- - Robert M. Kippes, Senior Portfolio Manager, who has been responsible for the
fund since 1992 and has been associated with the advisor and/or its affiliates
since 1989.
- - Charles D. Scavone, Senior Portfolio Manager, who has been responsible for the
fund since 1996 and has been associated with the advisor and/or its affiliates
since 1996. From 1994 to 1996, he was Associate Portfolio Manager for Van
Kampen American Capital Asset Management, Inc.
- - Kenneth A. Zschappel, Senior Portfolio Manager, who has been responsible for
the fund since 1996 and has been associated with the advisor and/or its
affiliates since 1990.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Aggressive Growth Fund are subject to the
maximum 5.50% initial sales charge as listed under the heading "CATEGORY I
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of
capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
FUTURE FUND CLOSURE
Due to the sometimes limited availability of common stocks of smaller companies
that meet the investment criteria for the fund, the fund may periodically
suspend or limit the offering of its shares.
During closed periods, the fund may impose different standards for additional
investments. Also, during those periods the fund will continue to pay Rule 12b-1
fees.
4
<PAGE> 8
--------------------------
AIM AGGRESSIVE GROWTH FUND
--------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 40.15 $ 49.97 $ 44.93 $ 40.13 $ 28.37
Income from investment operations:
Net investment income (loss) (0.37) (0.33) (0.26) (0.32) (0.04)
Net gains (losses) on securities (both
realized and unrealized) 16.22 (7.71) 7.60 6.09 11.80
Total from investment operations 15.85 (8.04) 7.34 5.77 11.76
Less distributions:
Distributions from net realized gains (0.39) (1.78) (2.30) (0.97) --
Net asset value, end of period $ 55.61 $ 40.15 $ 49.97 $ 44.93 $ 40.13
Total return(a) 39.73% (16.36)% 17.35% 14.77% 41.45%
- ----------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ----------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $2,808,451 $2,638,038 $3,864,257 $2,750,564 $2,245,554
Ratio of expenses to average net assets(b) 1.09%(c) 1.06% 1.06% 1.11% 1.08%
Ratio of net investment income (loss) to
average net assets(d) (0.69)%(c) (0.64)% (0.65)% (0.76)% (0.19)%
Portfolio turnover rate 75% 69% 73% 79% 52%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct sales charges.
(b) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
1.15% for 1995.
(c) Ratios are based on average net assets of $2,681,793,909.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements was (0.26)% for 1995.
<TABLE>
<CAPTION>
CLASS B CLASS C
---------------- ----------------
MARCH 1, MARCH 1,
THROUGH THROUGH
OCTOBER 31, 1999 OCTOBER 31, 1999
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 43.41 $43.41
Income from investment operations:
Net investment income (loss) (0.28) (0.28)
Net gains (losses) on securities (both realized and
unrealized) 12.12 12.12
Total from investment operations 11.84 11.84
Net asset value, end of period $ 55.25 $55.25
Total return(a) 27.27% 27.27%
- -------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $24,914 $6,807
Ratio of expenses to average net assets 2.08%(b) 2.08%(b)
Ratio of net investment income (loss) to average net assets (1.68)%(b) (1.68)%(b)
Portfolio turnover rate 75% 75%
- -------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(b) Ratios are annualized and based on average net assets of $11,337,167 and
$3,277,217 for Class B and Class C, respectively.
5
<PAGE> 9
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and
continue to hold them, those shares will convert to Class A shares of
that fund seven years after the end of the month in which shares were
purchased. If you exchange those shares for Class B shares of another
AIM Fund, the shares into which you exchanged will not convert to
Class A shares until eight years after the end of the month in which
you purchased your original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--03/00
<PAGE> 10
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- -------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--03/00 A-2
<PAGE> 11
--------------
THE AIM FUNDS
--------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ---------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--03/00
<PAGE> 12
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted
to establish a retirement plan. You may use AIM Funds-sponsored retirement
plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k)
plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing
plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--03/00 A-4
<PAGE> 13
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet
Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet.
The transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- -------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--03/00
<PAGE> 14
--------------
THE AIM FUNDS
--------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
MCF--03/00 A-6
<PAGE> 15
--------------
THE AIM FUNDS
--------------
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- -------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
------------------------------------------------------------------------------
A-7 MCF--03/00
<PAGE> 16
--------------
THE AIM FUNDS
--------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund 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.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares on each day the
NYSE is open for business, as of the close of the customary trading session, or
any earlier NYSE closing time that day. AIM Money Market Fund also determines
its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open
for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--03/00 A-8
<PAGE> 17
--------------------------
AIM AGGRESSIVE GROWTH FUND
--------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- ----------------------------------
AIM Aggressive Growth Fund
SEC 1940 Act file number: 811-1424
- ----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com AGRO-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 18
AIM BLUE CHIP FUND
-------------------------------------------------------------------------
AIM Blue Chip Fund seeks to provide long-term growth of capital and,
secondarily, current income.
AIM--Registered Trademark--
PROSPECTUS
MAY 26, 2000
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 19
------------------
AIM BLUE CHIP FUND
------------------
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con
Disciplina and Invest with Discipline are registered service marks and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 20
------------------
AIM BLUE CHIP FUND
------------------
INVESTMENT OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's primary investment objective is long-term growth of capital with a
secondary objective of current income. The investment objectives of the fund may
be changed by the Board of Trustees without shareholder approval.
The fund seeks to meet these objectives by investing at least 65% of its total
assets in the common stocks of blue chip companies. Blue chip companies are
those companies that the portfolio managers believe have the potential for
above-average growth in earnings and that are well-established in their
respective industries. The portfolio managers consider whether to sell a
particular security when they believe the security no longer has that potential.
When the portfolio managers believe securities other than common stocks offer
the opportunity for long-term growth of capital and current income, the fund may
invest in United States government securities, convertible securities and
high-quality debt securities. The fund may also invest up to 25% of its total
assets in foreign securities. Any percentage limitations with respect to the
fund are applied at the time of purchase.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, the
fund may not achieve its investment objectives.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. The prices of equity securities change in
response to many factors including the historical and prospective earnings of
the issuer of the stock, the value of its assets, general economic conditions,
interest rates, investor perceptions and market liquidity.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 21
------------------
AIM BLUE CHIP FUND
------------------
PERFORMANCE INFORMATION
- -------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- -----------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
<S> <C>
1990 ........................................... 3.01%
1991 ........................................... 30.32%
1992 ........................................... 2.64%
1993 ........................................... 4.61%
1994 ........................................... 4.66%
1995 ........................................... 32.00%
1996 ........................................... 23.75%
1997 ........................................... 31.91%
1998 ........................................... 30.42%
1999 ........................................... 25.65%
</TABLE>
The Class A shares' year-to-date total return as of March 31, 2000
was [ ]%.
During the periods shown in the bar chart, the highest quarterly return was
24.45% (quarter ended December 31, 1998) and the lowest quarterly return was
- -10.99% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -----------------------------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 18.75% 27.25% 17.54% 15.66% 02/04/87
Class B 19.80 -- -- 27.42 10/01/96
Class C 23.77 -- -- 23.06 08/04/97
Russell 1000--Registered
Trademark-- Index(1) 20.91 28.04 18.13 16.73 01/31/87(2)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Russell 1000--Registered Trademark-- Index is a widely recognized,
unmanaged index of common stocks that measures the performance of the 1,000
largest companies in the Russell 3000--Registered Trademark--Index, which
measures the performance of the 3,000 largest U.S. companies based on total
market capitalization.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
2
<PAGE> 22
------------------
AIM BLUE CHIP FUND
------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.64% 0.64% 0.64%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses 0.20 0.27 0.26
Total Annual Fund
Operating Expenses 1.19 1.91 1.90
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $665 $907 $1,168 $1,914
Class B 694 900 1,232 2,045
Class C 293 597 1,026 2,222
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $665 $907 $1,168 $1,914
Class B 194 600 1,032 2,045
Class C 193 597 1,026 2,222
- ----------------------------------------------
</TABLE>
3
<PAGE> 23
------------------
AIM BLUE CHIP FUND
------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor. The
advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
The advisor supervises all aspects of the fund's operations and provides
investment advisory services to the fund, including obtaining and evaluating
economic, statistical and financial information to formulate and implement
investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 120
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.64% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are
- - Monika H. Degan, Senior Portfolio Manager, who has been responsible for the
fund since 1997 and has been associated with the advisor and/or its affiliates
since 1995.
- - Joel E. Dobberpuhl, Senior Portfolio Manager, who has been responsible for the
fund since 1996 and has been associated with the advisor and/or its affiliates
since 1990.
- - Jonathan C. Schoolar, Senior Portfolio Manager, who has been responsible for
the fund since 1996 and has been associated with the advisor and/or its
affiliates since 1986.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Blue Chip Fund are subject to the maximum
5.50% initial sales charge as listed under the heading "CATEGORY I Initial Sales
Charges" in the "Shareholder Information--Choosing a Share Class" section of
this prospectus. Purchases of Class B and Class C shares are subject to the
contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of
capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
4
<PAGE> 24
------------------
AIM BLUE CHIP FUND
------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
The information for the three fiscal years ended 1999, the one month period
ended October 31, 1996 and the fiscal year ended September 30, 1996 has been
audited by KPMG LLP, whose report, along with the fund's financial statements,
is included in the fund's annual report, which is available upon request.
Information for prior years was audited by other public accountants.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------
OCTOBER 1
THROUGH YEAR ENDED
YEAR ENDED OCTOBER 31, OCTOBER 31, SEPTEMBER 30,
1999 1998 1997 1996 1996(A) 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 36.14 $ 30.96 $ 26.08 $ 25.56 $ 23.83 $ 19.22
Income from investment operations:
Net investment income 0.02 0.13(b) 0.17(b) -- 0.33 0.14
Net gains on securities (both realized and
unrealized) 10.44 5.75 6.93 0.52 4.61 5.05
Total from investment operations 10.46 5.88 7.10 0.52 4.94 5.19
Less distributions:
Dividends from net investment income (0.02) (0.07) (0.05) -- (0.21) (0.12)
Distributions from net realized gains (0.10) (0.63) (2.17) -- (3.00) (0.46)
Total distributions (0.12) (0.70) (2.22) -- (3.21) (0.58)
Net asset value, end of period $ 46.48 $ 36.14 $ 30.96 $ 26.08 $ 25.56 $ 23.83
Total return(c) 29.01% 19.36% 29.68% 2.04% 22.39% 27.84%
- ---------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $2,299,551 $1,085,648 $ 498,178 $120,448 $106,415 $71,324
Ratio of expenses to average net assets(d) 1.19%(e) 1.22% 1.31% 1.30%(f) 1.26% 1.3%
Ratio of net investment income to average net
assets(g) 0.03%(e) 0.33% 0.50% 0.12%(f) 0.53% 0.7%
Portfolio turnover rate 22% 27% 43% 10% 58% 17%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The fund changed investment advisors on June 3, 1996.
(b) Calculated using average shares outstanding.
(c) Does not deduct sales charges and is not annualized for periods less than
one year.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.32%, 1.37%, (annualized) and 1.28% for the periods 1997-1996 and September
30, 1996.
(e) Ratios are based on average net assets of $1,776,436,482.
(f) Annualized.
(g) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursement were 0.49%, 0.05% (annualized) and 0.51% for the periods
1997-1996 and September 30, 1996.
5
<PAGE> 25
------------------
AIM BLUE CHIP FUND
------------------
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------------------------------- ------------------------------------------------
OCTOBER 1, AUGUST 4,
THROUGH YEAR ENDED THROUGH
YEAR ENDED OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1999 1998 1997 1996 1999 1998 1997
- ------------------------------------------------------------------------------ ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 35.73 $ 30.76 $ 26.07 $25.56 $ 35.72 $ 30.75 $31.72
Income from investment
operations:
Net investment income
(loss) (0.29)(a) (0.12) (0.03)(a) (0.01) (0.29)(a) (0.12)(a) (0.01)(a)
Net gains (losses) on
securities (both realized
and unrealized) 10.31 5.72 6.92 0.52 10.31 5.72 (0.96)
Total from investment
operations 10.02 5.60 6.89 0.51 10.02 5.60 (0.97)
Less distributions:
Dividends from net
investment income -- -- (0.03) -- -- -- --
Distributions from net
realized gains (0.10) (0.63) (2.17) -- (0.10) (0.63) --
Total distributions (0.10) (0.63) (2.20) -- (0.10) (0.63) --
Net asset value, end of
period $ 45.65 $ 35.73 $ 30.76 $26.07 $ 45.64 $ 35.72 $30.75
Total return(b) 28.08% 18.52% 28.81% 2.00% 28.09% 18.52% (3.06)%
- ------------------------------------------------------------------------------ -----------------------------------------
Ratios/supplement data:
- ------------------------------------------------------------------------------ -----------------------------------------
Net assets, end of period
(000s omitted) $1,891,171 $745,862 $264,337 $8,101 $349,951 $87,554 $3,947
Ratio of expenses to average
net assets(c) 1.91%(d) 1.94% 2.10% 2.01%(e) 1.90%(d) 1.94% 2.10%(e)
Ratio of net investment
income (loss) to average
net assets(f) (0.68)%(d) (0.38)% (0.28)% (0.58)%(e) (0.68)%(d) (0.38)% (0.28)%(e)
Portfolio turnover rate 22% 27% 43% 10% 22% 27% 43%
- ------------------------------------------------------------------------------ -----------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.12% and 2.08% (annualized) for 1997-1996 for Class B and 2.12%
(annualized) for 1997 for Class C.
(d) Ratios are based on average net assets of $1,383,727,625 and $224,568,052
for Class B and Class C, respectively.
(e) Annualized
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (0.31)% and (0.65)% (annualized) for 1997-1996 for Class
B and (0.31)% (annualized) for 1997 for Class C.
6
<PAGE> 26
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and
continue to hold them, those shares will convert to Class A shares of
that fund seven years after the end of the month in which shares were
purchased. If you exchange those shares for Class B shares of another
AIM Fund, the shares into which you exchanged will not convert to
Class A shares until eight years after the end of the month in which
you purchased your original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--03/00
<PAGE> 27
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- -------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--03/00 A-2
<PAGE> 28
--------------
THE AIM FUNDS
--------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ---------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--03/00
<PAGE> 29
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted
to establish a retirement plan. You may use AIM Funds-sponsored retirement
plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k)
plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing
plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--03/00 A-4
<PAGE> 30
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet
Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet.
The transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- -------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--03/00
<PAGE> 31
--------------
THE AIM FUNDS
--------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
MCF--03/00 A-6
<PAGE> 32
--------------
THE AIM FUNDS
--------------
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- -------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
------------------------------------------------------------------------------
A-7 MCF--03/00
<PAGE> 33
--------------
THE AIM FUNDS
--------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund 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.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares on each day the
NYSE is open for business, as of the close of the customary trading session, or
any earlier NYSE closing time that day. AIM Money Market Fund also determines
its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open
for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--03/00 A-8
<PAGE> 34
------------------
AIM BLUE CHIP FUND
------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- --------------------------------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- ----------------------------------
AIM Blue Chip Fund
SEC 1940 Act file number: 811-1424
- ----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com BCH-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 35
AIM CAPITAL DEVELOPMENT FUND
- -------------------------------------------------------------------------------
AIM Capital Development Fund seeks to provide long-term growth of capital.
AIM--Registered Trademark--
PROSPECTUS
MAY 26, 2000
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 36
----------------------------
AIM CAPITAL DEVELOPMENT FUND
----------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con
Disciplina and Invest with Discipline are registered service marks and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 37
----------------------------
AIM CAPITAL DEVELOPMENT FUND
----------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital. The investment
objective of the fund may be changed by the Board of Trustees without
shareholder approval.
The fund seeks to meet its objective by investing primarily in securities,
including common stocks, convertible securities and bonds, of small- and
medium-sized companies. Among factors which the portfolio managers may consider
when purchasing these securities are (1) the growth prospects for a company's
products; (2) the economic outlook for its industry; (3) a company's new product
development; (4) its operating management capabilities; (5) the relationship
between the price of the security and its estimated fundamental value; (6)
relevant market, economic and political environments; and (7) financial
characteristics, such as balance sheet analysis and return on assets. The
portfolio managers consider whether to sell a particular security when any one
of these factors materially changes or when the securities are no longer
considered medium-sized company securities. The fund may also invest up to 25%
of its total assets in foreign securities. Any percentage limitations with
respect to assets of the fund are applied at the time of purchase.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, the
fund may not achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs, which can lower the actual return on your
investment. Active trading may also increase short-term gains and losses, which
may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions and market liquidity. This is
especially true with respect to equity securities of smaller companies, whose
prices may go up and down more than equity securities of larger,
more-established companies. Also, since equity securities of smaller companies
may not be traded as often as equity securities of larger, more-established
companies, it may be difficult or impossible for the fund to sell securities at
a desirable price.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 38
----------------------------
AIM CAPITAL DEVELOPMENT FUND
----------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance. Total return information in the bar chart
and table below has been affected by special market factors, including the
fund's investments in initial public offerings (IPOs), which had a magnified
impact on the fund due to its small asset base. There is no guarantee that, as
the fund's assets grow, it will continue to experience substantially similar
performance.
ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
Total
Year Ended Annual
December 31 Returns
- ----------- -------
<S> <C>
1997 ................................ 23.69%
1998 ................................ 4.53%
1999 ................................ 27.78%
</TABLE>
The Class A shares' year-to-date total return as of March 31, 2000 was [ ]%.
During the periods shown in the bar chart, the highest quarterly return was
30.92% (quarter ended December 31, 1999) and the lowest quarterly return was
- -20.93% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR INCEPTION DATE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A 20.78% 18.30% 06/17/96
Class B 21.81 16.30 10/01/96
Class C 25.74 14.61 08/04/97
Russell Midcap--Registered Trademark-- Index(1) 18.23 18.89 06/30/96(2)
Russell 2000--Registered Trademark-- Index(3) 21.26 12.83(2) 06/30/96(2)
- --------------------------------------------------------------------------------------------
</TABLE>
(1) The Russell Midcap--Registered Trademark-- Index measures the performance of
the lowest 800 companies in the Russell 1000--Registered Trademark-- Index.
These companies are considered representative of medium-sized companies. The
fund has elected to use the Russell Midcap--Registered Trademark-- Index as
its primary index rather than the Russell 2000--Registered Trademark-- Index
since the Russell Midcap--Registered Trademark-- Index more closely reflects
the performance of the securities in which the fund invests.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
(3) The Russell 2000--Registered Trademark-- Index is a widely recognized,
unmanaged index of common stocks that measures the performance of the 2,000
smallest companies in the Russell 3000--Registered Trademark-- Index, which
measures the performance of the 3,000 largest U.S. companies based on total
market capitalization.
2
<PAGE> 39
----------------------------
AIM CAPITAL DEVELOPMENT FUND
----------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- ---------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
- ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - -- - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- --------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.66% 0.66% 0.66%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses 0.37 0.46 0.46
Total Annual Fund
Operating Expenses 1.38 2.12 2.12
- --------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $683 $963 $1,264 $2,116
Class B 715 964 1,339 2,263
Class C 315 664 1,139 2,452
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $683 $963 $1,264 $2,116
Class B 215 664 1,139 2,263
Class C 215 664 1,139 2,452
- ----------------------------------------------
</TABLE>
3
<PAGE> 40
----------------------------
AIM CAPITAL DEVELOPMENT FUND
----------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor. The
advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
The advisor supervises all aspects of the fund's operations and provides
investment advisory services to the fund, including obtaining and evaluating
economic, statistical and financial information to formulate and implement
investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 120
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.66% of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are
- - Edgar M. Larsen, Senior Portfolio Manager, who has been responsible for the
fund since 1996 and has been associated with the advisor and/or its affiliates
since 1996. From 1981 to 1996, he was, among other offices, Senior Vice
President of John Hancock Advisers, Inc. and its predecessors.
- - Paul J. Rasplicka, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its affiliates
since 1994. From 1994 to 1998, he was Portfolio Manager of Institutional Trust
Company, an affiliate of the advisor.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Capital Development Fund are subject to the
maximum 5.50% initial sales charge as listed under the heading "CATEGORY I
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of
capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
4
<PAGE> 41
----------------------------
AIM CAPITAL DEVELOPMENT FUND
----------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
Total return information in this table has been affected by special market
factors, including the fund's investments in initial public offerings (IPOs),
which have had a magnified impact on the fund due to its small asset base. There
is no guarantee that, as the fund's assets grow, it will continue to experience
substantially similar performance.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------
JUNE 17,
YEAR ENDED OCTOBER 31, THROUGH
1999 1998 1997 OCTOBER 31, 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.89 $ 14.57 $ 11.09 $ 10.00
Income from investment operations:
Net investment income (loss) (0.10)(a) (0.06)(a) (0.10)(a) (0.01)(a)
Net gains (losses) on securities (both
realized and unrealized) 2.45 (1.62) (3.58) 1.10
Total from investment operations 2.35 (1.68) 3.48 1.09
Net asset value, end of period $ 15.24 $ 12.89 $ 14.57 $ 11.09
Total return(b) 18.23% (11.53)% 31.38% 10.90%
- ---------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $579,514 $717,263 $577,685 $251,253
Ratio of expenses to average net assets(c) 1.38%(d) 1.28% 1.33% 1.35%(e)
Ratio of net investment income (loss) to
average net assets(f) (0.70)%(d) (0.40)% (0.83)% (0.29)%(e)
Portfolio turnover rate 117% 78% 41% 13%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and is not annualized for periods less than
one year.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.38% and 1.60% (annualized) for 1997-1996 for Class A.
(d) Ratios are based on average net assets of $672,993,650.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursement were (0.88)% and (0.54)% (annualized) for 1997-1996 for
Class A.
5
<PAGE> 42
----------------------------
AIM CAPITAL DEVELOPMENT FUND
----------------------------
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------------- --------------------------------------
OCTOBER 1, YEAR ENDED AUGUST 4,
YEAR ENDED OCTOBER 31, THROUGH OCTOBER 31, THROUGH
1999 1998 1997 OCTOBER 31, 1996 1999 1998 OCTOBER 31, 1997
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $ 12.70 $ 14.46 $ 11.08 $ 11.26 $ 12.69 $ 14.45 $ 13.48
Income from investment
operations:
Net investment income
(loss) (0.20)(a) (0.16)(a) (0.20)(a) (0.01)(a) (0.20)(a) (0.16) (0.06)(a)
Net gains (losses) on
securities (both
realized and
unrealized) 2.40 (1.60) 3.58 (0.17) 2.40 (1.60) 1.03
Total from investment
operations 2.20 (1.76) 3.38 (0.18) 2.20 (1.76) 0.97
Net asset value, end of
period $ 14.90 $ 12.70 $ 14.46 $ 11.08 $ 14.89 $ 12.69 $ 14.45
Total return(a) 17.32% (12.17)% 30.51% (1.60)% 17.34% (12.18)% 7.20%
- -------------------------------------------------------------------------------------------------------------------
Ratios/supplemental
data:
- -------------------------------------------------------------------------------------------------------------------
Net assets, end of
period (000s omitted) $451,508 $493,993 $297,623 $22,435 $ 53,832 $ 48,293 $12,195
Ratio of expenses to
average net assets(c) 2.12%(d) 2.02% 2.09% 1.89%(e) 2.12%(d) 2.02% 2.14%(e)
Ratio of net investment
income (loss) to
average net assets(f) (1.44)%(d) (1.14)% (1.59)% (0.83)%(e) (1.44)%(d) (1.14)% (1.64)%(e)
Portfolio turnover rate 117% 78% 41% 13% 117% 78% 41%
- --------------------------------------------------------------------------- --------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.14% and 2.28% (annualized) for 1997-1996 for Class B and 2.19%
(annualized) for 1997 for Class C, respectively.
(d) Ratios are based on average net assets of $498,177,719 and $55,229,231 for
Class B and Class C, respectively.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (1.64)% and (1.22)% (annualized) for 1997-1996 for Class
B and (1.69)% (annualized) for 1997 for Class C.
6
<PAGE> 43
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and
continue to hold them, those shares will convert to Class A shares of
that fund seven years after the end of the month in which shares were
purchased. If you exchange those shares for Class B shares of another
AIM Fund, the shares into which you exchanged will not convert to
Class A shares until eight years after the end of the month in which
you purchased your original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--03/00
<PAGE> 44
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- -------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--03/00 A-2
<PAGE> 45
--------------
THE AIM FUNDS
--------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ---------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--03/00
<PAGE> 46
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted
to establish a retirement plan. You may use AIM Funds-sponsored retirement
plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k)
plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing
plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--03/00 A-4
<PAGE> 47
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet
Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet.
The transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- -------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--03/00
<PAGE> 48
--------------
THE AIM FUNDS
--------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
MCF--03/00 A-6
<PAGE> 49
--------------
THE AIM FUNDS
--------------
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- -------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
------------------------------------------------------------------------------
A-7 MCF--03/00
<PAGE> 50
--------------
THE AIM FUNDS
--------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund 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.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares on each day the
NYSE is open for business, as of the close of the customary trading session, or
any earlier NYSE closing time that day. AIM Money Market Fund also determines
its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open
for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--03/00 A-8
<PAGE> 51
----------------------------
AIM CAPITAL DEVELOPMENT FUND
----------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports only)
</TABLE>
- --------------------------------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
-----------------------------------
AIM Capital Development Fund
SEC 1940 Act file number: 811-1424
-----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com CDV-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 52
AIM CHARTER FUND
--------------------------------------------------------------------------
AIM Charter Fund seeks to provide growth of capital with a secondary
objective of current income.
PROSPECTUS AIM--Registered Trademark--
MAY 26, 2000
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 53
----------------
AIM CHARTER FUND
----------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con
Disciplina and Invest with Discipline are registered service marks and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 54
----------------
AIM CHARTER FUND
----------------
INVESTMENT OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's primary investment objective is growth of capital with a secondary
objective of current income. The investment objectives of the fund may be
changed by the Board of Trustees without shareholder approval.
The fund seeks to meet its objectives by investing at least 65% of its total
assets in securities of established companies that have long-term above-average
growth in earnings and dividends, and growth companies that the portfolio
managers believe have the potential for above-average growth in earnings and
dividends. The portfolio managers consider whether to sell a particular security
when they believe the security no longer has that potential. The fund may also
invest up to 20% of its total assets in foreign securities. Any percentage
limitations with respect to assets of the fund are applied at the time of
purchase.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, the
fund may not achieve its investment objectives.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objectives. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment. Active trading may also increase
short-term capital gains and losses, which may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you receive from your investment may vary. The value of
your investment in the fund will go up and down with the prices of the
securities in which the fund invests. The prices of equity securities change in
response to many factors including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions and market liquidity. The values of the convertible
securities in which the fund may invest also will be affected by market interest
rates, the risk that the issuer may default on interest or principal payments
and the value of the underlying common stock into which these securities may be
converted. Specifically, since these types of convertible securities pay fixed
interest and dividends, their values may fall if market interest rates rise and
rise if market interest rates fall. Additionally, an issuer may have the right
to buy back certain of the convertible securities at a time and at a price that
is unfavorable to the fund.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 55
----------------
AIM CHARTER FUND
----------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
<S> <C>
1990 ....................................... 8.23%
1991 ....................................... 37.77%
1992 ....................................... 1.13%
1993 ....................................... 9.39%
1994 ....................................... -4.26%
1995 ....................................... 35.68%
1996 ....................................... 19.58%
1997 ....................................... 24.73%
1998 ....................................... 26.83%
1999 ....................................... 33.87%
</TABLE>
The Class A shares' year-to-date total return as of March 31, 2000 was [ ]%.
During the periods shown in the bar chart, the highest quarterly return was
26.08% (quarter ended December 31, 1998) and the lowest quarterly return was
- -11.89% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended
SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 26.49% 26.57% 17.76% 14.91% 11/26/68
Class B 27.82 -- -- 24.72 06/26/95
Class C 31.80 -- -- 23.09 08/04/97
S&P 500(1) 21.03 28.54 18.19 12.75(2) 11/30/68(2)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
2
<PAGE> 56
----------------
AIM CHARTER FUND
----------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- -------------------------------------------------------
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.63% 0.63% 0.63%
Distribution and/or
Service (12b-1) Fees 0.30 1.00 1.00
Other Expenses 0.14 0.19 0.19
Total Annual Fund
Operating Expenses 1.07 1.82 1.82
Fee Waiver(2) 0.02 0.02 0.02
Net Expenses 1.05 1.80 1.80
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) The investment advisor has contractually agreed to waive a portion of its
fees.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's gross operating expenses remain the same. To the extent fees are waived,
the expenses will be lower. Although your actual returns and costs may be higher
or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $653 $872 $1,108 $1,784
Class B 685 873 1,185 1,940
Class C 285 573 985 2,137
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $653 $872 $1,108 $1,784
Class B 185 573 985 1,940
Class C 185 573 985 2,137
- ----------------------------------------------
</TABLE>
3
<PAGE> 57
----------------
AIM CHARTER FUND
----------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor.
A I M Capital Management, Inc. (the subadvisor), a wholly owned subsidiary of
the advisor, is the fund's subadvisor and is responsible for its day-to-day
management. Both the advisor and the subadvisor are located at 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173. The advisors supervise all aspects
of the fund's operations and provide investment advisory services to the fund,
including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976,
and the subadvisor has acted as an investment advisor since 1986. Today, the
advisor, together with its subsidiaries, advises or manages over 120 investment
portfolios, including the fund, encompassing a broad range of investment
objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.61% of average daily net assets.
PORTFOLIO MANAGERS
The advisors use a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of the subadvisor, are
- - Monika H. Degan, Portfolio Manager, who has been responsible for the fund
since 2000 and has been associated with the advisor and/or its affiliates
since 1995.
- - Lanny H. Sachnowitz, Senior Portfolio Manager, who has been responsible for
the fund since 1991 and has been associated with the advisor and/or its
affiliates since 1987.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Charter Fund are subject to the maximum 5.50%
initial sales charge as listed under the heading "CATEGORY I Initial Sales
Charges" in the "Shareholder Information--Choosing a Share Class" section of
this prospectus. Purchases of Class B and Class C shares are subject to the
contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of
capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
4
<PAGE> 58
----------------
AIM CHARTER FUND
----------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.32 $ 13.41 $ 11.19 $ 10.63 $ 8.90
Income from investment operations:
Net investment income 0.02 0.12 0.10 0.19 0.15
Net gains (losses) on securities (both
realized and unrealized) 4.39 1.23 2.91 1.43 2.11
Total from investment operations 4.41 1.35 3.01 1.62 2.26
Less distributions:
Dividends from net investment income (0.03) (0.10) (0.12) (0.16) (0.20)
Distributions from net realized gains (0.54) (1.34) (0.67) (0.90) (0.33)
Total distributions (0.57) (1.44) (0.79) (1.06) (0.53)
Net asset value, end of period $ 17.16 $ 13.32 $ 13.41 $ 11.19 $ 10.63
Total return(a) 34.05% 11.20% 28.57% 16.70% 27.03%
- ------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $4,948,666 $3,706,938 $3,466,912 $2,647,208 $1,974,417
Ratio of expenses (exclusive of interest) to
average net assets(b) 1.05%(c) 1.08% 1.09% 1.12% 1.17%
Ratio of net investment income to average net
assets(d) 0.11%(c) 0.95% 0.79% 1.81% 1.55%
Portfolio turnover rate 107% 154% 170% 164% 161%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct sales charges.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.07%, 1.10% and 1.10% for 1999-1997.
(c) Ratios are based on average net assets of $4,518,746,255.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursement were 0.09%, 0.93% and 0.78% for 1999-1997.
5
<PAGE> 59
----------------
AIM CHARTER FUND
----------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B CLASS C
-------------------------------------------------------------- ----------------------------------
JUNE 26, AUGUST 4,
THROUGH YEAR ENDED THROUGH
YEAR ENDED OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1999 1998 1997 1996 1996 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 13.24 $ 13.37 $ 11.18 $ 10.62 $ 9.81 $ 13.27 $ 13.39 $13.86
Income from investment
operations:
Net investment income (0.10) 0.02 0.01 0.10 0.03 (0.09) 0.02(a) --
Net gains (losses) on
securities (both realized
and unrealized) 4.37 1.22 2.89 1.45 0.80 4.37 1.23 (0.45)
Total from investment
operations 4.27 1.24 2.90 1.55 0.83 4.28 1.25 (0.45)
Less distributions:
Dividends from net investment
income -- (0.03) (0.04) (0.09) (0.02) -- (0.03) --
Distributions from net
realized gains (0.54) (1.34) (0.67) (0.90) -- (0.54) (1.34) (0.02)
Total distributions (0.54) (1.37) (0.71) (0.99) (0.02) (0.54) (1.37) (0.02)
Net asset value, end of period $ 16.97 $ 13.24 $ 13.37 $ 11.18 $ 10.62 $ 17.01 $ 13.27 $13.39
Total return(b) 33.06% 10.33% 27.54% 15.90% 8.48% 33.06% 10.39% (3.24)%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(000s omitted) $2,206,752 $1,408,687 $1,056,094 $515,672 $67,592 $138,467 $37,846 $5,669
Ratio of expenses
(exclusive of interest)
to average net assets(c) 1.80%(d) 1.84% 1.85% 1.94% 1.98%(f) 1.80%(d) 1.84% 1.82%(f)
Ratio of net investment
income to average
net assets(e) (0.64)%(d) 0.19% 0.03% 0.99% 0.74%(f) (0.64)%(d) 0.19% 0.06%(f)
Portfolio turnover rate 107% 154% 170% 164% 161% 107% 154% 170%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.82%, 1.86% and 1.86% for 1999-1997 for Class B and 1.82%, 1.86% and 1.83%
(annualized) for 1999-1997 for Class C.
(d) Ratios are based on average net assets of $1,863,108,558 and $80,932,531
for Class B and Class C, respectively.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursement were (0.66)%, 0.17% and 0.02% for 1999-1997 for Class B and
(0.66)%, 0.17% and 0.04% (annualized) for 1999-1997 for Class C.
(f) Annualized.
6
<PAGE> 60
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and
continue to hold them, those shares will convert to Class A shares of
that fund seven years after the end of the month in which shares were
purchased. If you exchange those shares for Class B shares of another
AIM Fund, the shares into which you exchanged will not convert to
Class A shares until eight years after the end of the month in which
you purchased your original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--03/00
<PAGE> 61
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- -------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--03/00 A-2
<PAGE> 62
--------------
THE AIM FUNDS
--------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ---------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--03/00
<PAGE> 63
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted
to establish a retirement plan. You may use AIM Funds-sponsored retirement
plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k)
plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing
plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--03/00 A-4
<PAGE> 64
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet
Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet.
The transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- -------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--03/00
<PAGE> 65
--------------
THE AIM FUNDS
--------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
MCF--03/00 A-6
<PAGE> 66
--------------
THE AIM FUNDS
--------------
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- -------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
------------------------------------------------------------------------------
A-7 MCF--03/00
<PAGE> 67
--------------
THE AIM FUNDS
--------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund 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.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares on each day the
NYSE is open for business, as of the close of the customary trading session, or
any earlier NYSE closing time that day. AIM Money Market Fund also determines
its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open
for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--03/00 A-8
<PAGE> 68
----------------
AIM CHARTER FUND
----------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- your account, or wish to obtain free copies of the
fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- -----------------------------------
AIM Charter Fund
SEC 1940 Act file number: 811-1424
- -----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com CHT-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 69
AIM CONSTELLATION FUND
--------------------------------------------------------------------------
AIM Constellation Fund seeks to provide growth of capital.
AIM--Registered Trademark--
PROSPECTUS
MAY 26, 2000
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 70
----------------------
AIM CONSTELLATION FUND
----------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE
FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con
Disciplina and Invest with Discipline are registered service marks and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 71
----------------------
AIM CONSTELLATION FUND
----------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is growth of capital. The investment objective
of the fund may be changed by the Board of Trustees without shareholder
approval.
The fund seeks to meet its objective by investing principally in common
stocks of companies the portfolio managers believe are likely to benefit from
new or innovative products, services or processes as well as those that have
experienced above-average, long-term growth in earnings and have excellent
prospects for future growth. The portfolio managers consider whether to sell a
particular security when it no longer meets these criteria. The fund may also
invest up to 20% of its total assets in foreign securities. Any percentage
limitations with respect to assets of the fund are applied at the time
of purchase.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, the
fund may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions and market liquidity. This is
especially true with respect to equity securities of smaller companies, whose
prices may go up and down more than equity securities of larger,
more-established companies. Also, since equity securities of smaller companies
may not be traded as often as equity securities of larger, more-established
companies, it may be difficult or impossible for the fund to sell securities at
a desirable price.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 72
----------------------
AIM CONSTELLATION FUND
----------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
<S> <C>
1990 ........................................... -4.09%
1991 ........................................... 70.41%
1992 ........................................... 15.03%
1993 ........................................... 17.29%
1994 ........................................... 1.30%
1995 ........................................... 35.45%
1996 ........................................... 16.27%
1997 ........................................... 12.92%
1998 ........................................... 18.89%
1999 ........................................... 44.38%
</TABLE>
The Class A shares' year-to-date total return as of March 31, 2000 was [ ]%.
During the periods shown in the bar chart, the highest quarterly return was
36.59% (quarter ended December 31, 1999) and the lowest quarterly return was
- -26.24% (quarter ended September 30, 1990).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 36.43% 23.60% 20.48% 19.38% 04/30/76
Class B 38.14 -- -- 23.16 11/03/97
Class C 42.15 -- -- 21.01 08/04/97
S&P 500(1) 21.03 28.54 18.19 16.09 04/30/76(2)
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used on a general measure of U.S. stock market performance.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
2
<PAGE> 73
----------------------
AIM CONSTELLATION FUND
----------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- -------------------------------------------------------
(fees paid directly
from your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C> <C>
Management Fees 0.63% 0.63% 0.63%
Distribution and/or
Service (12b-1) Fees 0.30 1.00 1.00
Other Expenses 0.19 0.37 0.37
Total Annual Fund
Operating Expenses 1.12 2.00 2.00
Fee Waiver(2) 0.02 0.02 0.02
Net Expenses 1.10 1.98 1.98
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) The investment advisor has contractually agreed to waive a portion of its
fees.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's gross operating expenses remain the same. To the extent fees are waived
or expenses are reimbursed, the expenses will be lower. Although your actual
returns and costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $658 $886 $1,133 $1,838
Class B 703 927 1,278 2,100
Class C 303 627 1,078 2,327
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $658 $886 $1,133 $1,838
Class B 203 627 1,078 2,100
Class C 203 627 1,078 2,327
- ----------------------------------------------
</TABLE>
3
<PAGE> 74
----------------------
AIM CONSTELLATION FUND
----------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor.
A I M Capital Management, Inc. (the subadvisor), a wholly owned subsidiary of
the advisor, is the fund's subadvisor and is responsible for its day-to-day
management. Both the advisor and the subadvisor are located at 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173. The advisors supervise all aspects
of the fund's operations and provide investment advisory services to the fund,
including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976,
and the subadvisor has acted as an investment advisor since 1986. Today, the
advisor, together with its subsidiaries, advises or manages over 120 investment
portfolios, including the fund, encompassing a broad range of investment
objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.61% of average daily net assets.
PORTFOLIO MANAGERS
The advisors use a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of the subadvisor, are
- - David P. Barnard, Senior Portfolio Manager, who has been responsible for the
fund since 1990 and has been associated with the advisor and/or its affiliates
since 1982.
- - Steven A. Brase, Portfolio Manager, who has been responsible for the fund
since 2000 and has been associated with the advisor and/or its affiliates
since 1998. From 1995 to 1998, he was Associate Portfolio Manager and Partner
for Bricoleur Capital Management, Inc.
- - Brant H. DeMuth, Senior Portfolio Manager, who has been responsible for the
fund since 2000 and has been associated with the advisor and/or its affiliates
since 1996. From 1992 to 1996, he was Portfolio Manager for Colorado Public
Employee's Retirement Association.
- - Robert M. Kippes, Senior Portfolio Manager, who has been responsible for the
fund since 1993 and has been associated with the advisor and/or its affiliates
since 1989.
- - Christopher P. Perras, Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1999. From 1997 to 1999, he was an equity analyst at Van Wagoner Capital
Management. From 1995 to 1997, he was Associate Portfolio Manager for Van
Kampen American Capital Asset Management, Inc.
- - Charles D. Scavone, Senior Portfolio Manager, who has been responsible for the
fund since 1996 and has been associated with the advisor and/or its affiliates
since 1996. From 1994 to 1996, he was Associate Portfolio Manager for Van
Kampen American Capital Asset Management, Inc.
- - Kenneth A. Zschappel, Senior Portfolio Manager, who has been responsible for
the fund since 1996 and has been associated with the advisor and/or its
affiliates since 1990.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Constellation Fund are subject to the maximum
5.50% initial sales charge as listed under the heading "CATEGORY I Initial Sales
Charges" in the "Shareholder Information--Choosing a Share Class" section of
this prospectus. Purchases of Class B and Class C shares are subject to the
contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of
capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
4
<PAGE> 75
----------------------
AIM CONSTELLATION FUND
----------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 26.37 $ 29.23 $ 25.48 $ 23.69 $ 18.31
Income from investment operations:
Net investment income (loss) (0.17) (0.14) (0.11) (0.06) (0.05)
Net gains (losses) on securities (both
realized and unrealized) 9.18 (0.62) 4.75 2.60 5.95
Total from investment operations 9.01 (0.76) 4.64 2.54 5.90
Distributions from net realized gains (0.73) (2.10) (0.89) (0.75) (0.52)
Net asset value, end of period $ 34.65 $ 26.37 $ 29.23 $ 25.48 $ 23.69
Total return(a) 34.81% (2.30)% 18.86% 11.26% 33.43%
- ----------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $14,292,905 $12,391,844 $14,319,441 $11,255,506 $7,000,350
Ratio of expenses to average net assets(b) 1.10%(c) 1.10% 1.11% 1.14% 1.16%
Ratio of net investment income (loss) to average
net assets(d) (0.50)%(c) (0.47)% (0.40)% (0.27)% (0.32)%
Portfolio turnover 62% 76% 67% 58% 45%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct sales charges.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.12%, 1.12%, 1.13%, 1.16% and 1.18% for 1999-1995.
(c) Ratios are based on average net assets of $13,661,148,228.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursement were (0.52)%, (0.50)%, (0.42)%, (0.29)% and (0.34)% for
1999-1995.
<TABLE>
<CAPTION>
CLASS B CLASS C
- -------------------------------------------------------------------------------------------------------------------------
AUGUST 4
YEAR ENDED NOVEMBER 3, 1997 YEAR ENDED THROUGH
OCTOBER 31, THROUGH OCTOBER 31, OCTOBER 31,
1999 OCTOBER 31, 1998 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 26.11 $ 30.04 $ 26.10 $ 29.18 $ 30.32
Income from investment operations:
Net investment income (loss) (0.42) (0.37)(a) (0.42) (0.37)(a) (0.04)
Net gains (losses) on securities (both
realized and unrealized) 9.04 (1.46) 9.04 (0.61) (1.10)
Total from investment operations 8.62 (1.83) 8.62 (0.98) (1.14)
Distributions from net realized gains (0.73) (2.10) (0.73) (2.10) --
Net asset value, end of period $ 34.00 $ 26.11 $ 33.99 $ 26.10 $ 29.18
Total return(b) 33.64% (5.86)% 33.65% (3.12)% (3.76)%
- -------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $589,718 $275,676 $161,490 $76,522 $21,508
Ratio of expenses to average net assets(c) 1.98%(d) 1.98%(e) 1.98%(d) 1.97% 1.84%(e)
Ratio of net investment income (loss) to
average net assets(f) (1.38)%(d) (1.36)%(e) (1.38)%(d) (1.35)% (1.12)%(e)
Portfolio turnover rate 62% 76% 62% 76% 67%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.00% and 2.00% (annualized) for 1999-1998 for Class B and 2.00%, 1.99% and
1.86% (annualized) for 1999-1997 for Class C.
(d) Ratios are based on average net assets of $436,573,129 and $117,521,680 for
Class B and Class C, respectively.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (1.40)% and (1.38)% (annualized) for 1999-1998 for Class
B and (1.40)%, (1.37)% and (1.15)% (annualized) for 1999-1997 for Class C.
5
<PAGE> 76
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and
continue to hold them, those shares will convert to Class A shares of
that fund seven years after the end of the month in which shares were
purchased. If you exchange those shares for Class B shares of another
AIM Fund, the shares into which you exchanged will not convert to
Class A shares until eight years after the end of the month in which
you purchased your original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--03/00
<PAGE> 77
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- -------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--03/00 A-2
<PAGE> 78
--------------
THE AIM FUNDS
--------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ---------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--03/00
<PAGE> 79
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted
to establish a retirement plan. You may use AIM Funds-sponsored retirement
plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k)
plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing
plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--03/00 A-4
<PAGE> 80
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet
Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet.
The transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- -------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--03/00
<PAGE> 81
--------------
THE AIM FUNDS
--------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
MCF--03/00 A-6
<PAGE> 82
--------------
THE AIM FUNDS
--------------
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- -------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
------------------------------------------------------------------------------
A-7 MCF--03/00
<PAGE> 83
--------------
THE AIM FUNDS
--------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund 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.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares on each day the
NYSE is open for business, as of the close of the customary trading session, or
any earlier NYSE closing time that day. AIM Money Market Fund also determines
its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open
for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--03/00 A-8
<PAGE> 84
----------------------
AIM CONSTELLATION FUND
----------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- -----------------------------------
AIM Constellation Fund
SEC 1940 Act file number: 811-1424
- -----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com CST-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 85
AIM DENT
DEMOGRAPHIC TRENDS FUND
--------------------------------------------------------------------------
AIM Dent Demographic Trends Fund seeks to provide long-term growth of
capital.
AIM--Registered Trademark--
PROSPECTUS
MAY 26, 2000
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered trademark--
<PAGE> 86
--------------------------------
AIM DENT DEMOGRAPHIC TRENDS FUND
--------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
FEE TABLE AND EXPENSE EXAMPLE 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 2
Expense Example 2
FUND MANAGEMENT 3
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 3
Advisor Compensation 3
Portfolio Managers 3
OTHER INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 3
Dividends and Distributions 3
FINANCIAL HIGHLIGHTS 4
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con
Disciplina and Invest with Discipline are registered service marks and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 87
--------------------------------
AIM DENT DEMOGRAPHIC TRENDS FUND
--------------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital. The investment
objective of the fund may be changed by the Board of Trustees without
shareholder approval.
The fund seeks to meet its objective by investing in securities of companies
that are likely to benefit from changing demographic, economic and lifestyle
trends. These securities may include common stocks, convertible bonds,
convertible preferred stocks and warrants of companies within a broad range of
market capitalizations. The fund may also invest up to 25% of its total assets
in foreign securities. Any percentage limitations with respect to assets of
the fund are applied at the time of purchase.
The portfolio managers purchase securities of companies that have experienced,
or that they believe have the potential for, above-average, long-term growth in
revenues and earnings. The portfolio managers consider whether to sell a
particular security when they believe the security no longer has that potential.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, the
fund may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions and market liquidity. This is
especially true with respect to equity securities of small- and medium-sized
companies, whose prices may go up and down more than the prices of equity
securities of larger, more established companies. Also, since equity securities
of small- and medium-sized companies may not be traded as often as equity
securities of larger, more established companies, it may be difficult or
impossible for the fund to sell securities at a desired price.
The prices of growth stocks in which the fund invests may rise and fall more
than the prices of stocks generally.
The values of the convertible securities in which the fund may invest also
will be affected by market interest rates, the risk that the issuer may default
on interest or principal payments and the value of the underlying common stock
into which these securities may be converted. Specifically, since these types of
convertible securities pay fixed interest and dividends, their values may fall
if market interest rates rise and rise if market interest rates fall.
Additionally, an issuer may have the right to buy back certain of the
convertible securities at a time and at a price that is unfavorable to the fund.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 88
--------------------------------
AIM DENT DEMOGRAPHIC TRENDS FUND
--------------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- ---------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
- ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.85% 0.85% 0.85%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses 0.45 0.44 0.44
Total Annual Fund
Operating Expenses 1.65 2.29 2.29
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $709 $1,042 $1,398 $2,397
Class B 732 1,015 1,425 2,465
Class C 332 715 1,225 2,626
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $709 $1,042 $1,398 $2,397
Class B 232 715 1,225 2,465
Class C 232 715 1,225 2,626
- ----------------------------------------------
</TABLE>
2
<PAGE> 89
--------------------------------
AIM DENT DEMOGRAPHIC TRENDS FUND
--------------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all
aspects of the fund's operations and provides investment advisory services to
the fund, including the fund's investment decisions, the execution of securities
transactions, and obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund. H.S.
Dent Advisors, Inc. (the subadvisor) serves as the fund's subadvisor, and is
located at 6515 Gwin Road, Oakland, California 94611. The subadvisor is
responsible for providing the advisor with macroeconomic, thematic, demographic,
lifestyle trends and sector research, custom reports and investment and market
capitalization recommendations for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 120
investment portfolios, including the fund, encompassing a broad range of
investment objectives. The subadvisor has acted as an investment advisor since
1999.
ADVISOR COMPENSATION
The advisor is to receive a fee from the fund calculated at the annual rate of
0.85% of the first $2 billion of average daily net assets and 0.80% over $2
billion of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are
- - Edgar M. Larsen, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1996. From 1981 to 1996, he was, among other offices, Senior Vice
President of John Hancock Advisers, Inc. and its predecessors.
- - Lanny H. Sachnowitz, Senior Portfolio Manager, who has been responsible for
the fund since 1999 and has been associated with the advisor and/or its
affiliates since 1987.
- - Derek H. Webb, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1992.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Dent Demographic Trends Fund are subject to
the maximum 5.50% initial sales charge as listed under the heading "CATEGORY I
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of
capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
3
<PAGE> 90
--------------------------------
AIM DENT DEMOGRAPHIC TRENDS FUND
--------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
Total return information in this table has been affected by special
market factors, including the fund's investments in initial public offerings
(IPOs), which have had a magnified impact on the fund due to its small asset
base. There is no guarantee that, as the fund's assets grow, it will continue to
experience substantially similar performance.
<TABLE>
<CAPTION>
CLASS A
----------------
JUNE 7
THROUGH
OCTOBER 31, 1999
- ------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $ 10.00
Income from investment operations:
Net investment income (loss) (0.03)
Net gains on securities (both realized and unrealized) 2.17
Total from investment operations 2.14
Net asset value, end of period $ 12.14
Total return(a) 21.40%
- ------------------------------------------------------------------------------
Ratios/supplemental data:
- ------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $163,872
Ratio of expenses to average net assets(b) 1.60%
Ratio of net investment income (loss) to average net
assets(d) (1.00)%
Portfolio turnover rate 29%
- ------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct sales charges and is not annualized for periods less than
one year.
(b) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
1.65% (annualized).
(c) Ratios are annualized and based on average net assets of $86,627,852.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements was (1.05)% (annualized).
<TABLE>
<CAPTION>
CLASS B CLASS C
---------------- ----------------
JUNE 7 JUNE 7
THROUGH THROUGH
OCTOBER 31, 1999 OCTOBER 31, 1999
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.00
Income from investment operations:
Net investment income (loss) (0.04) (0.04)
Net gains on securities (both realized and unrealized) 2.15 2.15
Total from investment operations 2.11 2.11
Net asset value, end of period $ 12.11 $ 12.11
Total return(a) 21.10% 21.10%
- ------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $177,430 $51,605
Ratio of expenses to average net assets(b) 2.24% 2.24%
Ratio of net investment income (loss) to average net
assets(d) (1.64)% (1.64)%
Portfolio turnover rate 29% 29%
- ------------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(b) After fee waivers and/or expense reimbursement. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.29% (annualized) for Class B and 2.29% (annualized) for Class C.
(c) Ratios are annualized and based on average net assets of $89,140,054 and
$25,873,790 for Class B and Class C, respectively.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (1.69)% (annualized) for Class B and (1.69)%
(annualized) for Class C.
4
<PAGE> 91
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and
continue to hold them, those shares will convert to Class A shares of
that fund seven years after the end of the month in which shares were
purchased. If you exchange those shares for Class B shares of another
AIM Fund, the shares into which you exchanged will not convert to
Class A shares until eight years after the end of the month in which
you purchased your original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--03/00
<PAGE> 92
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- -------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--03/00 A-2
<PAGE> 93
--------------
THE AIM FUNDS
--------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ---------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--03/00
<PAGE> 94
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted
to establish a retirement plan. You may use AIM Funds-sponsored retirement
plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k)
plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing
plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--03/00 A-4
<PAGE> 95
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet
Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet.
The transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- -------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--03/00
<PAGE> 96
--------------
THE AIM FUNDS
--------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
MCF--03/00 A-6
<PAGE> 97
--------------
THE AIM FUNDS
--------------
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- -------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
------------------------------------------------------------------------------
A-7 MCF--03/00
<PAGE> 98
--------------
THE AIM FUNDS
--------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund 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.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares on each day the
NYSE is open for business, as of the close of the customary trading session, or
any earlier NYSE closing time that day. AIM Money Market Fund also determines
its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open
for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--03/00 A-8
<PAGE> 99
--------------------------------
AIM DENT DEMOGRAPHIC TRENDS FUND
--------------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
- ---------------------------------------------------------
</TABLE>
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- ----------------------------------
AIM Dent Demographic Trends Fund
SEC 1940 Act file number: 811-1424
- ----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com DDT-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 100
AIM EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
AIM Emerging Growth Fund seeks to provide long-term growth of capital.
PROSPECTUS AIM--Registered Trademark--
MAY 26, 2000
This prospectus contains important
information about the Class A, B,
and C shares of the fund. Please
read it before investing and keep it
for future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 101
------------------------
AIM EMERGING GROWTH FUND
------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FEE TABLE AND EXPENSE EXAMPLE 2
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 2
Expense Example 2
FUND MANAGEMENT 3
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 3
Advisor Compensation 3
Portfolio Managers 3
OTHER INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 3
Dividends and Distributions 3
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con
Disciplina and Invest with Discipline are registered service marks and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 102
-------------------------
AIM EMERGING GROWTH FUND
-------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital. The investment
objective of the fund may be changed by the Board of Trustees without
shareholder approval.
The fund seeks to meet its objective by investing in securities of companies
the portfolio managers believe are likely to benefit from new or innovative
products, services or processes. These securities may include common stocks,
convertible bonds, convertible preferred stocks and warrants. While the fund
will invest without regard to market capitalization, the fund expects to invest
a significant portion of its assets in securities of small-and medium-sized
companies. Under normal conditions, the top 10 holdings may comprise at least a
third of the portfolio's net assets. The fund may also invest up to 25% of its
total assets in foreign securities. Any percentage limitations with respect to
assets of the fund are applied at the time of purchase.
The portfolio managers purchase securities of companies that have experienced,
or that they believe have the potential for, above-average, long-term growth.
The portfolio managers consider whether to sell a particular security when they
believe the security no longer has that potential.
The fund is non-diversified. This means that with respect to 50% of its
assets, it is permitted to invest more than 5% of its assets in the securities
of any one issuer.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, the
fund may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions and market liquidity. This is
especially true with respect to equity securities of small- and medium-sized
companies, whose prices may go up and down more than the prices of equity
securities of larger, more established companies. Also, since equity securities
of small- and medium-sized companies may not be traded as often as equity
securities of larger, more established companies, it may be difficult or
impossible for the fund to sell securities at a desired price.
The values of the convertible securities in which the fund may invest also
will be affected by market interest rates, the risk that the issuer may default
on interest or principal payments and the value of the underlying common stock
into which these securities may be converted. Specifically, since these types of
convertible securities pay fixed interest and dividends, their values may fall
if market interest rates rise and rise if market interest rates fall.
Additionally, an issuer may have the right to buy back certain of the
convertible securities at a time and at a price that is unfavorable to the fund.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
Because a large percentage of the fund's assets may be invested in a limited
number of securities, and because the fund is non-diversified, the fund will
invest in fewer securities than if it were a diversified fund. Thus, a change in
the value of these securities could significantly affect the value of your
investment in the fund.
The fund may participate in the initial public offering (IPO) market, and a
significant portion of the fund's return may be attributable to its investment
in IPOs, which may have a magnified impact due to the fund's small asset base.
As the fund's assets grow, it is probable that the effect of the fund's
investment in IPOs on its total returns will decline, which may reduce the
fund's total returns.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 103
-------------------------
AIM EMERGING GROWTH FUND
-------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- --------------------------------------------------------
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- --------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
- --------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- --------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.85% 0.85% 0.85%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses(2) [0.48] [0.52] [0.52]
Total Annual Fund
Operating Expenses [1.68%] [2.37%] [2.37%]
- --------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) Other expenses are based on estimated amounts for the current fiscal year.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more
than the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- ------------------------------------
<S> <C> <C>
Class A $711 $1,050
Class B 740 1,039
Class C 340 739
- ------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- ------------------------------------
<S> <C> <C>
Class A $711 $1,050
Class B 240 739
Class C 240 739
- ------------------------------------
</TABLE>
2
<PAGE> 104
-------------------------
AIM EMERGING GROWTH FUND
-------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. serves as the fund's investment advisor. The advisor is
located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor
supervises all aspects of the fund's operations and provides investment advisory
services to the fund, including obtaining and evaluating economic, statistical
and financial information to formulate and implement investment programs for the
fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 120
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
The advisor is to receive a fee from the fund calculated at the annual rate of
0.85% of the first $1 billion of average daily net assets and 0.80% of assets
over $1 billion of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are
- - Ryan E. Crane, Portfolio Manager, who has been responsible for the fund since
2000 and has been associated with the advisor and/or its affiliates since
1994.
- - Robert M. Kippes, Portfolio Manager, who has been responsible for the fund
since 2000 and has been associated with the advisor and/or its affiliates
since 1989.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Emerging Growth Fund are subject to the
maximum 5.50% initial sales charge as listed under the heading "CATEGORY I
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of
capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
3
<PAGE> 105
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and
continue to hold them, those shares will convert to Class A shares of
that fund seven years after the end of the month in which shares were
purchased. If you exchange those shares for Class B shares of another
AIM Fund, the shares into which you exchanged will not convert to
Class A shares until eight years after the end of the month in which
you purchased your original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--03/00
<PAGE> 106
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- -------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--03/00 A-2
<PAGE> 107
--------------
THE AIM FUNDS
--------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ---------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--03/00
<PAGE> 108
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted
to establish a retirement plan. You may use AIM Funds-sponsored retirement
plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k)
plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing
plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--03/00 A-4
<PAGE> 109
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet
Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet.
The transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- -------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--03/00
<PAGE> 110
--------------
THE AIM FUNDS
--------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
MCF--03/00 A-6
<PAGE> 111
--------------
THE AIM FUNDS
--------------
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- -------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
------------------------------------------------------------------------------
A-7 MCF--03/00
<PAGE> 112
--------------
THE AIM FUNDS
--------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund 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.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares on each day the
NYSE is open for business, as of the close of the customary trading session, or
any earlier NYSE closing time that day. AIM Money Market Fund also determines
its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open
for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--03/00 A-8
<PAGE> 113
-------------------------
AIM EMERGING GROWTH FUND
-------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- ----------------------------------
AIM EMERGING GROWTH FUND
SEC 1940 Act file number: 811-1424
- ----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com EMG-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 114
AIM LARGE CAP
BASIC VALUE FUND
--------------------------------------------------------------------------
AIM Large Cap Basic Value Fund seeks to provide long-term growth of
capital with a secondary objective of current income.
AIM--Registered Trademark--
MAY 26, 2000
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 115
------------------------------
AIM LARGE CAP BASIC VALUE FUND
------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
FEE TABLE AND EXPENSE EXAMPLE 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 2
Expense Example 2
FUND MANAGEMENT 3
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 3
Advisor Compensation 3
Portfolio Managers 3
OTHER INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 3
Dividends and Distributions 3
FINANCIAL HIGHLIGHTS 4
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con
Disciplina and Invest with Discipline are registered service marks and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 116
------------------------------
AIM LARGE CAP BASIC VALUE FUND
------------------------------
INVESTMENT OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's primary investment objective is long-term growth of capital with a
secondary objective of current income. The investment objectives of the fund may
be changed by the Board of Trustees without shareholder approval.
The fund seeks to meet its objectives by investing in large-capitalization
company securities that offer potential for capital growth, and may offer
potential for current income. These securities may include common stocks,
convertible bonds, convertible preferred stocks and warrants of companies with
market capitalizations that are within the range of stocks in the Russell
1000--Registered Trademark-- Value Index at the time of purchase. Under normal
conditions, the top 10 holdings may comprise at least a third of the portfolio's
net assets. The fund may also invest up to 25% of its total assets in foreign
securities. The fund may also invest in debt instruments that are consistent
with its investment objectives of long-term growth of capital and current
income. Any percentage limitations with respect to assets of the fund are
applied at the time of purchase.
The portfolio managers purchase securities of companies that they believe have
the potential for above-average growth in revenues and earnings and that they
believe are undervalued in relation to long-term earning power or other factors.
The portfolio managers consider whether to sell a particular security when they
believe the security no longer has that potential.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, the
fund may not achieve its investment objectives.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions and market liquidity. Debt
securities are particularly vulnerable to credit risk and interest rate
fluctuations. When interest rates rise, bond prices fall; the longer a bond's
duration, the more sensitive it is to this risk.
The prices of growth stocks in which the fund invests may rise and fall more
than the prices of stocks generally.
The values of the convertible securities in which the fund may invest also
will be affected by market interest rates, the risk that the issuer may default
on interest or principal payments and the value of the underlying common stock
into which these securities may be converted. Specifically, since these types of
convertible securities pay fixed interest and dividends, their values may fall
if market interest rates rise and rise if market interest rates fall.
Additionally, an issuer may have the right to buy back certain of the
convertible securities at a time and at a price that is unfavorable to the fund.
Also, since a large percentage of the fund's assets will be invested in a
limited number of securities, any change in value of those securities could
significantly affect the value of your investment in the fund.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
The fund may participate in the initial public offering (IPO) market. Because
of the fund's small asset base, any investment the fund may make in IPOs may
significantly increase the fund's total return. As the fund's assets grow, the
impact of IPO investments will decline, which may reduce the fund's total
return.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 117
------------------------------
AIM LARGE CAP BASIC VALUE FUND
------------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- -------------------------------------------------------
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B(2) CLASS C(2)
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.60% 0.60% 0.60%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses 9.07 9.10 9.10
Total Annual Fund
Operating Expenses 10.02 10.70 10.70
Expense
Reimbursement(3) 8.77 8.77 8.77
Net Expenses 1.25 1.93 1.93
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) Class of shares not currently offered for sale. Expenses are based on those
of Class A shares.
(3) The investment advisor has contractually agreed to limit net expenses so
that net expenses are 1.25%, 1.93% and 1.93%, respectively.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's gross operating expenses remain the same. To the extent fees are waived
or expenses are reimbursed, the expenses will be lower. Although your actual
returns and costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- --------------------------------------
<S> <C> <C>
Class A $1,473 $3,183
Class B 1,540 3,244
Class C 1,140 2,944
- --------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- --------------------------------------
<S> <C> <C>
Class A $1,473 $3,183
Class B 1,040 2,944
Class C 1,040 2,944
- --------------------------------------
</TABLE>
2
<PAGE> 118
------------------------------
AIM LARGE CAP BASIC VALUE FUND
------------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
is responsible for its day-to-day management. The advisor is located at 11
Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all
aspects of the fund's operations and provides investment advisory services to
the fund, including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 120
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
The advisor is to receive a fee from the fund calculated at the annual rate of
0.60% of the first $1 billion of average daily net assets, 0.575% over $1
billion to and including $2 billion of average daily net assets and 0.55% of
average daily net assets over $2 billion.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are
- - Evan G. Harrel, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1998. From 1994 to 1998, he was Vice President and Portfolio Manager
with Van Kampen American Capital Asset Management, Inc.
- - Matthew W. Seinsheimer, Portfolio Manager, who has been responsible for the
fund since 2000 and has been associated with the advisor and/or its affiliates
since 1998. From 1995 to 1998, he was Portfolio Manager for American Indemnity
Company.
- - Bret W. Stanley, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1998. From 1994 to 1998, he was Vice President and Portfolio Manager
with Van Kampen American Capital Asset Management, Inc.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Large Cap Basic Value Fund are subject to the
maximum 5.50% initial sales charge as listed under the heading "CATEGORY I
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of
capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
3
<PAGE> 119
------------------------------
AIM LARGE CAP BASIC VALUE FUND
------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
CLASS A
-----------------------
JUNE 30,
THROUGH
OCTOBER 31,
1999
- -------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $10.00
Income from investment operations:
Net investment income 0.03
Net gains (losses) on securities (both realized and
unrealized) (0.63)
Total from investment operations (0.60)
Net asset value, end of period $ 9.40
Total return(a) (6.00)%
- -------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $1,153
Ratio of expenses to average net assets(b) 1.25%(c)
Ratio of net investment income to average net assets(d) 0.87%(c)
Portfolio turnover rate 10%
- -------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct sales charges and is not annualized for periods less than
one year.
(b) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
10.02% (annualized).
(c) Ratios are annualized and based on average net assets of $1,118,261.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements was (7.90)% (annualized).
4
<PAGE> 120
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and
continue to hold them, those shares will convert to Class A shares of
that fund seven years after the end of the month in which shares were
purchased. If you exchange those shares for Class B shares of another
AIM Fund, the shares into which you exchanged will not convert to
Class A shares until eight years after the end of the month in which
you purchased your original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--03/00
<PAGE> 121
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- -------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--03/00 A-2
<PAGE> 122
--------------
THE AIM FUNDS
--------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ---------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--03/00
<PAGE> 123
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted
to establish a retirement plan. You may use AIM Funds-sponsored retirement
plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k)
plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing
plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--03/00 A-4
<PAGE> 124
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet
Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet.
The transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- -------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--03/00
<PAGE> 125
--------------
THE AIM FUNDS
--------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
MCF--03/00 A-6
<PAGE> 126
--------------
THE AIM FUNDS
--------------
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- -------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
------------------------------------------------------------------------------
A-7 MCF--03/00
<PAGE> 127
--------------
THE AIM FUNDS
--------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund 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.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares on each day the
NYSE is open for business, as of the close of the customary trading session, or
any earlier NYSE closing time that day. AIM Money Market Fund also determines
its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open
for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--03/00 A-8
<PAGE> 128
------------------------------
AIM LARGE CAP BASIC VALUE FUND
------------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- ----------------------------------
AIM Large Cap Basic Value Fund
SEC 1940 Act file number: 811-1424
- ----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com LCBV-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 129
AIM LARGE CAP GROWTH FUND
--------------------------------------------------------------------------
AIM Large Cap Growth Fund seeks to provide long-term growth of capital.
AIM--Registered Trademark--
PROSPECTUS
MAY 26, 2000
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 130
-------------------------
AIM LARGE CAP GROWTH FUND
-------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
FEE TABLE AND EXPENSE EXAMPLE 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 2
Expense Example 2
FUND MANAGEMENT 3
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 3
Advisor Compensation 3
Portfolio Managers 3
OTHER INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 3
Dividends and Distributions 3
FINANCIAL HIGHLIGHTS 4
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con
Disciplina and Invest with Discipline are registered service marks and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 131
-------------------------
AIM LARGE CAP GROWTH FUND
-------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital. The investment
objective of the fund may be changed by the Board of Trustees without
shareholder approval.
The fund seeks to meet its objective by investing in large-capitalization
company securities. These securities may include common stocks, convertible
bonds, convertible preferred stocks and warrants of companies with market
capitalizations that are within the top 50% of stocks in the Russell
1000--Registered Trademark-- Index at the time of purchase. Under normal
conditions, the top 10 holdings may comprise at least a third of the portfolio's
net assets. The fund may also invest up to 25% of its total assets in foreign
securities. Any percentage limitations with respect to assets of the fund are
applied at the time of purchase.
The portfolio managers purchase securities of a limited number of large-cap
companies that they believe have the potential for above-average growth in
revenues and earnings. The portfolio managers consider whether to sell a
particular security when they believe the security no longer has that potential.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, the
fund may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions and market liquidity.
The values of the convertible securities in which the fund may invest also
will be affected by market interest rates, the risk that the issuer may default
on interest or principal payments and the value of the underlying common stock
into which these securities may be converted. Specifically, since these types of
convertible securities pay fixed interest and dividends, their values may fall
if market interest rates rise and rise if market interest rates fall.
Additionally, an issuer may have the right to buy back certain of the
convertible securities at a time and at a price that is unfavorable to the fund.
Also, since a large percentage of the fund's assets will be invested in a
limited number of securities, any change in value of those securities could
significantly affect the value of your investment in the fund.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
The fund may participate in the initial public offering (IPO) market. Because
of the fund's small asset base, any investment the fund may make in IPOs may
significantly increase the fund's total returns. As the fund's assets grow, the
impact of IPO investments will decline, which may reduce the fund's total
return.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 132
-------------------------
AIM LARGE CAP GROWTH FUND
-------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- -------------------------------------------------------
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.75% 0.75% 0.75%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses 2.53 2.58 2.58
Total Annual Fund
Operating Expenses 3.63 4.33 4.33
Fee Waiver and
Reimbursement(2) 1.68 1.68 1.68
Net Expenses 1.95 2.65 2.65
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) Fee waiver has been restated to reflect current agreement. The investment
advisor has contractually agreed to waive fees and/or reimburse expenses of
Class A, Class B and Class C shares to the extent necessary to limit other
expenses (excluding interest, taxes, dividends on short sales and
extraordinary expenses) of Class A shares to 0.85%.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. To the extent fees are waived or
expenses are reimbursed, the expenses will be lower. Although your actual
returns and costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------
<S> <C> <C> <C> <C>
Class A $895 $1,600 $2,325 $4,225
Class B 934 1,612 2,402 4,335
Class C 534 1,312 2,202 4,478
- --------------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------
<S> <C> <C> <C> <C>
Class A $895 $1,600 $2,325 $4,225
Class B 434 1,312 2,202 4,335
Class C 434 1,312 2,202 4,478
- --------------------------------------------------
</TABLE>
2
<PAGE> 133
-------------------------
AIM LARGE CAP GROWTH FUND
-------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor. The
advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
The advisor supervises all aspects of the fund's operations and provides
investment advisory services to the fund, including obtaining and evaluating
economic, statistical and financial information to formulate and implement
investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 120
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
The advisor is to receive a fee from the fund calculated at the annual rate of
0.75% of the first $1 billion of average daily net assets, 0.70% over $1 billion
to and including $2 billion of average daily net assets and 0.625% of average
daily net assets over $2 billion.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are
- - Monika H. Degan, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1995.
- - Geoffrey V. Keeling, Portfolio Manager, who has been responsible for the fund
since 1999 and has been associated with the advisor and/or its affiliates
since 1995.
- - Jonathan C. Schoolar, Senior Portfolio Manager, who has been responsible for
the fund since 1999 and has been associated with the advisor and/or its
affiliates since 1986.
- - Robert L. Shoss, Portfolio Manager, who has been responsible for the fund
since 1999 and has been associated with the advisor and/or its affiliates
since 1995.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Large Cap Growth Fund are subject to the
maximum 5.50% initial sales charge as listed under the heading "CATEGORY I
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of
capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
3
<PAGE> 134
-------------------------
AIM LARGE CAP GROWTH FUND
-------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
CLASS A
-----------
MARCH 1,
THROUGH
OCTOBER 31,
1999
-----------
- -------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $10.00
Income from investment operations:
Net investment income (loss) (0.04)
Net gains on securities (both realized and unrealized) 1.33
Total from investment operations 1.29
Net asset value, end of period $11.29
Total return(a) 13.70%
- -------------------------------------------------------------------------
Ratios/supplement data:
- -------------------------------------------------------------------------
Net assets, end of period (000s omitted) $7,785
Ratio of expenses to average net assets(b) 1.53%(c)
Ratio of net investment income to average net assets(d) (0.59)%(c)
Portfolio turnover rate 21%
- -------------------------------------------------------------------------
</TABLE>
(a) Does not deduct sales charges and is not annualized for periods less than
one year.
(b) After fees waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
3.63% (annualized).
(c) Ratios are annualized and based on average net assets of $5,601,043.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements was (2.69)% (annualized).
<TABLE>
<CAPTION>
CLASS B CLASS C
----------- -----------
APRIL 5, APRIL 5,
THROUGH THROUGH
OCTOBER 31, OCTOBER 31,
1999 1999
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $11.02 $11.02
Income from investment operations:
Net investment income (loss)(a) (0.08) (0.08)
Net gains (losses) on securities (both realized and
unrealized) 0.31 0.31
Total from investment operations 0.23 0.23
Net asset value, end of period $11.25 $11.25
Total return(b) 2.09% 2.09%
- ----------------------------------------------------------------------------------------
Ratios/supplement data:
- ----------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $5,183 $ 901
Ratio of expenses to average net assets(c) 2.23%(d) 2.23%(d)
Ratio of net investment income (loss) to average net
assets(e) (1.29)%(d) (1.29)%(d)
Portfolio turnover rate 21% 21%
- ----------------------------------------------------------------------------------------
</TABLE>
(a) Calculated based upon the average shares outstanding during the period.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) After fee waivers and/or expense reimbursement. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
4.33% (annualized) for Class B and 4.33% (annualized) for Class C.
(d) Ratios are annualized and based on average net assets of $2,804,277 and
$453,655 for Class B and Class C, respectively.
(e) After fee waivers and/or expense reimbursements. Ratio of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (3.39)% (annualized) for Class B and (3.39)%
(annualized) for Class C.
4
<PAGE> 135
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and
continue to hold them, those shares will convert to Class A shares of
that fund seven years after the end of the month in which shares were
purchased. If you exchange those shares for Class B shares of another
AIM Fund, the shares into which you exchanged will not convert to
Class A shares until eight years after the end of the month in which
you purchased your original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--03/00
<PAGE> 136
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- -------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--03/00 A-2
<PAGE> 137
--------------
THE AIM FUNDS
--------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ---------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--03/00
<PAGE> 138
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted
to establish a retirement plan. You may use AIM Funds-sponsored retirement
plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k)
plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing
plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--03/00 A-4
<PAGE> 139
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet
Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet.
The transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- -------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--03/00
<PAGE> 140
--------------
THE AIM FUNDS
--------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
MCF--03/00 A-6
<PAGE> 141
--------------
THE AIM FUNDS
--------------
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- -------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
------------------------------------------------------------------------------
A-7 MCF--03/00
<PAGE> 142
--------------
THE AIM FUNDS
--------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund 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.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares on each day the
NYSE is open for business, as of the close of the customary trading session, or
any earlier NYSE closing time that day. AIM Money Market Fund also determines
its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open
for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--03/00 A-8
<PAGE> 143
-------------------------
AIM LARGE CAP GROWTH FUND
-------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information
about the Public Reference Room.
- ----------------------------------
AIM Large Cap Growth Fund
SEC 1940 Act file number: 811-1424
- ----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com LCG-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 144
AIM MID CAP GROWTH FUND
--------------------------------------------------------------------------
AIM Mid Cap Growth Fund seeks to provide long-term growth of capital.
AIM--Registered Trademark--
PROSPECTUS
MAY 26, 2000
This prospectus contains important
information about the Class A, B,
and C shares of the fund. Please
read it before investing and keep it
for future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 145
-----------------------
AIM MID CAP GROWTH FUND
-----------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - - -
FEE TABLE AND EXPENSE EXAMPLE 2
- - - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 2
Expense Example 2
FUND MANAGEMENT 3
- - - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 3
Advisor Compensation 3
Portfolio Managers 3
OTHER INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 3
Dividends and Distributions 3
- - - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con
Disciplina and Invest with Discipline are registered service marks and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 146
------------------------
AIM MID CAP GROWTH FUND
------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital. The investment
objective of the fund may be changed by the Board of Trustees without
shareholder approval.
The fund seeks to meet its objective by investing at least 65% of its total
assets in securities of companies that have market capitalizations, at the time
of purchase, within the range of market capitalizations of companies included in
the Standard & Poor's MidCap 400 Index. The Standard & Poor's MidCap 400 Index
is an unmanaged market-weighted index of domestic stocks that measures the
performance of the mid-size company segment of the U.S. market. Under normal
conditions, the top 10 holdings may comprise up to 40% of the fund's total
assets. The fund will invest primarily in common stocks but may also invest in
convertible securities and warrants. The fund may also invest up to 25% of its
total assets in foreign securities. Any percentage limitations with respect to
assets of the fund are applied at the time of purchase.
The portfolio managers focus on companies they believe are likely to benefit
from new or innovative products, services or processes as well as those that
have experienced above-average, long-term growth in earnings and have favorable
prospects for future growth. The portfolio managers consider whether to sell a
particular security when any of those factors materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, the
fund may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions and market liquidity. This is
especially true with respect to equity securities of smaller companies, whose
prices may go up and down more than equity securities of larger, more
established companies. Also, since equity securities of smaller companies may
not be traded as often as equity securities of larger, more established
companies, it may be difficult or impossible for the fund to sell securities at
a desirable price.
The values of the convertible securities in which the fund may invest also
will be affected by market interest rates, the risk that the issuer may default
on interest or principal payments and the value of the underlying common stock
into which these securities may be converted. Specifically, since these types of
convertible securities pay fixed interest and dividends, their values may fall
if market interest rates rise and rise if market interest rates fall.
Additionally, an issuer may have the right to buy back certain of the
convertible securities at a time and at a price that is unfavorable to the fund.
Since a large percentage of the fund's assets will be invested in a limited
number of securities, any change in value of those securities could
significantly affect the value of your investment in the fund.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
The fund may participate in the initial public offering (IPO) market. Because
of the fund's small asset base, any investment the fund may make in IPOs may
significantly increase the fund's total returns. As the fund's assets grow, the
impact of IPO investments will decline, which may reduce the fund's total
return.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 147
-----------------------
AIM MID CAP GROWTH FUND
------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- -----------------------------------------------------------
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -----------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever is less) None(1) 5.00% 1.00%
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.80% 0.80% 0.80%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses(2) 0.48 0.52 0.52
Total Annual Fund
Operating Expenses 1.63 2.32 2.32
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) Other expenses are based on estimated amounts for the current fiscal year.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's operating expenses remain the same. Although your actual returns and
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- -------------------------
<S> <C> <C>
Class A $707 $1,036
Class B 735 1,024
Class C 335 724
- -------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
- -------------------------
<S> <C> <C>
Class A $707 $1,036
Class B 235 724
Class C 235 724
- -------------------------
</TABLE>
2
<PAGE> 148
-----------------------
AIM MID CAP GROWTH FUND
-----------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. serves as the fund's investment adviser. The advisor is
located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor
supervises all aspects of the fund's operations and provides investment advisory
services to the fund, including obtaining and evaluating economic, statistical
and financial information to formulate and implement investment programs for the
fund.
The advisor has acted as an investment adviser since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 120
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
The advisor is to receive a fee from the fund calculated at the annual rate of
0.80% of the first $1 billion of average daily net assets and 0.75% of assets
over $1 billion of average daily net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are
- - Steven A. Brase, Portfolio Manager, who has been responsible for the fund
since 2000 and has been associated with the advisor and/or its affiliates
since 1998. From 1995 to 1998, he was Associate Portfolio Manager and Partner
for Bricoleur Capital Management, Inc.
- - Brant DeMuth, Senior Portfolio Manager, who has been responsible for the fund
since 1999 and has been associated with the advisor and/or its affiliates
since 1996. From 1992 to 1996, he was Portfolio Manager for Colorado Public
Employee's Retirement Association.
- - Christopher P. Perras, Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1999. From 1997 to 1999, he was an equity analyst at Van Wagoner Capital
Management. From 1995 to 1997, he was Associate Portfolio Manager for Van
Kampen American Capital Asset Management, Inc.
- - Charles D. Scavone, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1996. From 1994 to 1996, he was Associate Portfolio Manager for Van
Kampen American Capital Asset Management, Inc.
- - Kenneth A. Zschappel, Senior Portfolio Manager, who has been responsible for
the fund since 1999 and has been associated with the advisor and/or its
affiliates since 1990.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Mid Cap Growth Fund are subject to the
maximum 5.50% initial sales charge as listed under the heading "CATEGORY I
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class"
section of this prospectus. Purchases of Class B and Class C shares are subject
to the contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of
capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
3
<PAGE> 149
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and
continue to hold them, those shares will convert to Class A shares of
that fund seven years after the end of the month in which shares were
purchased. If you exchange those shares for Class B shares of another
AIM Fund, the shares into which you exchanged will not convert to
Class A shares until eight years after the end of the month in which
you purchased your original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--03/00
<PAGE> 150
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- -------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--03/00 A-2
<PAGE> 151
--------------
THE AIM FUNDS
--------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ---------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--03/00
<PAGE> 152
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted
to establish a retirement plan. You may use AIM Funds-sponsored retirement
plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k)
plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing
plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--03/00 A-4
<PAGE> 153
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet
Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet.
The transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- -------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--03/00
<PAGE> 154
--------------
THE AIM FUNDS
--------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
MCF--03/00 A-6
<PAGE> 155
--------------
THE AIM FUNDS
--------------
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- -------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
------------------------------------------------------------------------------
A-7 MCF--03/00
<PAGE> 156
--------------
THE AIM FUNDS
--------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund 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.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares on each day the
NYSE is open for business, as of the close of the customary trading session, or
any earlier NYSE closing time that day. AIM Money Market Fund also determines
its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open
for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--03/00 A-8
<PAGE> 157
-----------------------
AIM MID CAP GROWTH FUND
------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports only)
</TABLE>
- ---------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
-----------------------------------
AIM MID CAP GROWTH FUND
SEC 1940 Act file number: 811-1424
-----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com MCG-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 158
AIM WEINGARTEN FUND
-------------------------------------------------------------------------
AIM Weingarten Fund seeks to provide growth of capital.
PROSPECTUS AIM--Registered Trademark--
MAY 26, 2000
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 159
-------------------
AIM WEINGARTEN FUND
-------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con
Disciplina and Invest with Discipline are registered service marks and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 160
-------------------
AIM WEINGARTEN FUND
-------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to provide growth of capital. The investment
objective of the fund may be changed by the Board of Trustees without
shareholder approval.
The fund will invest primarily in common stocks of seasoned and
better-capitalized companies. The portfolio managers focus on companies that
have experienced above-average growth in earnings and have excellent prospects
for future growth. The portfolio managers consider whether to sell a particular
security when any of those factors materially changes. The fund may also invest
up to 20% of its total assets in foreign securities. Any percentage limitations
with respect to assets of the fund are applied at the time of purchase.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, the
fund may not achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs, which can lower the actual return on your
investment. Active trading may also increase short-term gains and losses, which
may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions and market liquidity.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 161
-------------------
AIM WEINGARTEN FUND
-------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
<S> <C>
1990 ....................................... 5.55%
1991 ....................................... 46.86%
1992 ....................................... -1.37%
1993 ....................................... 1.53%
1994 ....................................... -0.34%
1995 ....................................... 34.76%
1996 ....................................... 17.67%
1997 ....................................... 25.96%
1998 ....................................... 33.06%
1999 ....................................... 34.90%
</TABLE>
The Class A shares' year-to-date total return as of March 31, 2000 was [ ]%.
During the periods shown in the bar chart, the highest quarterly return was
28.03% (quarter ended December 31, 1998) and the lowest quarterly return was
- -15.75% (quarter ended September 30, 1990).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 27.50% 27.63% 18.01% 16.17% 06/17/69
Class B 28.85 -- -- 25.77 06/26/95
Class C 32.77 -- -- 26.83 08/04/97
S&P 500(1) 21.03 28.54 18.19 13.33(2) 06/30/69(2)
Russell 1000--Registered Trademark-- Index(3) 20.91 28.04 18.13 17.69(4) 12/31/78(4)
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance. The
fund has elected to use the S&P 500 as its primary index rather than the
Russell 1000--Registered Trademark-- Index since the S&P 500 more closely
reflects the performance of the securities in which the fund invests.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
(3) The Russell 1000--Registered Trademark-- Index is a widely recognized,
unmanaged index of common stocks that measures the performance of the 1,000
largest companies in the Russell 3000--Registered Trademark-- Index, which
measures the performance of the 3,000 largest U.S. companies based on total
market capitalization.
(4) The average annual total return given is since the date closest to the
earliest date the index became available.
2
<PAGE> 162
-------------------
AIM WEINGARTEN FUND
-------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.63% 0.63% 0.63%
Distribution and/or
Service (12b-1) Fees 0.30 1.00 1.00
Other Expenses 0.15 0.24 0.24
Total Annual Fund
Operating Expenses 1.08 1.87 1.87
Fee Waiver(2) 0.05 0.05 0.05
Net Expenses 1.03 1.82 1.82
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) The investment advisor has contractually agreed to waive a portion of its
fees.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's gross operating expenses remain the same. To the extent fees are waived,
the expenses will be lower. Although your actual returns and costs may be higher
or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $654 $875 $1,113 $1,795
Class B 690 888 1,211 1,984
Class C 290 588 1,011 2,190
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $654 $875 $1,113 $1,795
Class B 190 588 1,011 1,984
Class C 190 588 1,011 2,190
- ----------------------------------------------
</TABLE>
3
<PAGE> 163
-------------------
AIM WEINGARTEN FUND
-------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor.
A I M Capital Management, Inc. (the subadvisor), a wholly owned subsidiary of
the advisor, is the fund's subadvisor and is responsible for its day-to-day
management. Both the advisor and the subadvisor are located at 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173. The advisors supervise all aspects
of the fund's operations and provide investment advisory services to the fund,
including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976,
and the subadvisor has acted as an investment advisor since 1986. Today, the
advisor, together with its subsidiaries, advises or manages over 120 investment
portfolios, including the fund, encompassing a broad range of investment
objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.58% of average daily net assets.
PORTFOLIO MANAGERS
The advisors use a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of the subadvisor, are
- - David P. Barnard, Senior Portfolio Manager, who has been responsible for the
fund since 1986 and has been associated with the advisor and/or its affiliates
since 1982.
- - Monika H. Degan, Portfolio Manager, who has been responsible for the fund
since 1998 and has been associated with the advisor and/or its affiliates
since 1995.
- - Jonathan C. Schoolar, Senior Portfolio Manager, who has been responsible for
the fund since 1987 and has been associated with the advisor and/or its
affiliates since 1986.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Weingarten Fund are subject to the maximum
5.50% initial sales charge as listed under the heading "CATEGORY I Initial Sales
Charges" in the "Shareholder Information--Choosing a Share Class" section of
this prospectus. Purchases of Class B and Class C shares are subject to the
contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
The fund expects that its distributions, if any, will consist primarily of
capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
4
<PAGE> 164
-------------------
AIM WEINGARTEN FUND
-------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with the
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.72 $ 22.72 $ 20.19 $ 20.33 $ 17.82
Income from investment operations:
Net investment income (0.10) 0.02 0.01 0.06 --
Net gains on securities (both realized and unrealized) 8.16 2.38 4.82 2.51 4.36
Total from investment operations 8.06 2.40 4.83 2.57 4.36
Less distributions:
Dividends from net investment income (0.01) -- (0.06) -- (0.07)
Distributions from net realized gains (1.46) (3.40) (2.24) (2.71) (1.78)
Total distributions (1.47) (3.40) (2.30) (2.71) (1.85)
Net asset value, end of period $ 28.31 $ 21.72 $ 22.72 $ 20.19 $ 20.33
Total return(a) 38.62% 12.34% 26.83% 14.81% 28.20%
- --------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $8,089,739 $6,094,178 $5,810,582 $4,977,493 $4,564,730
Ratio of expenses to average net assets(b) 1.03%(c) 1.04% 1.07% 1.12% 1.17%
Ratio of net investment income (loss) to average net
assets(d) (0.38)%(c) 0.07% 0.07% 0.33% (0.02)%
Portfolio turnover rate 124% 125% 128% 159% 139%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct sales charges.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.08%, 1.09%, 1.11%, 1.15% and 1.19% for 1999-1995.
(c) Ratios are based on average net assets of $7,520,454,321.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursement were (0.43)%, 0.02%, 0.03%, 0.30% and (0.04)% for 1999-1995.
5
<PAGE> 165
-------------------
AIM WEINGARTEN FUND
-------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------------------------------------- --------------------------------
JUNE 26, AUGUST 4,
THROUGH YEAR ENDED THROUGH
YEAR ENDED OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
- ------------------------------------------------------------------------------------------ --------------------------------
1999 1998 1997 1996 1995 1999 1998 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------ --------------------------------
Net asset value, beginning
of period $ 21.12 $ 22.34 $ 19.98 $ 20.28 $ 18.56 $ 21.14 $ 22.34 $ 22.83
Income from investment
operations:
Net investment income
(loss) (0.30)(a) (0.15)(a) (0.15)(a) (0.05)(a) (0.03) (0.30)(a) (0.15)(a) (0.04)(a)
Net gains (losses) on
securities (both
realized and
unrealized) 7.93 2.33 4.75 2.46 1.75 7.92 2.35 (0.45)
Total from investment
operations 7.63 2.18 4.60 2.41 1.72 7.62 2.20 (0.49)
Distributions from net
realized gains (1.46) (3.40) (2.24) (2.71) -- (1.46) (3.40) --
Net asset value, end of
period $ 27.29 $ 21.12 $ 22.34 $ 19.98 $ 20.28 $ 27.30 $ 21.14 $ 22.34
Total return(b) 37.59% 11.45% 25.78% 13.95% 9.27% 37.50% 11.54% (2.15)%
- ------------------------------------------------------------------------------------------ --------------------------------
Ratios/supplemental data:
- ------------------------------------------------------------------------------------------ --------------------------------
Net assets, end of period
(000s omitted) $1,291,456 $705,750 $486,105 $267,459 $42,238 $105,420 $23,107 $ 2,326
Ratio of expenses to
average net assets(c) 1.82%(d) 1.83 1.87% 1.95% 1.91%(e) 1.82%(d) 1.83 1.84%(e)
Ratio of net investment
income (loss) to average
net assets(f) (1.17)%(d) (0.72)% (0.73)% (0.50)% (0.76)%(e) (1.17)%(d) (0.72)% (0.70)%(e)
Portfolio turnover rate 124% 125% 128% 159% 139% 124% 125% 128%
- ------------------------------------------------------------------------------------------ --------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.87%, 1.87%, 1.91%, 1.98% and 1.94% (annualized) for 1999-1995 for Class B
and 1.87%, 1.87% and 1.88% (annualized) for 1999-1997 for Class C.
(d) Ratios are based on average net assets of $1,038,290,381 and $59,391,348 for
Class B and Class C, respectively.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (1.22)%, (0.76)%, (0.77)%, (0.53)% and (0.79)%
(annualized) for 1999-1995 for Class B and (1.22)%, (0.76)% and (0.74)%
(annualized) for 1999-1997 for Class C.
6
<PAGE> 166
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29, 1998 and
continue to hold them, those shares will convert to Class A shares of
that fund seven years after the end of the month in which shares were
purchased. If you exchange those shares for Class B shares of another
AIM Fund, the shares into which you exchanged will not convert to
Class A shares until eight years after the end of the month in which
you purchased your original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
A-1 MCF--03/00
<PAGE> 167
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- ------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- -------------------------------------------------------------
INVESTOR'S
SALES CHARGE
----------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -------------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -------------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be
adjusted to the higher initial sales charge level for the amount actually
invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--03/00 A-2
<PAGE> 168
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THE AIM FUNDS
--------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
<TABLE>
<CAPTION>
PURCHASE OPTIONS
- ---------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank Connection
methods described above. form to the transfer agent. Once
the transfer agent has received the
form, call the transfer agent to
place your purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization
Form. Mail the application or form
to the transfer agent. Once your
request for this option has been
processed (which may take up to 10
days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--03/00
<PAGE> 169
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THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted
to establish a retirement plan. You may use AIM Funds-sponsored retirement
plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k)
plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing
plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--03/00 A-4
<PAGE> 170
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet
Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet.
The transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
- -------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of the
customary trading session of the NYSE, we generally will transmit payment on the
next business day.
A-5 MCF--03/00
<PAGE> 171
--------------
THE AIM FUNDS
--------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
MCF--03/00 A-6
<PAGE> 172
--------------
THE AIM FUNDS
--------------
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
- -------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
------------------------------------------------------------------------------
A-7 MCF--03/00
<PAGE> 173
--------------
THE AIM FUNDS
--------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund 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.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' assets may change on days when
you will not be able to purchase or redeem fund shares.
Each AIM Fund determines the net asset value of its shares on each day the
NYSE is open for business, as of the close of the customary trading session, or
any earlier NYSE closing time that day. AIM Money Market Fund also determines
its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open
for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours of the customary
trading session of the NYSE. The AIM Funds price purchase, exchange and
redemption orders at the net asset value calculated after the transfer agent
receives an order in good form. An AIM Fund may postpone the right of redemption
only under unusual circumstances, as allowed by the Securities and Exchange
Commission, such as when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--03/00 A-8
<PAGE> 174
-------------------
AIM WEINGARTEN FUND
-------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies
of the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic
mail request to [email protected]. Please call the SEC at 1-202-942-8090 for
information about the Public Reference Room.
- -----------------------------------
AIM Weingarten Fund
SEC 1940 Act file number: 811-1424
- -----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com WEI-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 175
STATEMENT OF
ADDITIONAL INFORMATION
RETAIL CLASSES OF
AIM AGGRESSIVE GROWTH FUND
AIM BLUE CHIP FUND
AIM CAPITAL DEVELOPMENT FUND
AIM CHARTER FUND
AIM CONSTELLATION FUND
AIM DENT DEMOGRAPHIC TRENDS FUND
AIM EMERGING GROWTH FUND
AIM LARGE CAP BASIC VALUE FUND
AIM LARGE CAP GROWTH FUND
AIM MID CAP GROWTH FUND
AIM WEINGARTEN FUND
(SERIES PORTFOLIOS OF
AIM EQUITY FUNDS)
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TX 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 FUNDS,
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, TX 77210-4739
OR BY CALLING (800) 347-4246.
-------------------
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 26, 2000, RELATING TO
THE AIM AGGRESSIVE GROWTH FUND PROSPECTUS DATED MAY 26, 2000,
THE AIM BLUE CHIP FUND PROSPECTUS DATED MAY 26, 2000,
THE AIM CAPITAL DEVELOPMENT FUND PROSPECTUS DATED MAY 26, 2000,
THE AIM CHARTER FUND PROSPECTUS DATED MAY 26, 2000,
THE AIM CONSTELLATION FUND PROSPECTUS DATED MAY 26, 2000,
THE AIM DENT DEMOGRAPHIC TRENDS FUND PROSPECTUS DATED MAY 26, 2000,
THE AIM EMERGING GROWTH FUND DATED MAY 26, 2000,
THE AIM LARGE CAP BASIC VALUE FUND PROSPECTUS DATED MAY 26, 2000,
THE AIM LARGE CAP GROWTH FUND PROSPECTUS DATED MAY 26, 2000,
THE AIM MID CAP GROWTH FUND PROSPECTUS DATED MAY 26, 2000,
AND THE AIM WEINGARTEN FUND PROSPECTUS DATED MAY 26, 2000
<PAGE> 176
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION......................................................................................................1
GENERAL INFORMATION ABOUT THE TRUST...............................................................................1
The Trust and Its Shares.................................................................................1
PERFORMANCE.......................................................................................................4
Total Return Calculations................................................................................5
Total Return Quotations..................................................................................5
Historical Portfolio Results.............................................................................5
Yield Quotations.........................................................................................9
PORTFOLIO TRANSACTIONS AND BROKERAGE.............................................................................10
General Brokerage Policy................................................................................10
Allocation of Portfolio Transactions....................................................................11
Allocation of IPO Securities Transactions...............................................................11
Section 28(e) Standards.................................................................................12
Transactions with Regular Brokers.......................................................................12
Brokerage Commissions Paid..............................................................................13
Portfolio Turnover......................................................................................14
INVESTMENT STRATEGIES AND RISKS..................................................................................14
Real Estate Investment Trusts...........................................................................17
Foreign Securities......................................................................................18
Foreign Exchange Transactions...........................................................................19
Illiquid Securities.....................................................................................20
Rule 144A Securities....................................................................................20
Repurchase Agreements...................................................................................20
Reverse Repurchase Agreements...........................................................................20
Special Situations......................................................................................21
Short Sales.............................................................................................21
Margin Transactions.....................................................................................21
Warrants................................................................................................22
Securities Issued on a When-Issued or Delayed Delivery Basis............................................22
Investment in Unseasoned Issuers........................................................................22
Lending of Portfolio Securities.........................................................................22
Interfund Loans.........................................................................................23
Borrowing...............................................................................................23
Equity-Linked Derivatives...............................................................................23
Investment in Other Investment Companies................................................................23
Temporary Defensive Investments.........................................................................24
OPTIONS, FUTURES AND CURRENCY STRATEGIES.........................................................................24
Introduction............................................................................................24
General Risks of Options, Futures and Currency Strategies...............................................24
Cover...................................................................................................25
Writing Call Options....................................................................................25
Writing Put Options.....................................................................................26
Purchasing Put Options..................................................................................26
Purchasing Call Options.................................................................................26
Over-the-Counter Options................................................................................27
</TABLE>
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<TABLE>
<S> <C>
Index Options...........................................................................................27
Limitations on Options..................................................................................28
Interest Rate, Currency and Stock Index Futures Contracts...............................................28
Options on Futures Contracts............................................................................29
Forward Contracts.......................................................................................29
Limitations on Use of Futures, Options on Futures and Certain Options on Currencies.....................29
INVESTMENT RESTRICTIONS..........................................................................................30
Fundamental Restrictions................................................................................30
Non-Fundamental Restrictions............................................................................31
MANAGEMENT.......................................................................................................32
Trustees and Officers...................................................................................32
INVESTMENT ADVISORY AND OTHER SERVICES...........................................................................37
THE DISTRIBUTION PLANS...........................................................................................41
The Class A and C Plan..................................................................................41
The Class B Plan........................................................................................42
Both Plans..............................................................................................42
THE DISTRIBUTOR..................................................................................................46
SALES CHARGES AND DEALER CONCESSIONS.............................................................................48
REDUCTIONS IN INITIAL SALES CHARGES..............................................................................51
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS......................................................................55
HOW TO PURCHASE AND REDEEM SHARES................................................................................57
Backup Withholding......................................................................................57
NET ASSET VALUE DETERMINATION....................................................................................59
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.........................................................................60
Reinvestment of Dividends and Distributions.............................................................60
Tax Matters.............................................................................................60
Qualification as a Regulated Investment Company.........................................................60
Determination of Taxable Income of a Regulated Investment Company.......................................61
Excise Tax on Regulated Investment Companies............................................................62
Fund Distributions......................................................................................63
Sale or Redemption of Shares............................................................................64
Reinstatement Privilege.................................................................................65
Foreign Shareholders....................................................................................65
Effect of Future Legislation; Local Tax Considerations..................................................65
SHAREHOLDER INFORMATION..........................................................................................66
</TABLE>
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<PAGE> 178
<TABLE>
<S> <C>
MISCELLANEOUS INFORMATION........................................................................................68
Charges for Certain Account Information.................................................................68
Audit Reports...........................................................................................69
Legal Matters...........................................................................................69
Custodian and Transfer Agent............................................................................69
Principal Holders of Securities.........................................................................69
Other Information.......................................................................................78
APPENDIX........................................................................................................A-1
Description of Commercial Paper Ratings................................................................A-1
Description of Corporate Bond Ratings..................................................................A-1
FINANCIAL STATEMENTS.............................................................................................FS
</TABLE>
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INTRODUCTION
AIM Equity 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 certain information
concerning the activities of the fund being considered for investment. The
information for the Retail Classes of AIM Aggressive Growth Fund ("Aggressive
Growth") is included in a Prospectus dated May 26, 2000. The information for the
Retail Classes of AIM Blue Chip Fund ("Blue Chip") is included in a Prospectus
dated May 26, 2000. The information for the Retail Classes of AIM Capital
Development Fund ("Capital Development") is included in a Prospectus dated May
26, 2000. The information for the Retail Classes of AIM Charter Fund ("Charter")
is included in a Prospectus dated May 26, 2000. The information for the Retail
Classes of AIM Constellation Fund ("Constellation") is included in a Prospectus
dated May 26, 2000. The information for the AIM Dent Demographic Trends Fund
("Demographic Trends") is included in a Prospectus dated May 26, 2000. The
information for the Retail Classes of AIM Emerging Growth Fund ("Emerging
Growth") is included in a Prospectus dated May 26, 2000. The information for the
Retail Classes of AIM Large Cap Basic Value Fund ("Large Cap Basic Value") is
included in a Prospectus dated May 26, 2000. The information for the Retail
Classes of AIM Large Cap Growth Fund ("Large Cap Growth") is included in a
Prospectus dated May 26, 2000. The information for the Retail Classes of AIM Mid
Cap Growth Fund ("Mid Cap") is included in a Prospectus dated May 26, 2000. The
information for the Retail Classes of AIM Weingarten Fund ("Weingarten") is
included in a Prospectus dated May 26, 2000. Copies of the Prospectuses and
additional copies of this Statement of Additional Information may be obtained
without charge by writing the principal distributor of the Funds' shares, A I M
Distributors, Inc. ("AIM Distributors"), P.O. Box 4739, Houston, TX 77210-4739
or by calling (800) 347-4246. Investors must receive a Prospectus before they
invest.
This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Funds. Some of
the information required to be in this Statement of Additional Information is
also included in the Prospectuses; and, in order to avoid repetition, reference
will be made to sections of the Prospectuses. Additionally, the Prospectuses 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 Prospectuses and this
Statement of Additional Information, may be obtained from the SEC by paying the
charges described under its rules and regulations.
GENERAL INFORMATION ABOUT THE TRUST
THE TRUST AND ITS SHARES
The Trust currently is organized as a Delaware business trust under an
Agreement and Declaration of Trust, dated December 6, 1999 (the "Trust
Agreement"). The Trust was previously organized as AIM Equity Funds, Inc.
("AEF"), a Maryland corporation. Pursuant to an Agreement and Plan of
Reorganization, the AEF Funds (defined below) were reorganized on May 26, 2000
as portfolios of the Trust, which is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as a diversified open-end series
management investment company.
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. The Trust currently consists of eleven separate portfolios:
Aggressive Growth, Blue Chip, Capital Development, Charter, Constellation,
Demographic Trends, Emerging Growth, Large Cap Basic Value, Large Cap Growth,
Mid Cap, and Weingarten (each an "AEF Fund" and collectively, the "AEF Funds").
Charter, Weingarten and Constellation each have four separate classes: Class A,
Class B and Class C and an Institutional Class. Aggressive Growth, Blue Chip,
Capital Development, Demographic Trends, Emerging Growth, Large Cap Basic Value,
Large Cap Growth and Mid Cap each have three classes of shares: Class A, Class B
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<PAGE> 180
and Class C shares. Class A shares (sold with a front-end sales charge) and
Class B and Class C shares (each sold with a contingent deferred sales charge)
of the AEF Funds are also referred to as the Retail Classes. Prior to October
15, 1993, Aggressive Growth was a portfolio of AIM Funds Group ("AFG"), a
Massachusetts business trust. Pursuant to an Agreement and Plan of
Reorganization between AFG and AEF, Aggressive Growth was redomesticated as a
portfolio of AEF. All historical financial and other information contained in
this Statement of Additional Information for periods prior to October 15, 1993,
relating to Aggressive Growth is that of AFG's Aggressive Growth. Blue Chip
acquired the investment portfolio of Baird Blue Chip Fund, Inc. (the "BBC
Fund"), a registered management investment company, on June 3, 1996, in a
corporate reorganization. All historical financial information contained in this
Statement of Additional Information for periods prior to June 3, 1996, relating
to Blue Chip is that of the BBC Fund. Capital Development acquired substantially
all of the assets of Baird Capital Development Fund, Inc. (the "BCD Fund"), a
registered management investment company, on August 12, 1996 in a corporate
reorganization. All historical financial information contained in this Statement
of Additional Information for periods prior to August 12, 1996, relating to
Capital Development is that of the BCD Fund.
Pursuant to the May 26, 2000 Agreement and Plan of Reorganization, the
Funds succeeded to the assets and assumed the liabilities of the series
portfolios with corresponding names (the "Predecessor Funds") of AEF. All
historical financial and other information contained in this Statement of
Additional Information for periods prior to May 26, 2000 relating to the Funds
(or a class thereof) is that of the Predecessor Funds (or the corresponding
class thereof).
Shares of beneficial interest of the Trust are redeemable at their net
asset value (subject, in certain circumstances, to a contingent deferred sales
charge) at the option of the shareholder or at the option of the Trust in
certain circumstances. For information concerning the methods of redemption,
investors should consult the Prospectuses under the caption "Redeeming Shares."
This Statement of Additional Information relates solely to the Retail
Classes of the Funds.
The assets received by the Trust from the issue or sale of shares of
each of its series of shares, and all income, earnings, profits and proceeds
thereof, subject only to the rights of creditors, are specifically allocated to
the appropriate Fund. They constitute the underlying assets of each Fund, are
required to be segregated on the Trust's books of account, and are to be charged
with the expenses with respect to such 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.
Each share of each Fund represents an equal proportionate interest in
that Fund with each other share and is entitled to such dividends and
distributions out of the income belonging to such Fund as are declared by the
Board. Each class represents interests in the same portfolio of investments but,
as further described in the Prospectuses, each such class is subject to
differing sales charges 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 applicable Fund allocable to such class available for
distribution after satisfaction of outstanding liabilities of the Fund allocable
to such class.
The Trust is not required to hold annual or regular meetings of
shareholders. Meetings of shareholders of a Fund will be held from time to time
to consider matters requiring a vote of such shareholders in accordance with the
requirements of the 1940 Act, state law or the provisions of the Trust
Agreement. It is not expected that shareholder meetings will be held annually.
Shares of the Retail Classes and the Institutional Class of each Fund
have equal rights and privileges. Each share of a particular class is entitled
to one vote, to participate equally in dividends and distributions declared by
the Trust's Board of Trustees with respect to the class of such Fund and, upon
liquidation of the Fund, to participate proportionately in the net assets of the
Fund allocable to such class remaining after satisfaction of outstanding
liabilities of the Fund allocable to such class. Fund shares are
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<PAGE> 181
fully paid, non-assessable and fully transferable when issued and have no
preemptive rights and have such conversion and exchange rights as set forth in
the Prospectuses and this Statement of Additional Information. Fractional shares
have proportionately the same rights, including voting rights, as are provided
for a full share.
Class B shares automatically convert to Class A shares at the end of
the month which is eight years after the date of purchase. A pro rata portion of
shares from reinvested dividends and distributions convert at the same time. No
other shares have conversion rights. Because Class B shares convert into Class A
shares, the holders of Class B shares (as well as the holders of Class A shares)
of each Fund must approve any material increase in fees payable with respect to
that Fund under the Class A and C Plan or a new class of shares into which the
Class B shares will convert must be created which will be identical in all
material respects to the Class A shares prior to the material increase in fees.
Except as specifically noted above, shareholders of each Fund are
entitled to one vote per share (with proportionate voting for fractional
shares), irrespective of the relative net asset value of the different classes
of shares, where applicable, of a Fund. However, on matters affecting one
portfolio of the Trust or one class of shares, a separate vote of shareholders
of that portfolio or class is required. Shareholders of a portfolio or class are
not entitled to vote on any matter which does not affect that portfolio or class
but which requires a separate vote of another portfolio or class. An example of
a matter which would be voted on separately by shareholders of a portfolio is
the approval of an advisory agreement, and an example of a matter which would be
voted on separately by shareholders of a class of shares is approval of a
distribution plan.
Shareholders of the Funds do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all Funds
voting together for election of trustees may elect all of the members of the
Board of Trustees of the Trust. In such event, the remaining holders cannot
elect any trustees of the Trust.
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 at least
two-thirds 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 retired by a written instrument
signed by a majority of the trustees and specifying the date of his or her
retirement.
Under Delaware law, shareholders of a Delaware business trust shall be
entitled to the same limitations or liability extended to shareholders of
private for-profit corporations, however, there is a remote possibility that
shareholders could, under certain circumstances, be held liable for the
obligations of the Trust to the extent the courts of another state which does
not recognize such limited liability were to apply the laws of such state to a
controversy involving such obligations. 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 the trustees to all parties, and each
party thereto must expressly waive all rights of action directly against
shareholders of the Trust. The Trust Agreement provides for indemnification out
of the property of a Fund for all losses and expenses of any shareholder of such
Fund held liable on account of being or having been a shareholder. Thus, the
risk of a shareholder incurring financial loss due to shareholder liability is
limited to circumstances in which a Fund would be unable to meet its obligations
and wherein the complaining party was held not to be bound by the disclaimer.
The Trust Agreement further provides that the trustees and officers
will not be liable for any act, omission or obligation of the Trust or any
trustee or officer. However, nothing in the Trust Agreement protects a trustee
or officer against any liability to the Trust or to the shareholders to which a
trustee or officer would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his or her office with the Trust. The Trust Agreement provides for
indemnification by the Trust of the trustees, officers, employees and agents of
the
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<PAGE> 182
Trust, if it is determined that such person acted in good faith and reasonably
believed: (1) in the case of conduct in his or her official capacity for the
Trust, that his or her conduct was in the Trust's best interests, (2) in all
other cases, that his or her conduct was at least not opposed to the Trust's
best interests and (3) in a criminal proceeding, that he or she had no reason to
believe that his or her conduct was unlawful. The Trust Agreement also
authorizes the purchase of liability insurance on behalf of trustees and
officers.
PERFORMANCE
Each Fund's performance may be quoted in advertising in terms of yield
or total return. All advertisements of the Funds will disclose the maximum sales
charge, if any (including deferred sales charge) to which investments in shares
of the Funds may be subject. If any advertised performance data does not reflect
the maximum sales charge (if any), such advertisement will disclose that the
sales charge has not been deducted in computing the performance data, and that,
if reflected, the maximum sales charge would reduce the performance quoted.
Standardized total return for Class A shares of a Fund reflects the
deduction of the maximum initial sales charge at the time of purchase.
Standardized total return for Class B shares of a Fund reflects the deduction of
the maximum applicable contingent deferred sales charge on a redemption of
shares held for the period. Standardized total return for Class C shares of a
Fund reflects the deduction of a 1% contingent deferred sales charge, if
applicable, on a redemption of shares held for the period.
A Fund's total return shows its overall change in value, including
changes in share price and assuming all the Fund's dividends and capital gain
distributions are reinvested and that all charges and expenses are deducted. A
cumulative total return reflects a 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 A 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 gain or
loss.
A fund may participate in the initial public offering ("IPO") market,
and a significant portion of the fund's returns may be attributable to its
investment in IPOs. Investment in IPOs could have a magnified impact on a fund
with a small asset base. There is no guarantee that as a fund's assets grow, it
will continue to experience substantially similar performance by investing in
IPOs.
Yield is computed in accordance with the standardized formula described
below and can be expected to fluctuate from time to time and is not necessarily
indicative of future results. Accordingly, yield information may not provide a
basis for comparison with investments which pay a fixed rate of interest for a
stated period of time. Yield is a function of the type and quality of a Fund's
investments, the Fund's maturity and the Fund's operating expense ratio.
From time to time, A I M Advisors, Inc. ("AIM") or its affiliates may
waive all or a portion of their fees and/or assume certain expenses of any Fund.
Voluntary fee waivers or reductions or commitments to assume expenses may be
rescinded at any time without further notice to investors. During periods of
voluntary fee waivers or reductions or commitments to assume expenses, AIM will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions or reimbursement of expenses set
forth in the Fee Table in a Prospectus may not be terminated or amended to the
Funds' detriment during the period stated in the agreement between AIM and the
Fund. Fee waivers or reductions or commitments to reduce expenses will have the
effect of increasing that Fund's yield and total return.
The performance of each Fund will vary from time to time and past
results are not necessarily indicative of future results. A Fund's performance
is a function of its portfolio management in selecting the type and quality of
portfolio securities and is affected by operating expenses of the Fund and
market
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<PAGE> 183
conditions. A shareholder's investment in a Fund is not insured or guaranteed.
These factors should be carefully considered by the investor before making an
investment in any Fund.
Additional performance information is contained in a Fund's Annual
Report to Shareholders, which is available upon request without charge.
TOTAL RETURN CALCULATIONS
Total returns quoted in advertising reflect all aspects of the
applicable Fund's return, including the effect of reinvesting dividends and
capital gain distributions, and any change in such 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 a particular Fund
over a stated period, and then calculating the annually 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 a 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 such Fund.
In addition to average annual returns, the Retail Class of each Fund
may quote unaveraged or cumulative total returns 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, 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 the applicable
Fund's maximum applicable Class A front-end sales charge or Class B or Class C
contingent deferred sales charge into account. Excluding sales charges from a
total return calculation produces a higher total return figure.
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return is as follows:
n
P(1+T) =ERV
Where P = a hypothetical initial payment of $1,000.
T = average annual total return (assuming the applicable
maximum sales load is deducted at the beginning of the
1, 5, or 10 year periods).
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the 1, 5, or 10 year periods (or
fractional portion of such period).
HISTORICAL PORTFOLIO RESULTS
Total returns for Class A shares of Aggressive Growth, Blue Chip, Capital
Development, Charter, Constellation, Demographic Trends, Emerging Growth, Large
Cap Basic Value, Large Cap Growth, Mid Cap and Weingarten, for the one-year,
five-year, ten-year, fifteen-year and twenty-year (or since inception, if
shorter) periods ended October 31, 1999 (which include the maximum sales charge
of 5.50% and reinvestment of all dividends and distributions), were as follows:
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CLASS A AVERAGE ANNUAL RETURNS
<TABLE>
<CAPTION>
ONE FIVE TEN FIFTEEN TWENTY SINCE
YEAR YEARS YEARS YEARS YEARS INCEPTION*
---- ----- ----- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
AGGRESSIVE GROWTH 32.03% 16.04% 19.99% 15.95% N/A 15.51%
BLUE CHIP 21.92% 24.08% 16.94% N/A N/A 14.85%
CAPITAL DEVELOPMENT 11.73% N/A N/A N/A N/A 11.43%
CHARTER 26.63% 21.83% 16.37% 16.87% 16.79% 14.44%
CONSTELLATION 27.41% 17.03% 17.91% 19.08% 18.83% 18.32%
DEMOGRAPHIC TRENDS N/A N/A N/A N/A N/A N/A
EMERGING GROWTH N/A N/A N/A N/A N/A N/A
LARGE CAP BASIC VALUE N/A N/A N/A N/A N/A N/A
LARGE CAP GROWTH N/A N/A N/A N/A N/A N/A
MID CAP N/A N/A N/A N/A N/A N/A
WEINGARTEN 31.07% 22.40% 16.22% 18.22% 19.56% 15.62%
</TABLE>
CLASS A CUMULATIVE RETURNS
<TABLE>
<CAPTION>
ONE FIVE TEN FIFTEEN TWENTY SINCE
YEAR YEARS YEARS YEARS YEARS INCEPTION*
---- ----- ----- ----- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
AGGRESSIVE GROWTH 32.03% 110.41% 518.68% 820.72% N/A 834.44%
BLUE CHIP 21.92% 194.07% 378.07% N/A N/A 482.98%
CAPITAL DEVELOPMENT 11.73% N/A N/A N/A N/A 44.05%
CHARTER 26.63% 168.44% 355.29% 935.84% 2,128.15% 6,375.52%
CONSTELLATION 27.41% 119.56% 419.33% 1,272.05% 3,052.71% 5,112.13%
DEMOGRAPHIC TRENDS N/A N/A N/A N/A N/A 14.74%
EMERGING GROWTH N/A N/A N/A N/A N/A N/A
LARGE CAP BASIC VALUE N/A N/A N/A N/A N/A -11.15%
LARGE CAP GROWTH N/A N/A N/A N/A N/A 7.42%
MID CAP N/A N/A N/A N/A N/A N/A
WEINGARTEN 31.07% 174.78% 349.70% 1,130.67% 3,462.17% 8,121.99%
</TABLE>
* The inception dates for the Class A shares of the Funds are May 1,
1984, February 4, 1987, June 17, 1996, November 26, 1968, April 30,
1976, June 7, 1999, March 31, 2000, June 30, 1999, March 1, 1999,
November 1, 1999 and June 17, 1969, respectively.
During the 10-year period ended October 31, 1999, a hypothetical $1,000
investment at the beginning of such period in Class A shares of Aggressive
Growth, Blue Chip, Charter, Constellation and Weingarten would have been worth
$6,187, $4,781, $4,553, $5,193 and $4,497, respectively, assuming all
distributions were reinvested.
During the 15-year period ended October 31, 1999, a hypothetical $1,000
investment at the beginning of such period in Class A shares of Aggressive
Growth, Charter, Constellation and Weingarten would have been worth $9,207,
$10,358, $13,721 and $12,307, respectively, assuming all dividends were
reinvested.
During the 20-year period ended October 31, 1999, a hypothetical $1,000
investment at the beginning of such period in Class A shares of Charter,
Constellation and Weingarten would have been worth $22,281, $31,527 and $35,622,
respectively, assuming all distributions were reinvested.
Total returns for each of the named Funds with respect to its Class B
shares (which deduct the maximum contingent deferred sales charge of 5% and
include reinvestment of all dividends and distributions), for the period ended
October 31, 1999 (or since inception), were as follows:
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CLASS B AVERAGE ANNUAL RETURNS
<TABLE>
<CAPTION>
Since
One Year Inception*
-------- ---------
<S> <C> <C>
AGGRESSIVE GROWTH N/A N/A
BLUE CHIP 23.08% 24.38%
CAPITAL DEVELOPMENT 12.32% 8.70%
CHARTER 28.06% 21.52%
CONSTELLATION 28.64% 10.41%
DEMOGRAPHIC TRENDS N/A N/A
EMERGING GROWTH N/A N/A
LARGE CAP BASIC VALUE N/A N/A
LARGE CAP GROWTH N/A N/A
MID CAP N/A N/A
WEINGARTEN 32.64% 22.10%
</TABLE>
CLASS B CUMULATIVE RETURNS
<TABLE>
<CAPTION>
Since
One Year Inception*
-------- ---------
<S> <C> <C>
AGGRESSIVE GROWTH N/A 22.27%
BLUE CHIP 23.08% 95.88%
CAPITAL DEVELOPMENT 12.32% 29.33%
CHARTER 28.06% 133.40%
CONSTELLATION 28.64% 21.81%
DEMOGRAPHIC TRENDS N/A 16.10%
EMERGING GROWTH N/A N/A
LARGE CAP BASIC VALUE N/A -10.70%
LARGE CAP GROWTH N/A -2.91%
MID CAP N/A N/A
WEINGARTEN 32.64% 138.23%
</TABLE>
* The inception dates for the Class B shares of the Funds are March 1,
1999, October 1, 1996, October 1, 1996, June 26, 1995, November 3,
1997, June 7, 1999, March 31, 2000, April 5, 1999, June 4, 1999,
November 1, 1999 and June 26, 1995, respectively.
Total returns for each of the named Funds with respect to its Class C
shares for the period ended October 31, 1999 (or since inception), were as
follows:
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CLASS C AVERAGE ANNUAL RETURNS
<TABLE>
<CAPTION>
Since
One Year Inception*
-------- ---------
<S> <C> <C>
AGGRESSIVE GROWTH N/A N/A
BLUE CHIP 27.09% 18.82%
CAPITAL DEVELOPMENT 16.34% 4.54%
CHARTER 32.06% 16.99%
CONSTELLATION 32.65% 10.32%
DEMOGRAPHIC TRENDS N/A N/A
EMERGING GROWTH N/A N/A
LARGE CAP BASIC VALUE N/A N/A
LARGE CAP GROWTH N/A N/A
MID CAP N/A N/A
WEINGARTEN 36.61% 19.90%
</TABLE>
CLASS C CUMULATIVE RETURNS
<TABLE>
<CAPTION>
Since
One Year Inception*
-------- ---------
<S> <C> <C>
AGGRESSIVE GROWTH N/A 26.27%
BLUE CHIP 27.09% 47.17%
CAPITAL DEVELOPMENT 16.34% 10.46%
CHARTER 32.06% 42.13%
CONSTELLATION 32.65% 24.62%
DEMOGRAPHIC TRENDS N/A 20.10%
EMERGING GROWTH N/A N/A
LARGE CAP BASIC VALUE N/A -6.94%
LARGE CAP GROWTH N/A 1.18%
MID CAP N/A N/A
WEINGARTEN 36.61% 50.19%
</TABLE>
* [The inception date for the Class C shares of the Funds is August 4,
1997, except the inception dates for the Class C shares of Aggressive
Growth, Demographic Trends, Emerging Growth, Large Cap Basic Value,
Large Cap Growth and Mid Cap are March 1, 1999, June 7, 1999, March
31, 2000, June 4, 1999, April 5, 1999 and November 1, 1999,
respectively.]
The performance data listed above is not necessarily indicative of the
future performance of any of the Funds.
Average annual returns and cumulative returns are not available for
Class A, B and C shares of Emerging Growth and Mid Cap and Class B and C shares
of Large Cap Basic Value because these classes had no operations prior to
October 31, 1999.
8
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YIELD QUOTATIONS
The standard formula for calculating yield is as follows:
YIELD = 2[((a-b)/(c x d) + 1)6 -1]
Where a = dividends and interest earned during a stated 30-day period.
For purposes of this calculation, dividends are accrued rather
than recorded on the ex-dividend date. Interest earned under
this formula must generally be calculated based on the yield
to maturity of each obligation (or, if more appropriate, based
on yield to call date).
b = expense accrued during period (net of reimbursement).
c = the average daily number of shares outstanding during the
period.
d = the maximum offering price per share on the last day of the
period.
Each 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 Incorporated and other independent services which monitor the
performance of mutual funds. The Funds may also advertise mutual fund
performance rankings which have been assigned to each respective Fund by such
monitoring services.
Each Fund's performance may also be compared in advertising and other
materials to the performance of comparative benchmarks such as the Consumer
Price Index ("CPI"), the Russell(R) indices, the Standard & Poor's 500 Stock
Index, and fixed-price investments such as bank certificates of deposit and/or
savings accounts.
The CPI, published by the U.S. Bureau of Labor Statistics, is a
statistical measure of changes, over time, in the prices of goods and services.
Standard & Poor's 500 Stock Index is a group of unmanaged securities widely
regarded by investors as representative of the stock market in general.
Comparisons assume the reinvestment of dividends. Fixed Price Investments, such
as bank certificates of deposits and savings accounts, are generally backed by
federal agencies for up to $100,000.
Each Fund's advertising may from time to time include discussions of
general economic conditions and interest rates. In addition, each Fund's
long-term performance may be described in advertising in relation to historical,
political and/or economic events. Each Fund's advertising may also include
references to the use of the Fund as part of an individual's overall retirement
investment program.
From time to time, Fund 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.
From time to time, Demographic Trends sales literature and/or
advertisements may quote (i) Harry S. Dent, Jr.'s theories on why the coming
decade may offer unprecedented opportunities for investors, including his
opinions on the stock market outlook and where growth may be strongest; (ii)
Harry S. Dent, Jr.'s opinions and theories from his books and publications,
including, but not limited to, Job Shock, The Great Boom Ahead and The Roaring
2000s, including his beliefs that (a) people's spending patterns may help
predict the stock market, (b) the stock market has tended to perform best when a
generation has reached its peak spending years from ages 45-50, and (c) as more
and more baby boomers reach their peak spending age, they could propel stock
prices up for the next decade; and (iii) Harry S. Dent, Jr.'s S-curve analysis,
a forecasting tool used to analyze products that show remarkable growth.
Large Cap Growth invests primarily in domestic "brand-name" companies
that are domiciled in the U.S. and compete in the global marketplace. By
investing in companies whose products and services are marketed around the
world, Large Cap Growth attempts to capture potential growth in foreign markets,
while benefiting from the growth opportunities and relative stability of the
U.S. marketplace.
9
<PAGE> 188
From time to time, the Funds' 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.
PORTFOLIO TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
AIM makes decisions to buy and sell securities for each Fund, selects
broker-dealers, effects the Funds' investment portfolio transactions, allocates
brokerage fees in such transactions, and where applicable, negotiates
commissions and spreads on transactions. AIM's primary consideration in
effecting a security transaction is to obtain the most favorable execution of
the order, which includes the best price on the security and a low commission
rate. While AIM seeks reasonably competitive commission rates, the Funds may not
pay the lowest commission or spread available. See "Section 28(e) Standards"
below.
Some of the securities in which the Funds invest are traded in
over-the-counter markets. In such transactions, a Fund deals directly with
dealers who make markets in the securities involved, except when better prices
are available elsewhere. Portfolio transactions placed through dealers who are
primary market makers are effected at net prices without commissions, but which
include compensation in the form of a mark up or mark down.
Traditionally, commission rates have not been negotiated on stock
markets outside the United States. Although in recent years many overseas stock
markets have adopted a system of negotiated rates, a number of markets maintain
an established schedule of minimum commission rates.
AIM may determine target levels of commission business with various
brokers on behalf of its clients (including the Funds) over a certain time
period. The target levels will be based upon the following factors, among
others: (1) the execution services provided by the broker; (2) the research
services provided by the broker; and (3) the broker's interest in mutual funds
in general and in the Funds and other mutual funds advised by AIM or A I M
Capital Management, Inc. ("AIM Capital") (collectively, the "AIM Funds") in
particular, including sales of the Funds and of the other AIM Funds. In
connection with (3) above, the Funds' trades may be executed directly by dealers
that sell shares of the AIM Funds or by other broker-dealers with which such
dealers have clearing arrangements. AIM will not use a specific formula in
connection with any of these considerations to determine the target levels.
The Funds may engage in certain principal and agency transactions with
banks and their affiliates that own 5% or more of the outstanding voting
securities of an AIM Fund, provided the conditions of an exemptive order
received by the Funds from the SEC are met. In addition, a Fund may purchase or
sell a security from or to another AIM Fund or account and may invest in
affiliated money market funds, provided the Funds follow procedures adopted by
the Board of Directors/Trustees of the various AIM Funds, including the Trust.
These inter-fund transactions do not generate brokerage commissions but may
result in custodial fees or taxes or other related expenses.
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<PAGE> 189
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage numerous other investment accounts. Some
of these accounts may have investment objectives similar to the Funds.
Occasionally, identical securities will be appropriate for investment by one of
the Funds and by another Fund or one or more of these investment accounts.
However, the position of each account in the same securities and the length of
time that each account may hold its investment in the same securities may 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 is consistent with the
investment policies of the Fund(s) and one or more of these accounts, and is
considered at or about the same time, AIM will fairly allocate transactions in
such securities among the Fund(s) and these accounts. AIM may combine such
transactions, in accordance with applicable laws and regulations, to obtain the
most favorable execution. Simultaneous transactions could, however, adversely
affect a Fund's ability to obtain or dispose of the full amount of a security
which it seeks to purchase or sell.
Sometimes the procedure for allocating portfolio transactions among the
various investment accounts advised by AIM could have an adverse effect on the
price or amount of securities available to a Fund. In making such allocations,
AIM considers the investment objectives and policies of its advisory clients,
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.
ALLOCATION OF IPO SECURITIES TRANSACTIONS
From time to time, certain of the AIM Funds or other accounts managed
by AIM may become interested in participating in security distributions that are
available in an IPO, and occasions may arise when purchases of such securities
by one AIM Fund or account may also be considered for purchase by one or more
other AIM Funds or accounts. In such cases, it shall be AIM's practice to
combine or otherwise bunch indications of interest for IPO securities for all
AIM Funds and accounts participating in purchase transactions for that security,
and to allocate such transactions in accordance with the following procedures:
AIM will determine the eligibility of each AIM Fund and account that
seeks to participate in a particular IPO by reviewing a number of factors,
including suitability of the investment with the AIM Fund's or account's
investment objective, policies and strategies, the liquidity of the AIM Fund or
account if such investment is purchased, and whether the portfolio manager
intends to hold the security as a long-term investment. The allocation of
limited supply securities issued in IPOs will be made to eligible AIM Funds and
accounts in a manner designed to be fair and equitable for the eligible AIM
Funds or accounts, and so that there is equal allocation of IPOs over the longer
term. Where multiple funds or accounts are eligible, rotational participation
may occur, based on the extent to which an AIM Fund or account has participated
in previous IPOs as well as the size of the AIM Fund or account. Each eligible
AIM Fund or account with an asset level of less than $500 million will be placed
in one of three tiers, depending upon its asset level. The AIM Funds and
accounts in the tier containing funds and accounts with the smallest asset
levels will participate first, each receiving a 40 basis point allocation
(rounded to the nearest share round lot that approximates 40 basis points) (the
"Allocation"), based on that AIM Fund's or account's net assets. This process
continues until all of the AIM Funds or accounts in the three tiers receive
their Allocation, or until the shares are all allocated. Should securities
remain after this process, eligible AIM Funds and accounts will receive their
Allocation on a straight pro rata basis. For the tier of AIM Funds and accounts
not receiving a full Allocation, the Allocation may be made only to certain AIM
Funds or accounts so that each may receive close to or exactly 40 basis points.
When AIM Funds and/or accounts with substantially identical investment
objectives and policies will participate in syndicates in amounts that are
substantially proportionate to each other. In these cases, the net assets of the
largest AIM Fund will be used to determine in which tier, as described in the
paragraph above, such group of AIM Funds or accounts will be placed. If no AIM
Fund is participating, then the net assets of the largest account will be used
to determine tier placement. The price per share of securities purchased in such
syndicate transactions will be the same for each AIM Fund and account.
11
<PAGE> 190
Due to their asset size, Charter, Constellation and Weingarten are unlikely to
participate in IPOs to a material degree.
SECTION 28(e) STANDARDS
Section 28(e) of the Securities Exchange Act of 1934 provides that AIM,
under certain circumstances, lawfully may cause an account to pay a higher
commission than the lowest available. Under Section 28(e), AIM must make a good
faith determination that the commissions paid are "reasonable in relation to the
value of the brokerage and research services provided ... viewed in terms of
either that particular transaction or [AIM's] overall responsibilities with
respect to the accounts as to which it exercises investment discretion." The
services provided by the broker also must lawfully and appropriately assist AIM
in the performance of its investment decision-making responsibilities.
Accordingly, in recognition of research services provided to it, a Fund may pay
a broker higher commissions than those available from another broker.
Research services received from broker-dealers supplement AIM's own
research (and the research of its affiliates), and may include the following
types of information: statistical and background information on the U.S. and
foreign economies, industry groups and individual companies; forecasts and
interpretations with respect to the U.S. and foreign economies, securities,
markets, specific industry groups and individual companies; information on
federal, state, local and foreign political developments; portfolio management
strategies; performance information on securities, indexes and investment
accounts; information concerning prices of securities; and information supplied
by specialized services to AIM and to the Board of Trustees with respect to the
performance, investment activities, and fees and expenses of other mutual funds.
Broker-dealers may communicate such information electronically, orally, in
written form or on computer software. Research services may also include the
providing of custody services, as well as the providing of equipment used to
communicate research information, the providing of specialized consultations
with AIM personnel with respect to computerized systems and data furnished to
AIM as a component of other research services, the arranging of meetings with
management of companies, and the providing of access to consultants who supply
research information.
The outside research assistance is useful to AIM since the
broker-dealers used by AIM tend to follow a broader universe of securities and
other matters than AIM's staff can follow. In addition, the research provides
AIM with a diverse perspective on financial markets. Research services provided
to AIM by broker-dealers are available for the benefit of all accounts managed
or advised by AIM or by its affiliates. Some broker-dealers may indicate that
the provision of research services is dependent upon the generation of certain
specified levels of commissions and underwriting concessions by AIM's clients,
including the Funds. However, the Funds are not under any obligation to deal
with any broker-dealer in the execution of transactions in portfolio securities.
In some cases, the research services are available only from the
broker-dealer providing them. In other cases, the research services may be
obtainable from alternative sources in return for cash payments. AIM believes
that the research services are beneficial in supplementing AIM's research and
analysis and that they improve the quality of AIM's investment advice. The
advisory fee paid by the Funds is not reduced because AIM receives such
services. However, to the extent that AIM would have purchased research services
had they not been provided by broker-dealers, the expenses to AIM could be
considered to have been reduced accordingly.
TRANSACTIONS WITH REGULAR BROKERS
As of October 31, 1999, Blue Chip, Charter and Dent Demographics held
an amount of common stock issued by Merrill Lynch & Co. having a market value of
$25,512,500, $39,250,000 and $5,887,500, respectively, and common stock issued
by Morgan Stanley, Dean Witter, Discover & Co. having a market value of
$57,914,063, $137,890,650 and $12,134,375, respectively. As of October 31, 1999,
Charter held an amount of common stock issued by Goldman Sachs Group, Inc.
having a market value of $10,650,000.
12
<PAGE> 191
BROKERAGE COMMISSIONS PAID
For the fiscal years ended October 31, 1999, 1998 and 1997, Aggressive
Growth paid brokerage commissions of $3,536,558, $5,098,276 and $4,026,523,
respectively. For the fiscal year ended October 31, 1999, AIM allocated certain
of Aggressive Growth's brokerage transactions to certain broker-dealers that
provided AIM with certain research, statistical and other information. Such
transactions amounted to $722,475,212 and the related brokerage commissions were
$1,045,622.
For the fiscal years ended October 31, 1999, 1998 and 1997, Blue Chip
paid brokerage commissions of $2,695,856, $1,457,590 and $858,396, respectively.
For the fiscal year ended October 31, 1999, AIM allocated certain of Blue Chip's
brokerage transactions to certain broker-dealers that provide AIM with certain
research, statistical and other information. Such transactions amounted to
$221,450,070 and the related brokerage commissions were $195,523.
For the fiscal years ended October 31, 1999, 1998 and 1997, Capital
Development paid brokerage commissions of $3,324,179, $2,277,419 and $628,188,
respectively. For the fiscal year ended October 31, 1999, AIM allocated certain
of Capital Development's brokerage transactions to certain broker-dealers that
provide AIM with certain research, statistical and other information. Such
transactions amounted to $319,102,239 and the related brokerage commissions were
$682,063.
For the fiscal years ended October 31, 1999, 1998 and 1997, Charter
paid brokerage commissions of $11,856,781, $15,567,811 and $12,073,633,
respectively. For the fiscal year ended October 31, 1999, AIM allocated certain
of Charter's brokerage transactions to certain broker-dealers that provided AIM
with certain research, statistical and other information. Such transactions
amounted to $1,349,408,533 and the related brokerage commissions were
$1,333,679.
For the fiscal years ended October 31, 1999, 1998 and 1997,
Constellation paid brokerage commissions of $20,108,956, $25,285,665 and
$16,928,988, respectively. For the fiscal year ended October 31, 1999, AIM
allocated certain of Constellation's brokerage transactions to certain
broker-dealers that provided AIM with certain research, statistical and other
information. Such transactions amounted to $2,153,357,263 and the related
brokerage commissions were $2,610,073.
For the period ended October 31, 1999, Demographic Trends paid
brokerage commissions of $250,423. For the period ended October 31, 1999, AIM
allocated certain of Demographic Trends' brokerage transactions to certain
broker-dealers that provided AIM with certain research, statistical and other
information. Such transactions amounted to $5,535,874 and the related brokerage
commissions were $6,004.
For the period ended October 31, 1999, Large Cap Basic Value paid
brokerage commissions of $1,021. For the period ended October 31, 1999, AIM
allocated certain of Large Cap Basic Value's brokerage transactions to certain
broker-dealers that provide AIM with certain research, statistical and other
information. Such transactions amounted to $14,324 and the related brokerage
commissions were $16.
For the period ended October 31, 1999, Large Cap Growth paid brokerage
commissions of $6,178. For the period ended October 31, 1999, AIM allocated
certain of Large Cap Growth's brokerage transactions to certain broker-dealers
that provided AIM with certain research, statistical and other information. Such
transactions amounted to $279,961 and the related brokerage commissions were
$251.
For the fiscal years ended October 31, 1999, 1998 and 1997, Weingarten
paid brokerage commissions of $20,226,511, $19,810,852 and $17,413,682,
respectively. For the fiscal year ended October 31, 1999, AIM allocated certain
of Weingarten's brokerage transactions to certain broker-dealers that provided
AIM with certain research, statistical and other information. Such transactions
amounted to $2,225,018,782 and the related brokerage commissions were
$2,027,136.
13
<PAGE> 192
PORTFOLIO TURNOVER
The portfolio turnover rate of Aggressive Growth, Blue Chip, Capital
Development, Charter, Constellation, Demographic Trends, Large Cap Basic Value,
Large Cap Growth and Weingarten is shown under "Financial Highlights" in the
applicable Prospectus. Higher portfolio turnover increases transaction costs to
the Funds.
INVESTMENT STRATEGIES AND RISKS
Information concerning each Fund's non-fundamental investment
objective(s) is set forth in the Prospectuses under the heading "Investment
Objective and Strategies." There can be no assurance that any Fund will achieve
its objective. The principal features of each Fund's investment program and the
principal risks associated with that investment program are discussed in the
Prospectuses under the heading "Investment Objective and Strategies" and
"Principal Risks of Investing in the Fund."
Set forth in this section is a description of each Fund's investment
policies, strategies and practices. The investment objective(s) of each Fund are
non-fundamental policies and may be changed by the Board of Trustees without
shareholder approval. Each Fund's investment policies, strategies and practices
are also non-fundamental. The Board of Trustees of the Trust reserves the right
to change any of these non-fundamental investment policies, strategies or
practices without shareholder approval. However, shareholders will be notified
before any material change in the investment policies becomes effective. Each
Fund has adopted certain investment restrictions, some of which are fundamental
and cannot be changed without shareholder approval. See "Investment
Restrictions" in this Statement of Additional Information. Individuals
considering the purchase of shares of any Fund should recognize that there are
risks in the ownership of any security. Any percentage limitations with respect
to assets of a Fund will be applied at the time of purchase.
The investment objective of Aggressive Growth is to achieve long-term
growth of capital. The Fund will invest primarily in common stocks of companies
whose earnings the Fund's portfolio managers expect to grow more than 15% per
year. Many of these companies are in the small to medium-sized category. The
Fund's strategy does not preclude investment in large, seasoned companies which
in the judgment of AIM possess superior potential returns similar to companies
with formative growth profiles. The Fund will also invest in established smaller
companies (under $500 million in market capitalization) which offer exceptional
value based upon substantially above average earnings growth potential relative
to market value. Investors should realize that equity securities of small to
medium-sized companies may involve greater risk than is associated with
investing in more established companies. Small to medium-sized companies often
have limited product and market diversification, fewer financial resources or
may be dependent on a few key managers. Any one of the foregoing may change
suddenly and have an immediate impact on the value of the Fund's securities.
Furthermore, whenever the securities markets are experiencing rapid price
changes due to national economic trends, secondary growth securities have
historically been subject to exaggerated price changes. The Fund may invest in
non-equity securities, such as corporate bonds or U.S. Government obligations
during periods when, in the opinion of AIM, prevailing market, financial, or
economic conditions warrant, as well as when such holdings are advisable in
light of a change in circumstances of a particular company or within a
particular industry.
Blue Chip's primary investment objective is long-term growth of capital
with a secondary objective of current income. It is anticipated that the major
portion of Blue Chip's portfolio will ordinarily be invested in common stocks,
convertible securities and bonds of blue chip companies (i.e., companies with
leading market positions and which possess strong financial characteristics, as
described below). While current income is a secondary objective, most of the
stocks in the Fund's portfolio are expected to pay dividends. The Fund will
generally invest in large and medium sized companies (i.e., companies which fall
in the largest 85% of market capitalization of publicly traded companies listed
in the United States) which possess the following characteristics:
14
<PAGE> 193
o MARKET CHARACTERISTICS -- Blue chip companies are those which
occupy (or in AIM's judgment have the potential to occupy)
leading market positions that are expected to be maintained or
enhanced over time. Strong market positions, particularly in
growing industries, can give a company pricing flexibility as
well as the potential for strong unit sales. These factors can
in turn lead to higher earnings growth and greater share price
appreciation. Market leaders can be identified within an
industry as those companies which have (i) superior growth
prospects compared with other companies in the same industry;
(ii) possession of proprietary technology with the potential
to bring about major changes within an industry; and/or (iii)
leading sales within an industry, or the potential to become a
market leader.
o FINANCIAL CHARACTERISTICS -- A blue chip company possesses at
least one of the following attributes: (i) faster earnings
growth than its competitors and the market in general; (ii)
higher profit margins relative to its competitors; (iii)
strong cash flow relative to its competitors; and/or (iv) a
balance sheet with relatively low debt and a high return on
equity relative to its competitors.
The Fund will diversify among industries and therefore will not invest
25% or more of its total assets in any one industry. Under normal market
conditions, Blue Chip's portfolio will be diversified among industries in a
manner similar to the industry diversification of broad market indices.
The investment objective of Capital Development is long-term growth of
capital. Production of income is incidental to this objective. The Fund's
principal investments are in common stocks, convertible securities and bonds.
The Fund will invest primarily in securities of small and medium-sized
companies (i.e., companies which fall in the smallest 85% by market
capitalization of publicly traded companies in the United States). Among factors
that AIM may consider when selecting investments in a company for the Fund are
(i) the growth prospects for a company's products, (ii) the economic outlook for
its industry, (iii) a company's new product development, (iv) its operating
management capabilities, (v) the relationship between the price of the security
and its estimated fundamental value, (vi) relevant market, economic and
political environments and (vii) financial characteristics such as balance sheet
analysis and return on assets.
The primary investment objective of Charter is growth of capital with a
secondary objective of current income. Although the amount of Charter's current
income will vary from time to time, it is anticipated that the current income
realized by Charter will generally be greater than that realized by mutual funds
whose sole objective is growth of capital.
The investment objective of Constellation is growth of capital.
Constellation aggressively seeks to increase shareholders' capital by investing
principally in common stocks of companies the portfolio managers believe are
likely to benefit from new or innovative products, services or processes that
should enhance such companies' prospects for future growth in earnings.
Emerging Growth is a non-diversified portfolio (as defined in the 1940
Act), which means that it may invest a greater proportion of its assets in the
securities of a smaller number of issuers and therefore may be subject to
greater market and credit risk than a more broadly diversified portfolio. (A
diversified portfolio may not, with respect to 75% of its total assets, invest
more than 5% of its assets in securities of one issuer.) Emerging Growth intends
to satisfy the diversification requirements of the Internal Revenue Code to
qualify as a regulated investment company. See "Dividends, Distributions and Tax
Matters" herein.
The investment objective of Weingarten is to seek growth of capital.
The Fund will invest in common stocks of seasoned and better capitalized
companies. Current income will not be an important criterion of investment
selection, and any such income should be considered incidental. It is
anticipated that common stocks will be the principal form of investment by the
Fund.
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<PAGE> 194
Management of Aggressive Growth and Constellation will be particularly
interested in companies that are likely to benefit from new or innovative
products, services or processes that should enhance such companies' prospects
for future growth in earnings. As a result of this policy, the market prices of
many of the securities purchased and held by a Fund may fluctuate widely. Any
income received from securities held by a Fund will be incidental, and an
investor should not consider a purchase of shares of a Fund as equivalent to a
complete investment program. Aggressive Growth, Constellation and Weingarten's
portfolios are primarily comprised of securities of two basic categories of
companies: (a) "core" companies, which Fund management considers to have
experienced above-average and consistent long-term growth in earnings and to
have excellent prospects for outstanding future growth, and (b) "earnings
acceleration" companies which Fund management believes are currently enjoying a
dramatic increase in profits.
Each of the Funds may invest, for cash management, temporary or
defensive purposes, all or substantially all of their assets in corporate bonds,
shares of affiliated money market funds, commercial paper, or U.S. Government
obligations. In addition, all or a portion of each Fund's assets may be held,
from time to time, in cash, repurchase agreements, shares of affiliated money
market funds, bonds or other short-term debt securities when such positions are
deemed advisable in light of economic or market conditions. For a description of
the various rating categories of corporate bonds and commercial paper in which
the Funds may invest, see the Appendix to this Statement of Additional
Information.
COMMON STOCKS -- The Funds will invest in common stocks. Common stocks
represent the residual ownership interest in the issuer and are entitled to the
income and increase in the value of the assets and business of the entity after
all of its obligations and preferred stocks are satisfied. Common stocks
generally have voting rights. Common stocks fluctuate in price in response to
many factors including historical and prospective earnings of the issuer, the
value of its assets, general economic conditions, interest rates, investor
perceptions and market liquidity.
PREFERRED STOCKS -- The Funds may invest in preferred stocks. Preferred
stock has a preference over common stock in liquidation (and generally dividends
as well) but is subordinated to the liabilities of the issuer in all respects.
As a general rule the market value of preferred stock with a fixed dividend rate
and no conversion element varies inversely with interest rates and perceived
credit risk, while the market price of convertible preferred stock generally
also reflects some element of conversion value. Because preferred stock is
junior to debt securities and other obligations of the issuer, deterioration in
the credit quality of the issuer will cause greater changes in the value of a
preferred stock than in a more senior debt security with similar stated yield
characteristics. Unlike interest payments on debt securities, preferred stock
dividends are payable only if declared by the issuer's Board of Directors.
Preferred stock also may be subject to optional or mandatory redemption
provisions.
CONVERTIBLE SECURITIES -- The Funds may invest in convertible
securities. A convertible security is a bond, debenture, note, preferred stock
or other security that may be converted into or exchanged for a prescribed
amount of common stock or other equity security of the same or a different
issuer within a particular period of time at a specified price or formula. A
convertible security entitles the holder to receive interest paid or accrued on
debt or the dividend paid on preferred stock until the convertible security
matures or is redeemed, converted or exchanged. Before conversion, convertible
securities have characteristics similar to nonconvertible income securities in
that they ordinarily provide a stable stream of income with generally higher
yields than those of common stocks of the same or similar issuers. Convertible
securities rank senior to common stock in a corporation's capital structure but
are usually subordinated to comparable nonconvertible securities. Convertible
securities may be subject to redemption at the option of the issuer at a price
established in the convertible security's governing instrument. Although each
Fund will only purchase convertible securities that AIM considers to have
adequate protection parameters, including an adequate capacity to pay interest
and repay principal in a timely manner, it invests without regard to corporate
bond ratings. Blue Chip does not intend to invest more than 10% of its total
assets in convertible securities.
CORPORATE DEBT SECURITIES -- The Funds may invest in corporate debt
securities. Corporations issue debt securities of various types, including bonds
and debentures (which are long-term), notes
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(which may be short- or long-term), bankers acceptances (indirectly secured
borrowings to facilitate commercial transactions) and commercial paper
(short-term unsecured notes). These securities typically provide for periodic
payments of interest, at a rate which may be fixed or adjustable, with payment
of principal upon maturity and are generally not secured by assets of the issuer
or otherwise guaranteed. The values of fixed rate income securities tend to vary
inversely with changes in interest rates, with longer-term securities generally
being more volatile than shorter-term securities. Corporate securities
frequently are subject to call provisions that entitle the issuer to repurchase
such securities at a predetermined price prior to their stated maturity. In the
event that a security is called during a period of declining interest rates, the
Fund may be required to reinvest the proceeds in securities having a lower
yield. In addition, in the event that a security was purchased at a premium over
the call price, a Fund will experience a capital loss if the security is called.
Adjustable rate corporate debt securities may have interest rate caps and
floors.
Blue Chip and Large Cap Growth will not invest in non-convertible
corporate debt securities rated below investment grade by Standard and Poor's
Ratings Services ("S&P") and Moody's Investors Service ("Moody's") or in unrated
non-convertible corporate debt securities believed by the Fund's investment
adviser to be below investment grade quality. Securities rated in the four
highest long-term rating categories by S&P and Moody's are considered to be
"investment grade." S&P's fourth highest long-term rating category is "BBB",
with BBB- being the lowest investment grade rating. Moody's fourth highest
long-term rating category is "Baa", with Baa3 being the lowest investment grade
rating. Publications of S&P indicate that it assigns securities to the "BBB"
rating category when such securities are "regarded as having an adequate
capacity to pay interest and repay principal. Such securities normally exhibit
adequate protection parameters, but adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay," whereas
securities rated AAA by S&P are regarded as having "capacity to pay interest and
repay principal that is extremely strong." Publications of Moody's indicate that
it assigns securities to the "Baa rating category when such securities are
considered as medium grade obligations, i.e., they are neither highly protected
nor poorly secured. Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well," whereas securities rated Aaa by Moody's "are judged to
be of the best quality" and "carry the smallest degree of investment risk."
U.S. GOVERNMENT SECURITIES -- The Funds may invest in securities issued
or guaranteed by the United States government or its agencies or
instrumentalities. These include Treasury securities (bills, notes, bonds and
other debt securities) which differ only in their interest rates, maturities and
times of issuance. U.S. Government agency and instrumentality securities include
securities which are supported by the full faith and credit of the U.S.,
securities that are supported by the right of the agency to borrow from the U.S.
Treasury, securities that are supported by the discretionary authority of the
U.S. Government to purchase certain obligations of the agency or instrumentality
and securities that are supported only by the credit of such agencies. While the
U.S. Government may provide financial support to such U.S. government-sponsored
agencies or instrumentalities, no assurance can be given that it always will do
so. The U.S. government, its agencies and instrumentalities do not guarantee the
market value of their securities. The values of such securities fluctuate
inversely to interest rates.
REAL ESTATE INVESTMENT TRUSTS
To the extent consistent with their respective investment objectives
and policies, the Funds may invest in equity and/or debt securities issued by
Real Estate Investment Trusts ("REITs"). Such investments will not exceed 25% of
the total assets of any of the Funds.
REITs are trusts which sell equity or debt securities to investors and
use the proceeds to invest in real estate or interests therein. A REIT may focus
on particular projects, such as apartment complexes, or geographic regions, such
as the southeastern United States, or both.
To the extent that a Fund has the ability to invest in REITs, such Fund
could conceivably own real estate directly as a result of a default on the
securities it owns. A Fund, therefore, may be subject to
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certain risks associated with the direct ownership of real estate including
difficulties in valuing and trading real estate, declines in the value of real
estate, risks related to general and local economic condition, adverse change in
the climate for real estate, environmental liability risks, increases in
property taxes and operating expense, changes in zoning laws, casualty or
condemnation losses, limitations on rents, changes in neighborhood values, the
appeal of properties to tenants, and increases in interest rates.
In addition to the risks described above, equity REITs may be affected
by any changes in the value of the underlying property owned by the trusts,
while mortgage REITs may be affected by the quality of any credit extended.
Equity and mortgage REITs are dependent upon management skill, are not
diversified, and are therefore subject to the risk of financing single or a
limited number of projects. Such trusts are also subject to heavy cash flow
dependency, defaults by borrowers, self-liquidation, and the possibility of
failing to maintain exemption from the 1940 Act. Changes in interest rates may
also affect the value of debt securities held by a Fund. By investing in REITs
indirectly through a Fund, a shareholder will bear not only his/her
proportionate share of the expenses of the Fund, but also, indirectly, similar
expenses of the REITs.
FOREIGN SECURITIES
To the extent consistent with their respective investment objectives,
each of the Funds may invest in foreign securities. Each of Aggressive Growth,
Blue Chip, Capital Development, Demographic Trends, Emerging Growth, Large Cap
Basic Value, Large Cap Growth and Mid Cap may invest up to 25% of its total
assets in foreign securities. Each of Charter, Constellation and Weingarten may
invest up to 20% of its total assets in foreign securities. For purposes of
computing such limitation American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs") and other securities representing underlying
securities of foreign issuers are treated as foreign securities. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically issued
by a United States bank or trust company which evidence ownership of underlying
securities issued by a foreign corporation. EDRs are receipts issued in Europe
which evidence a similar ownership arrangement. Generally, ADRs, in registered
form, are designed for use in the United States securities markets, and EDRs, in
bearer form, are designed for use in European securities markets. ADRs and EDRs
may be listed on stock exchanges, or traded in OTC markets in the United States
or Europe, as the case may be. ADRs, like other securities traded in the United
States, will be subject to negotiated commission rates.
To the extent a Fund invests in securities denominated in foreign
currencies, each Fund bears the risk of changes in the exchange rates between
U.S. currency and the foreign currency, as well as the availability and status
of foreign securities markets. These securities will be marketable equity
securities (including common and preferred stock, depositary receipts for stock
and fixed income or equity securities exchangeable for or convertible into
stock) of foreign companies which generally are listed on a recognized foreign
securities exchange or traded in a foreign over-the-counter market. Each of the
Funds may also invest in foreign securities listed on recognized U.S. securities
exchanges or traded in the U.S. over-the-counter market. Such foreign securities
may be issued by foreign companies located in developing countries in various
regions of the world. A "developing country" is a country in the initial stages
of its industrial cycle. As compared to investment in the securities markets of
developed countries, investment in the securities markets of developing
countries involves exposure to markets that may have substantially less trading
volume and greater price volatility, economic structures that are less diverse
and mature, and political systems that may be less stable.
Investments by a Fund in foreign securities, whether denominated in
U.S. currencies or foreign currencies, may entail all of the risks set forth
below. Investments by a Fund in ADRs, EDRs or similar securities also may entail
some or all of the risks as set forth below.
Currency Risk. The value of each Fund's foreign investments will be
affected by changes in currency exchange rates. The U.S. dollar value of a
foreign security decreases when the value of the U.S. dollar rises against the
foreign currency in which the security is denominated and increases when the
value of the U.S. dollar falls against such currency.
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On January 1, 1999, certain members of the European Economic and
Monetary Union ("EMU"), namely Austria, Belgium, Finland, France, Germany,
Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain established a
common European currency known as the "euro" and each member's local currency
became a denomination of the euro. It is anticipated that each participating
country will replace its local currency with the euro on July 1, 2002. Any other
European country that is a member of the European Union and satisfies the
criteria for participation in the EMU may elect to participate in the EMU and
may supplement its existing currency with the euro. The anticipated replacement
of existing currencies with the euro on July 1, 2002 could cause market
disruptions before or after July 1, 2002 and could adversely affect the value of
securities held by a Fund.
Political and Economic Risk. The economies of many of the countries in
which the Funds may invest are not as developed as the United States economy and
may be subject to significantly different forces. Political or social
instability, expropriation or confiscatory taxation, and limitations on the
removal of funds or other assets could also adversely affect the value of each
Fund's investments.
Regulatory Risk. Foreign companies are not registered with the SEC and
are generally not subject to the regulatory controls imposed on United States
issuers and, as a consequence, there is generally less publicly available
information about foreign securities than is available about domestic
securities. Foreign companies are not subject to uniform accounting, auditing
and financial reporting standards, practices and requirements comparable to
those applicable to domestic companies. Income from foreign securities owned by
the Funds may be reduced by a withholding tax at the source, which tax would
reduce dividend income payable to the Funds' shareholders.
Market Risk. The securities markets in many of the countries in which
the Funds invest will have substantially less trading volume than the major
United States markets. As a result, the securities of some foreign companies may
be less liquid and experience more price volatility than comparable domestic
securities. Increased custodian costs as well as administrative costs (such as
the need to use foreign custodians) may be associated with the maintenance of
assets in foreign jurisdictions. There is generally less government regulation
and supervision of foreign stock exchanges, brokers and issuers which may make
it difficult to enforce contractual obligations. In addition, transaction costs
in foreign securities markets are likely to be higher, since brokerage
commission rates in foreign countries are likely to be higher than in the United
States.
FOREIGN EXCHANGE TRANSACTIONS
Each Fund has authority to deal in foreign exchange between currencies
of the different countries in which it will invest either for the settlement of
transactions or as a hedge against possible variations in the foreign exchange
rates between those currencies. This may be accomplished through direct
purchases or sales of foreign currency, purchases of futures contracts with
respect to foreign currency (and options thereon), and contractual agreements to
purchase or sell a specified currency at a specified future date (up to one
year) at a price set at the time of the contract. Such contractual commitments
may be forward contracts entered into directly with another party or
exchange-traded futures contracts. The Fund may purchase and sell options on
futures contracts or forward contracts which are denominated in a particular
foreign currency to hedge the risk of fluctuations in the value of another
currency. The Funds' dealings in foreign exchange may involve specific
transactions or portfolio positions. Transaction hedging is the purchase or sale
of foreign currency with respect to specific receivables or payables of the Fund
accruing in connection with the purchase or sale of its portfolio securities,
the sale and redemption of shares of the Fund, or the payment of dividends and
distributions by the Fund. Position hedging is the purchase or sale of foreign
currency with respect to portfolio security positions (or underlying portfolio
security positions, such as in an ADR) denominated or quoted in a foreign
currency. The Fund will not speculate in foreign exchange, nor commit a larger
percentage of its total assets to foreign exchange hedges than the percentage of
its total assets that it could invest in foreign securities. Further information
concerning futures contracts and related options is set forth under the heading
"Options, Futures and Currency Strategies."
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ILLIQUID SECURITIES
None of the Funds will invest more than 15% of their net assets in
illiquid securities, including repurchase agreements with maturities in excess
of seven days.
RULE 144A SECURITIES
The Funds may purchase privately placed securities that are eligible
for purchase and sale pursuant to Rule 144A under the Securities Act of 1933
(the "1933 Act"). This Rule permits certain qualified institutional buyers, such
as a Fund, to trade in securities that have not been registered under the 1933
Act. AIM, under the supervision of the Trust's Board of Trustees, will consider
whether securities purchased under Rule 144A are illiquid and thus subject to a
Fund's restriction of investing no more than 15% of its assets in illiquid
securities. Determination of whether a Rule 144A security is liquid or not is a
question of fact. In making this determination AIM will consider the trading
markets for the specific security taking into account the unregistered nature of
a Rule 144A security. In addition, AIM could consider the (i) frequency of
trades and quotes, (ii) number of dealers and potential purchasers, (iii) dealer
undertakings to make a market, and (iv) nature of the security and of market
place trades (for example, the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer). The liquidity of
Rule 144A securities will also be monitored by AIM and, if as a result of
changed conditions, it is determined that a Rule 144A security is no longer
liquid, the Fund's holdings of illiquid securities will be reviewed to determine
what, if any, action is required to assure that the Fund does not invest more
than 15% of its assets in illiquid securities. Investing in Rule 144A securities
could have the effect of increasing the amount of the Fund's investments in
illiquid securities if qualified institutional buyers are unwilling to purchase
such securities.
REPURCHASE AGREEMENTS
The Funds may each enter into repurchase agreements. A repurchase
agreement is an instrument under which a Fund acquires ownership of a debt
security and the seller (usually a broker or bank) agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed upon time and price,
thereby determining the yield during the Fund's holding period. In the event of
bankruptcy or other default of a seller of a repurchase agreement, the Fund may
experience both delays in liquidating the underlying securities and losses,
including: (a) a possible decline in the value of the underlying security during
the period in which the Fund seeks to enforce its rights thereto; (b) a possible
subnormal level of income and lack of access to income during this period; and
(c) expenses of enforcing its rights. A repurchase agreement is collateralized
by the security acquired by the Fund and its value is marked to market daily in
order to minimize the Fund's risk. Repurchase agreements usually are for short
periods, such as one or two days, but may be entered into for longer periods of
time. Repurchase agreements are not included in each Fund's restrictions on
lending. Repurchase agreements are considered to be loans by each Fund under the
1940 Act.
Charter may enter into repurchase agreements (at any time, up to 50% of
its net assets), using only U.S. Government securities, for the sole purpose of
increasing its yield on idle cash.
REVERSE REPURCHASE AGREEMENTS
Consistent with Charter's, Demographic Trends', Emerging Growth's,
Large Cap Basic Value's and Mid Cap's policies on borrowings, each of those
Funds may invest in reverse repurchase agreements with banks, which involve the
sale of securities held by the Fund, with an agreement that the Fund will
repurchase the securities at an agreed upon price and date. The Funds may employ
reverse repurchase agreements (i) for temporary emergency purposes, such as to
meet unanticipated net redemptions so as to avoid liquidating other portfolio
securities during unfavorable market conditions; (ii) to cover short-term cash
requirements resulting from the timing of trade settlements; or (iii) to take
advantage of market situations where the interest income to be earned from the
investment of the proceeds of the transaction is greater than the interest
expense of the transaction. At the time it enters into a reverse repurchase
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agreement, a Fund will segregate liquid securities having a dollar value equal
to the repurchase price. Reverse repurchase agreements are considered borrowings
by the Fund under the 1940 Act.
SPECIAL SITUATIONS
Although Constellation does not currently intend to do so, it may
invest in "special situations." A special situation arises when, in the opinion
of the Fund's management, the securities of a particular company will, within a
reasonably estimable period of time, be accorded market recognition at an
appreciated value solely by reason of a development applicable to that company,
and regardless of general business conditions or movements of the market as a
whole. Developments creating special situations might include, among others:
liquidations, reorganizations, recapitalizations, mergers, material litigation,
technical breakthroughs, and new management or management policies. Although
large and well-known companies may be involved, special situations more often
involve comparatively small or unseasoned companies. Investments in unseasoned
companies and special situations often involve much greater risk than is
inherent in ordinary investment securities.
SHORT SALES
Each of the Funds may from time to time make short sales of securities
which it owns or which it has the right to acquire through the conversion of
exchange of other securities it owns. In a short sale, a Fund does not
immediately deliver the securities sold and does not receive the proceeds from
the sale. A Fund is said to have a short position in the securities sold until
it delivers the securities sold, at which time it receives the proceeds of the
sale. A Fund will neither make short sales of securities nor maintain a short
position unless, at all times when a short position is open, the Fund owns an
equal amount of such securities or securities convertible into or exchangeable,
without payment of any further consideration, for securities of the same issue
as, and equal in amount to, the securities sold short. This is a technique known
as selling short "against the box." To secure its obligation to deliver the
securities sold short, a Fund will deposit in escrow in a separate account with
its custodian, an equal amount of the securities sold short or securities
convertible into or exchangeable for such securities. In no event may more than
10% of a Fund's total assets be deposited or pledged as collateral for short
sales at any one time.
Since a Fund ordinarily will want to continue to receive interest and
dividend payments on securities in its portfolio which are convertible into the
securities sold short, the Fund will normally close out a short position by
purchasing and delivering an equal amount of the securities sold short, rather
than by delivering securities which it already holds.
A Fund will make a short sale, as a hedge, when it believes that the
price of a security may decline, causing a decline in the value of a security
owned by the Fund or a security convertible into or exchangeable for such
security, or when the Fund does not want to sell the security it owns, because
among other reasons, it wishes to defer recognition of gain or loss for federal
income tax purposes. In such case, any future losses in a Fund's long position
should be reduced by a gain in the short position. Conversely, any gain in the
long position should be reduced by a loss in the short position. The extent to
which such gains or losses are reduced will depend upon the amount of the
security sold short relative to the amount a Fund owns, either directly or
indirectly, and, in the case where the Fund owns convertible securities, changes
in the conversion premium. In determining the number of shares to be sold short
against a Fund's position in a convertible security, the anticipated fluctuation
in the conversion premium is considered. A Fund may also make short sales to
generate additional income from the investment of the cash proceeds of short
sales.
MARGIN TRANSACTIONS
None of Aggressive Growth, Blue Chip, Capital Development, Charter,
Large Cap Growth or Weingarten will purchase any security on margin, except that
each Fund may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of portfolio securities. The payment by a Fund
of initial or variation margin in connection with futures or related options
transactions will not be considered the purchase of a security on margin.
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WARRANTS
The Funds may, from time to time, invest in warrants. Warrants are, in
effect, longer-term call options. They give the holder the right to purchase a
given number of shares of a particular company at specified prices within
certain periods of time. The purchaser of a warrant expects that the market
price of the security will exceed the purchase price of the warrant plus the
exercise price of the warrant, thus giving him a profit. Of course, since the
market price may never exceed the exercise price before the expiration date of
the warrant, the purchaser of the warrant risks the loss of the entire purchase
price of the warrant. Warrants generally trade in the open market and may be
sold rather than exercised. Warrants are sometimes sold in unit form with other
securities of an issuer. Units of warrants and common stock may be employed in
financing young, unseasoned companies. The purchase price of a warrant varies
with the exercise price of a warrant, the current market value of the underlying
security, the life of the warrant and various other investment factors.
SECURITIES ISSUED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS
Each Fund may purchase securities on a "when-issued" basis, that is,
delivery of and payment for the securities is not fixed at the date of purchase,
but is set after the securities are issued (normally within forty-five days
after the date of the transaction). Each Fund also may purchase or sell
securities on a delayed delivery basis. The payment obligation and the interest
rate that will be received on the delayed delivery securities are fixed at the
time the buyer enters into the commitment. A Fund will only make commitments to
purchase when-issued or delayed delivery securities with the intention of
actually acquiring such securities, but the Fund may sell these securities
before the settlement date if it is deemed advisable.
Investment in securities on a when-issued or delayed delivery basis may
increase a Fund's exposure to market fluctuation and may increase the
possibility that the Fund will incur short-term gains subject to federal
taxation or short-term losses if the Fund must engage in portfolio transactions
in order to honor a when-issued or delayed delivery commitment. In a delayed
delivery transaction, the Fund relies on the other party to complete the
transaction. If the transaction is not completed, the Fund may miss a price or
yield considered to be advantageous. A Fund will employ techniques designed to
reduce such risks. If a Fund purchases a when-issued security, the Fund will
segregate liquid assets in an amount equal to the when-issued commitment. If the
market value of such segregated assets declines, additional cash or securities
will be segregated on a daily basis so that the market value of the segregated
assets will equal the amount of the Fund's when-issued commitments. To the
extent cash and securities are segregated, they will not be available for new
investments or to meet redemptions. Securities purchased on a delayed delivery
basis may require a similar segregation of liquid assets.
INVESTMENT IN UNSEASONED ISSUERS
Charter, Demographic Trends, Emerging Growth, Large Cap Basic Value and
Mid Cap may purchase securities of unseasoned issuers. Securities in such
issuers may provide opportunities for long term capital growth. Greater risks
are associated with investments in securities of unseasoned issuers than in the
securities of more established companies because unseasoned issuers have only a
brief operating history and may have more limited markets and financial
resources. As a result, securities of unseasoned issuers tend to be more
volatile than securities of more established companies.
LENDING OF PORTFOLIO SECURITIES
Consistent with applicable regulatory requirements, the Funds may lend
their portfolio securities (principally to broker-dealers) to the extent of
one-third of their respective total assets. Such loans would be callable at any
time and would be continuously secured by collateral equal to no less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash or debt securities issued or guaranteed by the U.S. Government or any of
its agencies. The Funds would continue to receive the
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income on loaned securities and would, at the same time, earn interest on the
loan collateral or on the investment of the loan collateral if it were cash. Any
cash collateral pursuant to these loans would be invested in short-term money
market instruments or affiliated money market funds. Where voting or consent
rights with respect to loaned securities pass to the borrower, the Funds will
follow the policy of calling the loan, in whole or in part as may be
appropriate, to permit the exercise of such voting or consent rights if the
matters involved are expected to have a material effect on the Funds' investment
in the loaned securities. Lending securities entails a risk of loss to the Funds
if and to the extent that the market value of the securities loaned were to
increase and the lender did not increase the collateral accordingly.
INTERFUND LOANS
Each Fund may lend up to 33 1/3% of its total assets to another AIM
Fund, on such terms and conditions as the SEC may require in an exemptive order.
An application for exemptive relief has been filed with the SEC on behalf of the
Funds and others. Each Fund may also borrow from another AIM Fund to satisfy
redemption requests or to cover unanticipated cash shortfalls due to a delay in
the delivery of cash to the Fund's custodian or improper delivery instructions
by a broker effectuating a transaction.
BORROWING
In addition to the ability to borrow money for temporary or emergency
purposes, Constellation may, but has no current intention to, borrow money from
banks to purchase or carry securities. Constellation may borrow amounts to
purchase or carry securities only if, immediately after such borrowing, the
value of its assets, including the amount borrowed, less its liabilities, is
equal to at least 300% of the amount borrowed, plus all outstanding borrowings.
Any investment gains made by Constellation with the borrowed monies in excess of
interest paid by the Fund will cause the net asset value of the Fund's shares to
rise faster than would otherwise be the case. On the other hand, if the
investment performance of the additional securities purchased with the proceeds
of such borrowings fails to cover the interest paid on the money borrowed by the
Fund, the net asset value of the Fund will decrease faster than would otherwise
be the case. This speculative factor is known as "leveraging."
EQUITY-LINKED DERIVATIVES
Each of the Funds may invest in equity-linked derivative products
designed to replicate the composition and performance of particular indices.
Examples of such products include S&P Depositary Receipts ("SPDRs"), World
Equity Benchmark Series ("WEBs"), NASDAQ 100 tracking shares ("QQQs"), Dow Jones
Industrial Average Instruments ("DIAMONDS") and Optomised Portfolios as Listed
Securities ("OPALS"). Investments in equity-linked derivatives involve the same
risks associated with a direct investment in the types of securities included in
the indices such products are designed to track. There can be no assurance that
the trading price of the equity-linked derivatives will equal the underlying
value of the basket of securities purchased to replicate a particular index or
that such basket will replicate the index. Investments in equity-linked
derivatives may constitute investment in other investment companies. See
"Investment in Other Investment Companies."
INVESTMENT IN OTHER INVESTMENT COMPANIES
Each of the Funds may invest in other investment companies to the
extent permitted by the 1940 Act, and rules and regulations thereunder, and if
applicable, exemptive orders granted by the SEC. The following restrictions
apply to investments in other investment companies other than Affiliated Money
Market Funds (defined below): (i) a Fund may not purchase more than 3% of the
total outstanding voting stock of another investment company; (ii) a Fund may
not invest more than 5% of its total assets in securities issued by another
investment company; and (iii) a Fund may not invest more than 10% of its total
assets in securities issued by other investment companies other than Affiliated
Money Market Funds. With respect to a Fund's purchase of shares of another
investment company, including Affiliated Money Market Funds, the Fund will
indirectly bear its proportionate share of the advisory fees and other
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operating expenses of such investment company. The Funds have obtained an
exemptive order from the SEC allowing them to invest uninvested cash balances
and cash collateral received in connection with securities lending in money
market funds that have AIM or an affiliate of AIM as an investment advisor (the
"Affiliated Money Market Funds"), provided that, with respect to uninvested cash
balances, investments in Affiliated Money Market Funds do not exceed 25% of the
total assets of such Fund.
TEMPORARY DEFENSIVE INVESTMENTS
In anticipation of or in response to adverse market conditions, for
cash management purposes, or for defensive purposes, each of the Funds may
temporarily hold all or a portion of its assets in cash, money market
instruments, bonds, or other debt securities. Each of the Funds may also invest
up to 25% of its total assets in Affiliated Money Market Funds for these
purposes. For a description of the various rating categories of corporate bonds
and commercial paper in which the Funds may invest, see the Appendix to this
Statement of Additional Information.
OPTIONS, FUTURES AND CURRENCY STRATEGIES
INTRODUCTION
The Funds may each use forward contracts, futures contracts, options on
securities, options on indices, options on currencies, and options on futures
contracts to attempt to hedge against the overall level of investment and
currency risk normally associated with each Fund's investments. These
instruments are often referred to as "derivatives," which may be defined as
financial instruments whose performance is derived, at least in part, from the
performance of another asset (such as a security, currency or an index of
securities).
GENERAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use by the Funds of options, futures contracts and forward currency
contracts involves special considerations and risks, as described below. Risks
pertaining to particular strategies are described in the sections that follow.
(1) Successful use of hedging transactions depends upon AIM's ability
to correctly predict the direction of changes in the value of the applicable
markets and securities, contracts and/or currencies. While AIM is experienced in
the use of these instruments, there can be no assurance that any particular
hedging strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between the price movements of an instrument (such as an option contract) and
the price movements of the investments being hedged. For example, if a
"protective put" is used to hedge a potential decline in a security and the
security does decline in price, the put option's increased value may not
completely offset the loss in the underlying security. Such a lack of
correlation might occur due to factors unrelated to the value of the investments
being hedged, such as changing interest rates, market liquidity, and speculative
or other pressures on the markets in which the hedging instrument is traded.
(3) Hedging strategies, if successful, can reduce risk of loss by
wholly or partially offsetting the negative effect of unfavorable price
movements in the investments being hedged. However, hedging strategies can also
reduce opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments.
(4) There is no assurance that a liquid secondary market will exist for
any particular option, futures contract, forward contract or option thereon at
any particular time.
(5) As described below, a Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in instruments involving
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obligations to third parties. If a Fund were unable to close out its positions
in such instruments, it might be required to continue to maintain such assets or
accounts or make such payments until the position expired or matured. The
requirements might impair the Fund's ability to sell a portfolio security or
make an investment at a time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a disadvantageous time.
(6) There is no assurance that a Fund will use hedging transactions.
For example, if a Fund determines that the cost of hedging will exceed the
potential benefit to the Fund, the Fund will not enter into such transaction.
COVER
Transactions using forward contracts, futures contracts and options
(other than options purchased by a Fund) expose a Fund to an obligation to
another party. A Fund will not enter into any such transactions unless it owns
either (1) an offsetting ("covered") position in securities, currencies, or
other options, forward contracts or futures contracts or (2) cash, liquid assets
and/or short-term debt securities with a value sufficient at all times to cover
its potential obligations not covered as provided in (1) above. Each Fund will
comply with SEC guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash or liquid securities. To the extent that a
futures contract, forward contract or option is deemed to be illiquid, the
assets used to "cover" the Fund's obligation will also be treated as illiquid
for purposes of determining the Fund's maximum allowable investment in illiquid
securities.
Even though options purchased by the Funds do not expose the Funds to
an obligation to another party, but rather provide the Funds with a right to
exercise, the Funds intend to "cover" the cost of any such exercise. To the
extent that a purchased option is deemed illiquid, the Fund will treat the
market value of the option (i.e., the amount at risk to the Fund) as illiquid,
but will not treat the assets used as cover on such transactions as illiquid.
Assets used as cover cannot be sold while the position in the
corresponding forward contract, futures contract or option is open, unless they
are replaced with other appropriate assets. If a large portion of a Fund's
assets is used for cover or otherwise set aside, it could affect portfolio
management or the Fund's ability to meet redemption requests or other current
obligations.
WRITING CALL OPTIONS
Each of the Funds may write (sell) covered call options on securities,
futures contracts, forward contracts, indices and currencies. As the writer of a
call option, a Fund would have the obligation to deliver the underlying
security, cash or currency (depending on the type of derivative) to the holder
(buyer) at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). So long as
the obligation of a Fund continues, it may be assigned an exercise notice,
requiring it to deliver the underlying security, cash or currency against
payment of the exercise price. This obligation terminates upon the expiration of
the call option, or such earlier time at which a Fund effects a closing purchase
transaction by purchasing an option identical to that previously sold.
When writing a call option a Fund, in return for the premium, gives up
the opportunity for profit from a price increase in the underlying security,
contract or currency above the exercise price, and retains the risk of loss
should the price of the security, contract or currency decline. Unlike one who
owns securities, contracts or currencies not subject to an option, a Fund has no
control over when it may be required to sell the underlying securities,
contracts or currencies, since most options may be exercised at any time prior
to the option's expiration. If a call option that a Fund has written expires, it
will realize a gain in the amount of the premium; however, such gain may be
offset by a decline in the market value of the underlying security, contract or
currency during the option period. If the call option is exercised, a Fund will
realize a gain or loss from the sale of the underlying security, contract or
currency, which will be increased or offset by the premium received.
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<PAGE> 204
Writing call options can serve as a limited hedge because declines in
the value of the hedged investment would be offset to the extent of the premium
received for writing the option.
Closing transactions may be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security, contract or currency
from being called or to permit the sale of the underlying security, contract or
currency. Furthermore, effecting a closing transaction will permit a Fund to
write another call option on the underlying security, contract or currency with
either a different exercise price or expiration date, or both.
WRITING PUT OPTIONS
Each of the Funds may write (sell) covered put options on securities,
futures contracts, forward contracts, indices and currencies. As the writer of a
put option, a Fund would have the obligation to buy the underlying security,
contract or currency (depending on the type of derivative) at the exercise price
at any time until (American style) or on (European style) the expiration date.
This obligation terminates upon the expiration of the put option, or such
earlier time at which a Fund effects a closing purchase transaction by
purchasing an option identical to that previously sold.
A Fund would write a put option at an exercise price that, reduced by
the premium received on the option, reflects the lower price it is willing to
pay for the underlying security, contract or currency. The risk in such a
transaction would be that the market price of the underlying security, contract
or currency would decline below the exercise price less the premium received.
PURCHASING PUT OPTIONS
Each of the Funds may purchase covered put options on securities,
futures contracts, forward contracts, indices and currencies. As the holder of a
put option, a Fund would have the right to sell the underlying security,
contract or currency at the exercise price at any time until (American style) or
on (European style) the expiration date. A Fund may enter into closing sale
transactions with respect to such options, exercise such option or permit such
option to expire.
A Fund may purchase a put option on an underlying security, contract or
currency ("protective put") owned by the Fund in order to protect against an
anticipated decline in the value of the security, contract or currency. Such
hedge protection is provided only during the life of the put option. The premium
paid for the put option and any transaction costs would reduce any profit
realized when the security, contract or currency is delivered upon exercise of
said option. Conversely, if the underlying security, contract or currency does
not decline in value, the option may expire worthless and the premium paid for
the protective put would be lost.
A Fund may also purchase put options on underlying securities,
contracts or currencies against which it has written other put options. For
example, where a Fund has written a "put option" on an underlying security,
rather than entering a closing transaction of the written option, it may
purchase a put option with a different exercise price and/or expiration date
that would eliminate some or all of the risk associated with the written put.
Used in combinations, these strategies are commonly referred to as put spreads.
Likewise, a Fund may write call options on underlying securities, contracts or
currencies against which it has purchased protective put options. This strategy
is commonly referred to as a "collar".
PURCHASING CALL OPTIONS
Each of the Funds may purchase covered call options on securities,
futures contracts, forward contracts, indices and currencies. As the holder of a
call option, a Fund would have the right to purchase the underlying security,
contract or currency at the exercise price at any time until (American style) or
on (European style) the expiration date. A Fund may enter into closing sale
transactions with respect to such options, exercise such options or permit such
options to expire.
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Call options may be purchased by a Fund for the purpose of acquiring
the underlying security, contract or currency for its portfolio. Utilized in
this fashion, the purchase of call options would enable a Fund to acquire the
security, contract or currency at the exercise price of the call option plus the
premium paid. So long as it holds such a call option, rather than the underlying
security or currency itself, the Fund is partially protected from any unexpected
decline in the market price of the underlying security, contract or currency
and, in such event, could allow the call option to expire, incurring a loss only
to the extent of the premium paid for the option.
Each of the Funds may also purchase call options on underlying
securities, contracts or currencies against which it has written other call
options. For example, where a Fund has written a call option on an underlying
security, rather than entering a closing transaction of the written option, it
may purchase a call option with a different exercise price and/or expiration
date that would eliminate some or all of the risk associated with the written
call. Used in combinations, these strategies are commonly referred to as "call
spreads."
OVER-THE-COUNTER OPTIONS
Options may be either listed on an exchange or traded in
over-the-counter ("OTC") markets. Listed options are third-party contracts
(i.e., performance of the obligations of the purchaser and seller is guaranteed
by the exchange or clearing corporation) and have standardized strike prices and
expiration dates. OTC options are two-party contracts with negotiated strike
prices and expiration dates. A Fund will not purchase an OTC option unless it
believes that daily valuations for such options are readily obtainable. OTC
options differ from exchange-traded options in that OTC options are transacted
with dealers directly and not through a clearing corporation (which guarantees
performance). Consequently, there is a risk of non-performance by the dealer.
Since no exchange is involved, OTC options are valued on the basis of an average
of the last bid prices obtained from dealers, unless a quotation from only one
dealer is available, in which case only that dealer's price will be used. In the
case of OTC options, there can be no assurance that a liquid secondary market
will exist for any particular option at any specific time. Although a Fund will
enter into OTC options only with dealers that are expected to be capable of
entering into closing transactions with it, there is no assurance that the Fund
will in fact be able to close out an OTC option position at a favorable price
prior to expiration. In the event of insolvency of the dealer, a Fund might be
unable to close out an OTC option position at any time prior to its expiration.
The staff of the SEC considers purchased OTC options (i.e., the market
value of the option) to be illiquid securities. A Fund may also sell OTC options
and, in connection therewith, segregate assets or cover its obligations with
respect to OTC options written by it. The assets used as cover for OTC options
written by the Fund will be considered illiquid unless the OTC options are sold
to qualified dealers who agree that the Fund may repurchase any OTC option it
writes at a maximum price to be calculated by a formula set forth in the option
agreement. The cover for an OTC option written subject to this procedure would
be considered illiquid only to the extent that the maximum repurchase price
under the formula exceeds the intrinsic value of the option.
INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities
or futures contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price movements in the
securities market or a particular market sector generally) rather than on price
movements in individual securities or futures contracts. The amount of cash is
equal to the difference between the closing price of the index and the exercise
price of the call or put times a specified multiple (the "multiplier"), which
determines the total dollar value for each point of such difference.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Fund writes a call
on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. A Fund can
offset some of the risk of writing a call index option position by holding a
diversified portfolio of securities similar to those on which the underlying
index is based. However, a Fund cannot, as a practical matter, acquire
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<PAGE> 206
and hold a portfolio containing exactly the same securities as underlie the
index and, as a result, bears a risk that the value of the securities held will
not be perfectly correlated with the value of the index.
LIMITATIONS ON OPTIONS
A Fund will not write options if, immediately after such sale, the
aggregate value of securities or obligations underlying the outstanding options
exceeds 20% of the Fund's total assets. A Fund will not purchase options if, at
any time of the investment, the aggregate premiums paid for the options will
exceed 5% of the Fund's total assets.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
Each of the Funds may enter into interest rate, currency or stock index
futures contracts (collectively, "Futures" or "Futures Contracts") as a hedge
against changes in prevailing levels of interest rates, currency exchange rates
or stock price levels, respectively, in order to establish more definitely the
effective return on securities or currencies held or intended to be acquired by
it. A Fund's hedging may include sales of Futures as an offset against the
effect of expected increases in interest rates, and decreases in currency
exchange rates and stock prices, and purchases of Futures as an offset against
the effect of expected declines in interest rates, and increases in currency
exchange rates or stock prices.
A Futures Contract is a two party agreement to buy or sell a specified
amount of a specified security or currency (or delivery of a cash settlement
price, in the case of an index future) for a specified price at a designated
date, time and place. A stock index future provides for the delivery, at a
designated date, time and place, of an amount of cash equal to a specified
dollar amount times the difference between the stock index value at the close of
trading on the contract and the price agreed upon in the Futures Contract; no
physical delivery of stocks comprising the index is made. Brokerage fees are
incurred when a Futures Contract is bought or sold, and margin deposits must be
maintained at all times the Future is outstanding.
The Funds will only enter into Futures Contracts that are traded
(either domestically or internationally) on futures exchanges and are
standardized as to maturity date and underlying financial instrument. Futures
exchanges and trading thereon in the United States are regulated under the
Commodity Exchange Act and by the Commodity Futures Trading Commission ("CFTC").
Foreign futures exchanges and trading thereon are not regulated by the CFTC and
are not subject to the same regulatory controls. For a further discussion of the
risks associated with investments in foreign securities, see "Foreign
Securities" in this Statement of Additional Information.
Closing out an open Future is effected by entering into an offsetting
Future for the same aggregate amount of the identical financial instrument or
currency and the same delivery date. There can be no assurance, however, that a
Fund will be able to enter into an offsetting transaction with respect to a
particular Future at a particular time. If a Fund is not able to enter into an
offsetting transaction, it will continue to be required to maintain the margin
deposits on the Future.
A Fund's Futures transactions will be entered into for hedging purposes
only; that is, Futures will be sold to protect against a decline in the price of
securities or currencies that the Fund owns, or Futures will be purchased to
protect the Fund against an increase in the price of securities or currencies it
has committed to purchase or expects to purchase.
"Margin" with respect to Futures is the amount of funds that must be
deposited by a Fund in order to initiate Futures trading and maintain its open
positions in Futures. A margin deposit made when the Futures Contract is entered
("initial margin") is intended to ensure the Fund's performance under the
Futures Contract. The margin required for a particular Future is set by the
exchange on which the Future is traded and may be significantly modified from
time to time by the exchange during the term of the Futures Contract.
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Subsequent payments, called "variation margin," to and from the futures
commission merchant through which a Fund entered into the Futures Contract will
be made on a daily basis as the price of the underlying security, currency or
index fluctuates making the Futures more or less valuable, a process known as
marking-to-market.
If a Fund were unable to liquidate a Future or an option on a Futures
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. The Fund would continue to be
subject to market risk with respect to the position. In addition, except in the
case of purchased options, the Fund would continue to be required to make daily
variation margin payments and might be required to maintain the position being
hedged by the Future or option or to maintain cash or securities in a segregated
account.
OPTIONS ON FUTURES CONTRACTS
Options on Futures Contracts are similar to options on securities or
currencies except that options on Futures Contracts give the purchaser the
right, in return for the premium paid, to assume a position in a Futures
Contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. Upon exercise of the option, the delivery of the Futures position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's Futures margin account.
FORWARD CONTRACTS
A forward contract is an obligation, usually arranged with a commercial
bank or other currency dealer, to purchase or sell a currency against another
currency at a future date and price as agreed upon by the parties. A Fund either
may accept or make delivery of the currency at the maturity of the forward
contract. A Fund may also, if its contra party agrees prior to maturity, enter
into a closing transaction involving the purchase or sale of an offsetting
contract. Forward contracts are traded over-the-counter, and not on organized
commodities or securities exchanges. As a result, it may be more difficult to
value such contracts, and it may be difficult to enter into closing
transactions.
Each of the Funds may engage in forward currency transactions in
anticipation of, or to protect itself against, fluctuations in exchange rates. A
Fund may enter into forward contracts with respect to a specific purchase or
sale of a security, or with respect to its portfolio positions generally. When a
Fund purchases a security denominated in a foreign currency for settlement in
the near future, it may immediately purchase in the forward market the currency
needed to pay for and settle the purchase. By entering into a forward contract
with respect to the specific purchase or sale of a security denominated in a
foreign currency, the Fund can secure an exchange rate between the trade and
settlement dates for that purchase or sale transaction. This practice is
sometimes referred to as "transaction hedging." Position hedging is the purchase
or sale of foreign currency with respect to portfolio security positions
denominated or quoted in a foreign currency.
The cost to a Fund of engaging in forward contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because forward contracts are usually entered
into on a principal basis, no fees or commissions are involved. The use of
forward contracts does not eliminate fluctuations in the prices of the
underlying securities a Fund owns or intends to acquire, but it does establish a
rate of exchange in advance. In addition, while forward contract sales limit the
risk of loss due to a decline in the value of the hedged currencies, they also
limit any potential gain that might result should the value of the currencies
increase.
LIMITATIONS ON USE OF FUTURES, OPTIONS ON FUTURES AND CERTAIN OPTIONS ON
CURRENCIES
To the extent that a Fund enters into Futures Contracts, options on
Futures Contracts and options on foreign currencies traded on a CFTC-regulated
exchange, in each case other than for bona fide hedging purposes (as defined by
the CFTC), the aggregate initial margin and premiums required to establish those
positions (excluding the amount by which options are "in-the-money") will not
exceed 5%
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of the total assets of the Fund, after taking into account unrealized profits
and unrealized losses on any contracts it has entered into. This guideline may
be modified by the Board, without a shareholder vote. This limitation does not
limit the percentage of the Fund's assets at risk to 5%.
INVESTMENT RESTRICTIONS
Each Fund is subject to the following investment restrictions, which
may be changed only by a vote of a majority of such Fund's outstanding shares,
except that Emerging Growth is not subject to restriction (1). Fundamental
restrictions may be changed only by a vote of the lesser of (i) 67% or more of
the Fund's shares present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or represented by proxy, or (ii) more
than 50% of the Fund's outstanding shares. Any investment restriction that
involves a maximum or minimum percentage of securities or assets shall not be
considered to be violated unless an excess over or a deficiency under the
percentage occurs immediately after, and is caused by, an acquisition or
disposition of securities or utilization of assets by the Fund.
FUNDAMENTAL RESTRICTIONS
(1) The Fund is a "diversified company" as defined in the 1940
Act. The Fund will not purchase the securities of any issuer if, as a
result, the Fund would fail to be a diversified company within the
meaning of the 1940 Act, and the rules and regulations promulgated
thereunder, as such statute, rules and regulations are amended from
time to time or are interpreted from time to time by the SEC staff
(collectively, the "1940 Act Laws and Interpretations") or except to
the extent that the Fund may be permitted to do so by exemptive order
or similar relief (collectively, with the 1940 Act Laws and
Interpretations, the "1940 Act Laws, Interpretations and Exemptions").
In complying with this restriction, however, the Fund may purchase
securities of other investment companies to the extent permitted by the
1940 Act Laws, Interpretations and Exemptions.
(2) The Fund may not borrow money or issue senior securities,
except as permitted by the 1940 Act Laws, Interpretations and
Exemptions.
(3) The Fund may not underwrite the securities of other
issuers. This restriction does not prevent the Fund from engaging in
transactions involving the acquisition, disposition or resale of its
portfolio securities, regardless of whether the Fund may be considered
to be an underwriter under the Securities Act of 1933.
(4) The Fund will not make investments that will result in the
concentration (as that term may be defined or interpreted by the 1940
Act Laws, Interpretations and Exemptions) of its investments in the
securities of issuers primarily engaged in the same industry. This
restriction does not limit the Fund's investments in (i) obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or (ii) tax-exempt obligations issued by governments
or political subdivisions of governments. In complying with this
restriction, the Fund will not consider a bank-issued guaranty or
financial guaranty insurance as a separate security.
(5) The Fund may not purchase real estate or sell real estate
unless acquired as a result of ownership of securities or other
instruments. This restriction does not prevent the Fund from investing
in issuers that invest, deal, or otherwise engage in transactions in
real estate or interests therein, or investing in securities that are
secured by real estate or interests therein.
(6) The Fund may not purchase physical commodities or sell
physical commodities unless acquired as a result of ownership of
securities or other instruments. This restriction does not prevent the
Fund from engaging in transactions involving futures contracts and
options thereon or investing in securities that are secured by physical
commodities.
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(7) The Fund may not make personal loans or loans of its
assets to persons who control or are under common control with the
Fund, except to the extent permitted by 1940 Act Laws, Interpretations
and Exemptions. This restriction does not prevent the Fund from, among
other things, purchasing debt obligations, entering into repurchase
agreements, loaning its assets to broker-dealers or institutional
investors, or investing in loans, including assignments and
participation interests.
(8) The Fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objectives, policies and
restrictions as the Fund.
The investment restrictions set forth above provide each of the Funds
with the ability to operate under new interpretations of the 1940 Act or
pursuant to exemptive relief from the SEC without receiving prior shareholder
approval of the change. Even though each of the Funds has this flexibility, the
Board of Trustees has adopted non-fundamental restrictions for each of the Funds
relating to certain of these restrictions which the advisor must follow in
managing the Funds. Any changes to these non-fundamental restrictions, which are
set forth below, require the approval of the Board of Trustees.
NON-FUNDAMENTAL RESTRICTIONS
The following restrictions apply to each of the Funds, except Emerging
Growth is not subject to restriction (1). They may be changed for any Fund
without approval of that Fund's voting securities.
(1) In complying with the fundamental restriction regarding
issuer diversification, the Fund will not, with respect to 75% of its
total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities), if, as a result, (i) more than 5% of
the Fund's total assets would be invested in the securities of that
issuer, or (ii) the Fund would hold more than 10% of the outstanding
voting securities of that issuer. The Fund may (i) purchase securities
of other investment companies as permitted by Section 12(d)(1) of the
1940 Act and (ii) invest its assets in securities of other money market
funds and lend money to other investment companies or their series
portfolios that have AIM or an affiliate of AIM as an investment
advisor (an "AIM Advised Fund"), subject to the terms and conditions of
any exemptive orders issued by the SEC.
(2) In complying with the fundamental restriction regarding
borrowing money and issuing senior securities, the Fund may borrow
money in an amount not exceeding 33 1/3% of its total assets (including
the amount borrowed) less liabilities (other than borrowings). The Fund
may borrow from banks, broker-dealers or an AIM Advised Fund. Other
than Constellation, the Fund may not borrow for leveraging, but may
borrow for temporary or emergency purposes, in anticipation of or in
response to adverse market conditions, or for cash management purposes.
Other than Constellation, the Fund may not purchase additional
securities when any borrowings from banks exceed 5% of the Fund's total
assets.
(3) In complying with the fundamental restriction regarding
industry concentration, the Fund may invest up to 25% of its total
assets in the securities of issuers whose principal business activities
are in the same industry.
(4) In complying with the fundamental restriction with regard
to making loans, the Fund may lend up to 33 1/3% of its total assets
and may lend money to another AIM Advised Fund, on such terms and
conditions as the SEC may require in an exemptive order.
(5) Notwithstanding the fundamental restriction with regard to
investing all assets in an open-end fund, the Fund may not invest all
of its assets in the securities of a single open-end management
investment company with the same fundamental investment objectives,
policies and restrictions as the Fund.
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[The following non-fundamental policies apply only to the Funds
specified.
[(1) Aggressive Growth does not intend to invest for the purposes of
influencing management or exercising control].
[(2) The amount Constellation may borrow will also be limited by the
applicable margin limitations imposed by the Federal Reserve Board. If at any
time the value of Constellation's assets should fail to meet the 300% asset
coverage requirement, the Fund will, within three days, reduce its borrowings to
the extent necessary. The Fund may be required to eliminate partially or totally
its outstanding borrowings at times when it may not be desirable for it to do
so. Any investment gains made by the Fund with the borrowed monies in excess of
interest paid by the Fund will cause the net asset value of the Fund's shares to
rise faster than would otherwise be the case. On the other hand, if the
investment performance of the additional securities purchased with the proceeds
of such borrowings fails to cover the interest paid on the money borrowed by
Constellation, the net asset value of the Fund will decrease faster than would
otherwise be the case. This speculative factor is known as "leveraging."]
[(3) Weingarten may not purchase more than 10% of the outstanding
securities of any one issuer or more than 10% of any class of securities of an
issuer, except that the Fund may purchase securities of Affiliated Money Market
Funds to the extent permitted by exemptive order or] purchase additional
securities when any borrowings from banks exceed 5% of the Fund's total assets.]
MANAGEMENT
The overall management of the business and affairs of the Funds and the
Trust is vested with the Trust's Board of Trustees. The Board of Trustees
approves all significant agreements between the Trust, on behalf of the Funds,
and persons or companies furnishing services to the Funds. The day-to-day
operations of each Fund are delegated to the officers of the Trust and to AIM,
subject always to the objectives, restrictions and policies of the applicable
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.
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 100, Houston, TX
77046-1173.
<TABLE>
<CAPTION>
========================================================================================================================
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
*CHARLES T. BAUER (81) Trustee and Chairman of the Board of Directors, A I M Management Group
Chairman Inc.; A I M Advisors, Inc., A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund Services, Inc.,
and Fund Management Company; and Executive Vice Chairman
and Director, AMVESCAP PLC.
========================================================================================================================
</TABLE>
* A director who is an "interested person" of A I M Advisors, Inc. and the
Trust as defined in the 1940 Act.
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<TABLE>
<CAPTION>
========================================================================================================================
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BRUCE L. CROCKETT (56) Trustee Director, ACE Limited (insurance company). Formerly,
906 Frome Lane Director, President and Chief Executive Officer, COMSAT
McLean, VA 22102 Corporation and Chairman, Board of Governors of INTELSAT
(international communications company).
- ------------------------------------------------------------------------------------------------------------------------
OWEN DALY II (75) Trustee Formerly, Director, Cortland Trust Inc. (investment
Six Blythewood Road company), CF & I Steel Corp., Monumental Life Insurance
Baltimore, MD 21210 Company and Monumental General Insurance Company; and
Chairman of the Board of Equitable Bancorporation.
- ------------------------------------------------------------------------------------------------------------------------
EDWARD K. DUNN, JR. (64) Trustee Chairman of the Board of Directors, Mercantile Mortgage
2 Hopkins Plaza, 8th Floor Corp. Formerly, Vice Chairman of the Board of Directors,
Suite 805 President and Chief Operating Officer, Mercantile - Safe
Baltimore, MD 21201 Deposit & Trust Co.; and President, Mercantile Bankshares.
- ------------------------------------------------------------------------------------------------------------------------
JACK FIELDS (48) Trustee Chief Executive Officer, Texana Global, Inc. (foreign
Jetero Plaza, Suite E trading company) and Twenty-First Century Group, Inc.
8810 Will Clayton Parkway (governmental affairs company). Formerly, Member of the
Humble, Texas 77338 U.S. House of Representatives.
- ------------------------------------------------------------------------------------------------------------------------
**CARL FRISCHLING (63) Trustee Partner, Kramer Levin Naftalis & Frankel LLP (law firm).
919 Third Avenue
New York, NY 10022
- ------------------------------------------------------------------------------------------------------------------------
*ROBERT H. GRAHAM (53) Trustee and Director, President and Chief Executive Officer, A I M
President Management Group Inc.; Director and President, A I M
Advisors, Inc.; Director and Senior Vice President, A I M
Capital Management, Inc., A I M Distributors, Inc., A I M
Fund Services, Inc., and Fund Management Company; and
Director and Chief Executive Officer, Managed Products,
AMVESCAP PLC.
- ------------------------------------------------------------------------------------------------------------------------
PREMA MATHAI-DAVIS (49) Trustee Chief Executive Officer, YWCA of the U.S.A.
350 Fifth Avenue, Suite 301
New York, NY 10118
- ------------------------------------------------------------------------------------------------------------------------
LEWIS F. PENNOCK (57) Trustee Partner, Pennock & Cooper (law firm).
6363 Woodway, Suite 825
Houston, TX 77057
- ------------------------------------------------------------------------------------------------------------------------
LOUIS S. SKLAR (60) Trustee Executive Vice President, Development and Operations,
The Williams Tower, 50th Floor Hines Interests Limited Partnership (real estate
2800 Post Oak Blvd. development).
Houston, TX 77056
========================================================================================================================
</TABLE>
- -------------------
** A trustee who is an "interested person" of the Trust as defined in the 1940
Act.
* A trustee who is an "interested person" of A I M Advisors, Inc. and the Trust
as defined in the 1940 Act.
33
<PAGE> 212
<TABLE>
<CAPTION>
========================================================================================================================
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GARY T. CRUM (52) Senior Vice Director and President, A I M Capital Management, Inc.;
President Director and Executive Vice President, A I M Management
Group Inc.; Director and Senior Vice President, A I M
Advisors, Inc.; and Director, A I M Distributors, Inc. and
AMVESCAP PLC.
- ------------------------------------------------------------------------------------------------------------------------
CAROL F. RELIHAN (45) Senior Vice Director, Senior Vice President, General Counsel and
President Secretary, A I M Advisors, Inc.; Senior Vice President,
and Secretary General Counsel and Secretary, A I M Management Group
Inc.; Director, Vice President and General Counsel, Fund
Management Company; General Counsel and Vice President, A
I M Fund Services, Inc.; and Vice President, A I M Capital
Management, Inc., and A I M Distributors, Inc.
- ------------------------------------------------------------------------------------------------------------------------
MELVILLE B. COX (56) Vice President Vice President and Chief Compliance Officer, A I M
Advisors, Inc., A I M Capital Management, Inc., [A I M
Distributors, Inc., A I M Fund Services, Inc., and Fund
Management Company.]
- ------------------------------------------------------------------------------------------------------------------------
DANA R. SUTTON (41) Vice President and Vice President and Fund Controller, A I M Advisors, Inc.;
Treasurer and Assistant Vice President and Assistant Treasurer, Fund
Management Company.
- ------------------------------------------------------------------------------------------------------------------------
EDGAR M. LARSEN (59) Vice President Vice President, A I M Capital Management, Inc.
========================================================================================================================
</TABLE>
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. Crockett, Daly, Dunn
(Chairman), Fields, Frischling, Pennock and Sklar and Dr. Mathai-Davis. The
Audit Committee is responsible for: (i) considering management's recommendations
of independent accountants for each Fund and evaluating such accountants'
performance, costs and financial stability; (ii) with AIM, reviewing and
coordinating audit plans prepared by the Funds' independent accountants and
management's internal audit staff; and (iii) reviewing financial statements
contained in periodic reports to shareholders with the Funds' independent
accountants and management.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly, Dunn, Fields, Frischling, Pennock and Sklar (Chairman) and Dr.
Mathai-Davis. The Investment Committee is responsible for: (i) overseeing AIM's
investment-related compliance systems and procedures to ensure their continued
adequacy; and (ii) considering and acting, on an interim basis, between meetings
of the full Board, on investment-related matters requiring Board consideration,
including dividends and distributions, brokerage policies and pricing matters.
The members of the Nominating and Compensation Committee are Messrs.
Crockett (Chairman), Daly, Dunn, Fields, Pennock and Sklar and Dr. Mathai-Davis.
The Nominating and Compensation Committee is responsible for: (i) considering
and nominating individuals to stand for election as independent trustees as long
as the Trust maintains a distribution plan pursuant to Rule 12b-1 under the 1940
Act; (ii) reviewing from time to time the compensation payable to the
independent trustees; and (iii) making recommendations to the Board regarding
matters related to compensation, including deferred compensation plans and
retirement plans for the independent trustees.
34
<PAGE> 213
The Nominating and Compensation Committee will consider nominees
recommended by a shareholder to serve as trustees, provided (i) that such person
is a shareholder of record at the time he or she submits such names and is
entitled to vote at the meeting of shareholders at which trustees will be
elected, and (ii) that the Nominating and Compensation Committee or the Board,
as applicable, shall make the final determination of persons to be nominated.
All of the Trust's trustees also serve as directors or trustees of some
or all of the other investment companies managed or advised by AIM. All of the
Trust's executive officers hold similar offices with some or all of the other
investment companies managed or advised by AIM.
Remuneration of Trustees
Each trustee is reimbursed for expenses incurred in connection with
each meeting of the Board of Trustees or any committee attended. 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 director or trustee of 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 Trust:
<TABLE>
<CAPTION>
=======================================================================================================
RETIREMENT TOTAL
AGGREGATE COMPENSATION BENEFITS COMPENSATION
FROM THE ACCRUED FROM ALL
TRUSTEE TRUST(1) BY ALL AIM FUNDS(2) AIM FUNDS(3)
------- ---------------------- ------------------- ------------
<S> <C> <C> <C>
Charles T. Bauer $ 0 $ 0 $ 0
------- -------- --------
Bruce L. Crockett 24,660 37,485 103,500
------- -------- --------
Owen Daly II 24,660 122,898 103,500
------- -------- --------
Edward K. Dunn, Jr. 24,659 0 103,500
------- -------- --------
Jack Fields 24,169 15,826 101,500
------- -------- --------
Carl Frischling(4) 24,541 97,791 103,500
------- -------- --------
Robert H. Graham 0 0 0
------- -------- --------
John F. Kroeger(5) 0 107,896 0
------- -------- --------
Prema Mathai-Davis 24,659 0 101,500
------- -------- --------
Lewis F. Pennock 24,541 45,766 103,500
------- -------- --------
Ian Robinson(6) 10,014 94,442 25,000
------- -------- --------
Louis S. Sklar 24,541 90,232 101,500
============================================================================================
</TABLE>
35
<PAGE> 214
(1) The total amount of compensation deferred by all directors of the
Trust's predecessor during the fiscal year ended October 31, 1999,
including earnings thereon, was $159,484.
(2) During the fiscal year ended October 31, 1999, the total amount of
expenses allocated to the Trust's predecessor in respect of such
retirement benefits was $215,041. Data reflects compensation for the
calendar year ended December 31, 1999.
(3) Each trustee serves as director or trustee of at least 12 registered
investment companies advised by AIM. Data reflects total compensation
for the calendar year ended December 31, 1999.
(4) During the fiscal year ended October 31, 1999, Aggressive Growth, Blue
Chip, Capital Development, Charter, Constellation, Demographic Trends,
Large Cap Basic Value, Large Cap Growth and Weingarten, each paid
$8,655, $9,059, $5,896, $15,483, $31,683, $988, $951, $2,211 and
$20,003, respectively, in legal fees to Mr. Frischling's law firm,
Kramer Levin Naftalis & Frankel LLP for services rendered. Mr.
Frischling, a trustee of the Trust, is a partner in such firm.
(5) Mr. Kroeger was a director of the Trust's predecessor until June 11,
1998, when he resigned. On that date he became a consultant to the
Trust's predecessor. Mr. Kroeger passed away on November 26, 1998. Mr.
Kroeger's widow will receive his pension as described below under "AIM
Funds Retirement Plan for Eligible Directors/Trustees."
(6) Mr. Robinson was a director of the Trust's predecessor until March 12,
1999, when he retired.
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, AIM Management or any of their affiliates) may be entitled to
certain benefits upon retirement from the Board of Trustees. Pursuant to the
Plan, a trustee becomes eligible to retire and receive full benefits under the
Plan when he or she 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 or her date of retirement equal to a maximum of
75% of the annual 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) and based on the number of such trustee's
years of service (not in excess of 10 years of service) completed with respect
to any of the Applicable 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 all benefits under the Plan,
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 Applicable AIM Fund.
Set forth below is a table that shows the estimated annual benefits
payable to an eligible trustee upon retirement assuming the retainer amount
reflected below and various years of service. The estimated credited years of
service for Messrs. Crockett, Daly, Dunn, Fields, Frischling, Kroeger, Pennock,
Robinson and Sklar and Dr. Mathai-Davis are 13, 13, 2, 3, 23, 20, 18, 11, 10 and
1 years, respectively.
36
<PAGE> 215
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
============== ============================
Number of
Years of Annual Retirement
Service With Compensation Paid By All
the Applicable Applicable AIM Funds
AIM Funds
============== ============================
<S> <C>
10 $67,500
-- -------
9 $60,750
-- -------
8 $54,000
-- -------
7 $47,250
-- -------
6 $40,500
-- -------
5 $33,750
== =======
</TABLE>
Deferred Compensation Agreements
Messrs. Daly, Dunn, Fields, Frischling and Sklar and Dr. Mathai-Davis
(the "Deferring Trustees"), have each executed a Deferred Compensation Agreement
(collectively, the "Compensation Agreements"). Pursuant to the Compensation
Agreements, the Deferring Trustees may elect to defer receipt of up to 100% of
their compensation payable by the Trust, 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, generally in equal quarterly installments over a period of five (5) or ten
(10) years (depending on the Compensation Agreement) beginning on the date the
Deferring Trustee's retirement benefits commence under the Plan. The Trust'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 Trust. If a Deferring Trustee dies prior to the
distribution of amounts in his or her deferral account, the balance of the
deferral account will be distributed to his or her designated beneficiary in a
single lump sum payment as soon as practicable after such Deferring Trustee's
death. The Compensation 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 Trust and of each other AIM Fund from
which they are deferring compensation.
INVESTMENT ADVISORY AND OTHER SERVICES
AIM is a direct wholly owned subsidiary of AIM Management, a holding
company that has been engaged in the financial services business since 1976. The
address of AIM is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. AIM was
organized in 1976, and, together with its subsidiaries, advises or manages over
120 investment portfolios encompassing a broad range of investment objectives.
AIM Management is an indirect wholly owned subsidiary of AMVESCAP PLC, 11
Devonshire Square, London EC2M 4YR, United Kingdom. AMVESCAP PLC and its
subsidiaries are an independent investment management group engaged in
institutional investment management and retail mutual fund businesses in the
United States, Europe and the Pacific Region. Certain of the trustees and
officers of AIM are also executive officers of the Trust and their affiliations
are shown under "Trustees and Officers."
AIM and the Trust have adopted a Code of Ethics which requires
investment personnel and certain other employees (a) to pre-clear personal
securities transactions subject to the Code of Ethics;
37
<PAGE> 216
(b) file reports regarding such transactions; (c) 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 (subject to a de minimis exception), and (iii) transactions involving
securities being considered for investment by an AIM Fund (subject to the de
minimis exception); and (d) abide by certain other provisions of the Code of
Ethics. The de minimis exception under the Code of Ethics covers situations
where there is no material conflict of interest because of the large market
capitalization of a security and the relatively small number of shares involved
in a personal transaction. The Code of Ethics also generally prohibits AIM
employees who are registered with the NASD from purchasing securities in initial
public offerings. Personal trading reports are periodically reviewed by AIM, and
the Board of Trustees reviews quarterly and annual reports (which summarize any
significant violations of the Code of Ethics). Sanctions for violating the Code
of Ethics may include censure, monetary penalties, suspension or termination of
employment.
The Trust, on behalf of each Fund has entered into a Master Investment
Advisory Agreement dated May 26, 2000 (the "Master Advisory Agreement") and a
Master Administrative Services Agreement (the "Master Administrative Services
Agreement") with AIM. In addition, AIM has entered into a Master Sub-Advisory
Agreement (the "Master Sub-Advisory Agreement") with AIM Capital with respect to
Charter, Weingarten and Constellation. A prior investment advisory agreement
with substantially similar terms to the Master Advisory Agreement and a prior
administrative services agreement with substantially similar terms to the Master
Administrative Services Agreement were in effect until May 26, 2000.
Under the terms of the Master Advisory Agreement, AIM supervises all
aspects of the Funds' operations and provides investment advisory services to
the Funds. AIM obtains and evaluates economic, statistical and financial
information to formulate and implement investment programs for the Funds. AIM
will not be liable to the Funds or their shareholders except in the case of
AIM's willful misfeasance, bad faith, gross negligence or reckless disregard of
duty.
Pursuant to the Master Administrative Services Agreement, AIM has
agreed to provide or arrange for the provision of certain accounting and other
administrative services to the Funds, including the services of a principal
financial officer of the Funds and related staff. As compensation to AIM for its
services under the Master Administrative Service Agreements, the Funds reimburse
AIM for expenses incurred by AIM or its subsidiaries in connection with such
services.
Under the terms of the Master Sub-Advisory Agreement, AIM has appointed
AIM Capital to provide certain investment advisory services for each of Charter,
Constellation and Weingarten, subject to overall supervision by AIM and the
Trust's Board of Trustees. Certain of the trustees and officers of AIM Capital
are also executive officers of the Trust.
Both the Master Advisory Agreement and the Master Sub-Advisory
Agreement provide that the Fund will pay or cause to be paid all expenses of the
Fund not assumed by AIM or AIM Capital, including, without limitation: brokerage
commissions, taxes, legal, auditing or governmental fees, the cost of preparing
share certificates, custodian, transfer and shareholder service agent costs,
expenses of issue, sale, redemption, and repurchase of shares, expenses of
registering and qualifying shares for sale, expenses relating to 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 Funds' shareholders.
The Master Advisory Agreement and the Master Sub-Advisory Agreement
will continue in effect until June 30, 2000 and thereafter from year to year
only 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 Funds (as defined in the 1940 Act), and (ii) the affirmative
vote of a majority of the trustees who are not parties to the agreements or
"interested persons" of any such party (the "Non-Interested Trustees") by votes
cast in person at a meeting called for such purpose. Each agreement provides
that the Funds, AIM (in the case of the Master Advisory Agreement) or AIM
Capital
38
<PAGE> 217
(in the case of the Master Sub-Advisory Agreement) may terminate such agreement
on 60 days' written notice without penalty Each agreement terminates
automatically in the event of its assignment.
AIM may from time to time waive or reduce its fee. Voluntary fee
waivers or reductions may be rescinded at any time without further notice to
investors. During periods of voluntary fee waivers or reductions, AIM will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions set forth in the Fee Table in a
Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM and the Fund. Fee waivers or
reductions set forth in the Master Advisory Agreement may not be terminated
without shareholder approval.
AIM has contractually agreed to a reduction of advisory fees for
Charter, Constellation and Weingarten at net asset levels higher than those
currently incorporated in the advisory fee schedule. Accordingly, with respect
to each of Charter and Constellation, AIM receives a fee calculated at an annual
rate of 1.0% of the first $30 million of such Fund's average daily net assets,
plus 0.75% of such Fund's average daily net assets in excess of $30 million to
and including $150 million, plus 0.625% of such Fund's average daily net assets
in excess of $150 million. With respect to Weingarten, AIM's fee is calculated
at an annual rate of 1.0% of the first $30 million of the Fund's average daily
net assets, plus 0.75% of the Fund's average daily net assets in excess of $30
million to and including $350 million, plus 0.625% of the Fund's average daily
net assets in excess of $350 million.
With respect to Aggressive Growth, AIM's fee is calculated at an annual
rate of 0.80% of the first $150 million of the Fund's average daily net assets,
plus 0.625% of the Fund's average daily net assets in excess of $150 million.
With respect to Blue Chip and Capital Development, AIM is entitled to receive a
fee calculated at an annual rate of 0.75% of the first $350 million of such
Fund's average daily net assets, plus 0.625% of such Fund's average daily net
assets in excess of $350 million. With respect to Demographic Trends, AIM is
entitled to receive a fee calculated at an annual rate of 0.85% of the first $2
billion of average daily net assets plus 0.80% of the Fund's average daily net
assets in excess of $2 billion. With respect to Emerging Growth, AIM is entitled
to receive a fee calculated at an annual rate of 0.85% of the first $1 billion
of average daily net assets plus 0.80% of the Fund's assets in excess of $1
billion. With respect to Large Cap Basic Value, AIM is entitled to receive a fee
calculated at an annual rate of 0.60% of the first $1 billion of average daily
net assets, plus 0.575% of the Fund's average daily net assets in excess of $1
billion to and including $2 billion of average daily net assets, plus 0.55% of
the Fund's average daily net assets in excess of $2 billion. With respect to
Large Cap Growth, AIM is entitled to receive a fee calculated at an annual rate
of 0.75% of the first $1 billion of such Fund's average daily net assets, plus
0.70% of such Fund's average daily net assets in excess of $1 billion to and
including $2 billion, plus 0.625% of such Fund's average daily net assets in
excess of $2 billion. With respect to Mid Cap, AIM is entitled to receive a fee
calculated at an annual rate of 0.80% of the first $1 billion of the Fund's
average daily net assets, plus 0.75% of the Fund's average daily net assets in
excess of $1 billion.
As compensation for its services, AIM pays 50% of the advisory fees it
receives pursuant to the Master Advisory Agreement with respect to Charter,
Constellation and Weingarten to AIM Capital.
Each Fund paid to AIM the following advisory fees net of any expense
limitations (fee waivers) for the years ended October 31, 1999, 1998 and 1997:
39
<PAGE> 218
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Aggressive Growth ........... $17,085,022 $21,617,925 $19,244,957
Blue Chip ................... 21,592,076 8,680,763 3,154,473
Capital Development ......... 8,102,504 7,886,238 3,371,800
Charter ..................... 39,884,618 31,058,588 24,725,606
Constellation ............... 87,350,901 86,555,468 80,116,284
Demographic Trends .......... 646,554 N/A N/A
Large Cap Basic Value ....... -0- N/A N/A
Large Cap Growth ............ 10,176 N/A N/A
Weingarten .................. 50,710,809 40,657,216 35,300,671
</TABLE>
For the fiscal year ended October 31, 1999, 1998 and 1997, AIM waived
advisory fees for each Fund as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Aggressive Growth .............. $ 0 $ 0 $ 0
Blue Chip ...................... 0 0 100,380
Capital Development ............ 0 0 262,189
Charter ........................ 1,130,089 762,337 498,463
Constellation .................. 3,107,849 3,074,705 2,805,955
Demographic Trends ............. 43,724 N/A N/A
Large Cap Basic Value .......... 2,279 N/A N/A
Large Cap Growth ............... 32,079 N/A N/A
Weingarten ..................... 4,288,405 2,917,461 2,187,021
</TABLE>
AIM, in turn, paid the following sub-advisory fees to AIM Capital, as
sub-advisor for Charter, Constellation and Weingarten, for the years ended
October 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Charter .................. $19,942,309 $15,529,294 $12,362,803
Constellation ............ 43,675,451 43,277,734 40,058,142
Weingarten ............... 25,355,405 20,328,608 17,650,335
</TABLE>
The payments set forth above were made pursuant to a substantially
similar advisory agreement between AIM and the Trust's predecessor.
In addition, if a Fund engages in securities lending, AIM will provide
the Fund investment advisory services and related administrative services. The
Master Investment Advisory Agreement describes the administrative services to be
rendered by AIM if a Fund engages in securities lending activities, as well as
the compensation AIM may receive for such administrative services. Services to
be provided include: (a) overseeing participation in the securities lending
program to ensure compliance with all applicable regulatory and investment
guidelines; (b) assisting the securities lending agent or principal (the agent)
in determining which specific securities are available for loan; (c) monitoring
the agent to ensure that securities loans are effected in accordance with AIM's
instructions and with procedures adopted by the Board; (d) preparing appropriate
periodic reports for, and seeking appropriate approvals from, the Board with
respect to securities lending activities; (e) responding to agent inquiries; and
(f) performing such other duties as may be necessary.
AIM's compensation for advisory services rendered in connection with
securities lending is included in the advisory fee schedule. As compensation for
the related administrative services AIM will provide, a lending Fund will pay
AIM a fee equal to 25% of the net monthly interest or fee income retained or
paid to the Fund from such activities. AIM currently intends to waive such fee,
and has agreed to seek Board approval prior to its receipt of all or a portion
of such fee.
40
<PAGE> 219
The Master Administrative Services Agreement provides that AIM may
perform or arrange for the performance of certain accounting and other
administrative services to each Fund. For such services, AIM is entitled to
receive from each Fund reimbursement of its costs or such reasonable
compensation as may be approved by the Trust's Board of Trustees. The Master
Administrative Services Agreement will continue in effect until June 30, 2000
and thereafter from year to year only 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 Funds (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.
In addition, the Transfer Agency and Service agreement for the Fund
provides that A I M Fund Services, Inc. ("AFS"), a registered transfer agent and
wholly owned subsidiary of AIM, will perform certain shareholder services for
the Fund for a fee per account serviced. The 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 their accounts.
The Funds paid AIM the following amounts as reimbursement of
administrative services costs for the years ended October 31, 1999, 1998 and
1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Aggressive Growth ................. $126,956 $108,996 $ 97,609
Blue Chip ......................... 153,309 85,043 73,653
Capital Development ............... 111,632 85,252 74,810
Charter ........................... 235,274 152,008 127,908
Constellation ..................... 431,120 295,926 251,513
Demographic Trends ................ 16,849 N/A N/A
Large Cap Basic Value ............. 16,849 N/A N/A
Large Cap Growth .................. 29,197 N/A N/A
Weingarten ........................ 281,500 179,633 163,243
</TABLE>
The payments set forth in the table above were made pursuant to a
substantially similar administrative services agreement between AIM and the
Trust's predecessor.
THE DISTRIBUTION PLANS
THE CLASS A AND C PLAN
The Trust has adopted a Master Distribution Plan pursuant to Rule 12b-1
under the 1940 Act relating to the Class A and Class C shares of the Funds (the
"Class A and C Plan"). The Class A and C Plan provides that the Class A shares
pay 0.35% per annum of their daily average net assets in the case of Blue Chip,
Capital Development, Demographic Trends, Emerging Growth, Large Cap Basic Value,
Large Cap Growth and Mid Cap, 0.30% per annum of their average daily net assets
in the case of Charter, Constellation and Weingarten and 0.25% per annum of the
average net assets of Aggressive Growth as compensation to AIM Distributors for
the purpose of financing any activity which is primarily intended to result in
the sale of Class A shares. Under the Class A and C Plan, Class C shares of
Aggressive Growth, Blue Chip, Capital Development, Charter, Constellation,
Demographic Trends, Emerging Growth, Large Cap Basic Value, Large Cap Growth and
Mid Cap, and Weingarten pay compensation to AIM Distributors at an annual rate
of 1.00% of the average daily net assets attributable to Class C shares. The
Class A and C Plan is designed to compensate AIM Distributors, on a quarterly
basis, for certain promotional and other sales-related costs, and to implement a
dealer incentive program which provides for periodic payments to selected
dealers who furnish continuing personal shareholder services to their customers
who purchase and own Class A or Class C shares of a Fund. Payments can
41
<PAGE> 220
also be directed by AIM Distributors to selected institutions who have entered
into service agreements with respect to Class A and Class C shares of each Fund
and who provide continuing personal services to their customers who own Class A
and Class C shares of the Fund. Activities appropriate for financing under the
Class A and C Plan include, but are not limited to, the following: printing of
prospectuses and statements of additional information and reports for other than
existing shareholders; overhead; preparation and distribution of advertising
material and sales literature; expenses of organizing and conducting sales
seminars; supplemental payments to dealers and other institutions such as
asset-based sales charges or as payments of service fees under shareholder
service arrangements; and costs of administering the Class A and C Plan.
Of the aggregate amount payable under the Class A and C Plan, payments
to dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the Fund,
in amounts of up to 0.25% of the average daily net assets of the Fund
attributable to the customers of such dealers or financial institutions are
characterized as a service fee, and payments to dealers and other financial
institutions in excess of such amount and payments to AIM Distributors would be
characterized as an asset-based sales charge pursuant to the Class A and C Plan.
THE CLASS B PLAN
The Trust has also adopted a Master Distribution Plan pursuant to Rule
12b-1 under the 1940 Act relating to Class B shares of Aggressive Growth, Blue
Chip, Capital Development, Charter, Constellation, Demographic Trends, Emerging
Growth, Large Cap Basic Value, Large Cap Growth, Mid Cap and Weingarten (the
"Class B Plan", and collectively with the Class A and C Plan, the "Plans").
Under the Class B Plan, Aggressive Growth, Blue Chip, Capital Development,
Charter, Constellation, Demographic Trends, Emerging Growth, Large Cap Basic
Value, Large Cap Growth, Mid Cap and Weingarten pay compensation to AIM
Distributors at an annual rate of 1.00% of the average daily net assets
attributable to Class B shares. Of such amount, the Funds pay a service fee of
0.25% of the average daily net assets attributable to Class B shares to selected
dealers and other institutions which furnish continuing personal shareholder
services to their customers who purchase and own Class B shares. Any amounts not
paid as a service fee would constitute an asset-based sales charge. Amounts paid
in accordance with the Class B Plan may be used to finance any activity
primarily intended to result in the sale of Class B shares, including, but not
limited to, printing of prospectuses and statements of additional information
and reports for other than existing shareholders; overhead; preparation and
distribution of advertising material and sales literature; expenses of
organizing and conducting sales seminars; supplemental payments to dealers and
other institutions such as asset-based sales charges or as payments of service
fees under shareholder service arrangements; and costs of administering the
Class B Plan.
BOTH PLANS
Pursuant to an incentive program, AIM Distributors may enter into
agreements ("Shareholder Service Agreements") with investment dealers selected
from time to time by AIM Distributors for the provision of distribution
assistance in connection with the sale of the Funds' shares to such dealers'
customers, and for the provision of continuing personal shareholder services to
customers who may from time to time directly or beneficially own shares of the
Funds. 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 Funds; 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 Fund's shares; 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 Fund's shares; and providing such other
information and services as the Funds or the customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements
authorizing payments to selected dealers, banks may enter into Shareholder
Service Agreements authorizing payments under the
42
<PAGE> 221
Plans 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 the Funds and the Trust; 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 shares of the Funds;
and such other administrative services as the Funds reasonably may request, to
the extent permitted by applicable statute, rule or regulation. Similar
agreements may be permitted under the Plans for institutions which provide
recordkeeping for and administrative services to 401(k) plans.
The Trust may also enter into Variable Group Annuity Contractholder
Service Agreements ("Variable Contract Agreements") on behalf of Aggressive
Growth, Blue Chip, Capital Development, Charter, Constellation, Demographic
Trends, Emerging Growth, Large Cap Basic Value, Large Cap Growth, Mid Cap and
Weingarten authorizing payments to selected insurance companies offering
variable annuity contracts to employers as funding vehicles for retirement plans
qualified under Section 401(a) of the Code. Services provided pursuant to such
Variable Contract Agreements may include some or all of the following: answering
inquiries regarding the Fund and the Trust; performing sub-accounting;
establishing and maintaining Contractholder accounts and records; processing and
bunching purchase and redemption transactions; providing periodic statements of
contract account balances; forwarding such reports and notices to
Contractholders relative to the Fund as deemed necessary; generally,
facilitating communications with Contractholders concerning investments in a
Fund on behalf of Plan participants; and performing such other administrative
services as deemed to be necessary or desirable, to the extent permitted by
applicable statute, rule or regulation to provide such services.
Under a Shareholder Service Agreement, the Funds agree to pay
periodically fees to selected dealers and other institutions who render the
foregoing services to their customers. The fees payable under a Shareholder
Service Agreement generally will be calculated at the end of each payment period
for each business day of the Funds during such period at the annual rate of
0.25% of the average daily net asset value of the Funds' shares purchased or
acquired through exchange. Fees calculated in this manner shall be paid only to
those selected dealers or other institutions who are dealers or institutions of
record at the close of business on the last business day of the applicable
payment period for the account in which the Funds' shares are held.
The Plans are subject to any applicable limitations imposed from time
to time by rules of the National Association of Securities Dealers, Inc.
AIM Distributors may from time to time waive or reduce any portion of
its 12b-1 fee for Class A shares and Class C shares. Voluntary fee waivers or
reductions may be rescinded at any time without further notice to investors.
During periods of voluntary fee waivers or reductions. AIM Distributors will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions set forth in the Fee Table in a
Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM Distributors and the Fund.
Under the Plans, certain financial institutions which have entered into
service agreements and which sell shares of the Funds on an agency basis, may
receive payments from the Funds pursuant to the respective Plans. AIM
Distributors does not act as principal, but rather as agent for the Funds, in
making dealer incentive and shareholder servicing payments under the Plans.
These payments are an obligation of the Funds and not of AIM Distributors.
For the fiscal year ended October 31, 1999, with respect to Class A
shares, Aggressive Growth, Blue Chip, Capital Development, Charter,
Constellation and Weingarten paid AIM Distributors under the Class A and C Plan
$6,704,485, $6,217,528, $2,355,478, $13,556,239, $40,983,445 and $22,561,363,
respectively, or an amount equal to 0.25%, 0.35%, 0.35%, 0.30%, 0.30%, and
0.30%, respectively, of the Fund's Class A shares average daily net assets. For
the period June 7, 1999 (date operations
43
<PAGE> 222
commenced) through October 31, 1999, with respect to Class A shares, Demographic
Trends paid AIM Distributors under the Class A and C Plan $112,110, or an amount
equal to 0.35% of the Fund's Class A shares average daily net assets. For the
period June 30, 1999 (date operations commenced) through October 31, 1999, with
respect to Class A shares, Large Cap Basic Value paid AIM Distributors under the
Class A and C Plan $1,330, or an amount equal to 0.35% of the Fund's Class A
shares average daily net assets. For the period March 1, 1999 (date operations
commenced) through October 31, 1999, with respect to Class A shares, Large Cap
Growth paid AIM Distributors under the Class A and C Plan $13,159, or an amount
equal to 0.35% of the Fund's Class A shares average daily net assets.
For the fiscal year ended October 31, 1999, with respect to Class B
shares, Blue Chip, Capital Development, Charter, Constellation and Weingarten
paid AIM Distributors under the Class B Plan $13,837,276, $4,981,777,
$18,631,086, $4,365,731 and $10,382,904, respectively, or an amount equal to
1.00%, 1.00%, 1.00%, 1.00% and 1.00%, respectively, of the Fund's Class B shares
average daily net assets. For the period June 7, 1999 (date operations
commenced) through October 31, 1999, with respect to Class B shares, Demographic
Trends paid AIM Distributors under the Class B Plan $79,099, or an amount equal
to 1.00% of the Class B shares average daily net assets. For the period March 1,
1999 (date operations commenced) through October 31, 1999, with respect to Class
B shares, Aggressive Growth paid AIM Distributors under the Class B Plan
$79,099, or an amount equal to 1.00% of the Fund's Class B shares average daily
net assets. For the period April 5, 1999 (date operations commenced) through
October 31, 1999, with respect to Class B shares, Large Cap Growth paid AIM
Distributors under the Class B Plan $16,134, or an amount equal to 1.00% of the
Fund's Class B shares average daily net assets.
For the fiscal year ended October 31, 1999, with respect to Class C
shares, Blue Chip, Capital Development, Charter, Constellation and Weingarten
paid AIM Distributors under the Class A and C Plan $2,245,680, $552,292,
$809,235, $1,175,217 and $593,913, respectively, or an amount equal to 1.00%,
1.00%, 1.00%, 1.00% and 1.00%, respectively, of the Fund's Class C shares
average daily net assets on an annualized basis. For the period March 1, 1999
(date operations commenced) through October 31, 1999, with respect to Class C
shares, Aggressive Growth paid AIM Distributors under the Class A and C Plan
$21,997, or an amount equal to 1.00% of the Fund's Class C shares average daily
net assets. For the period June 7, 1999 (date operations commenced) through
October 31, 1999, with respect to Class C shares, Demographic Trends paid AIM
Distributors under the Class A and C Plan $104,204, or an amount equal to 1.00%
of the Fund's Class C shares average daily net assets. For the period April 5,
1999 (date operations commenced) through October 31, 1999, with respect to Class
C shares, Large Cap Growth paid AIM Distributors under the Class A and C Plan
$2,610, or an amount equal to 1.00% of the Fund's Class C shares average daily
net assets.
The payments set forth in the prior three paragraphs were made pursuant
to substantially similar distribution plans adopted by the Trust's predecessor.
An estimate by category of actual fees paid by the following Funds
under the Class A and C Plan during the year ended October 31, 1999, were
allocated as follows:
<TABLE>
<CAPTION>
CLASS A COMPENSATION COMPENSATION COMPENSATION
PRINTING TO TO TO
ADVERTISING AND MAILING SEMINARS UNDERWRITERS DEALERS SALES PERSONNEL
----------- ----------- -------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth 95,349 9,772 30,057 -0- 6,569,306 -0-
Blue Chip 671,274 65,487 199,512 -0- 5,281,254 -0-
Capital Development 436,181 39,546 110,715 -0- 1,769,036 -0-
Charter 1,218,066 116,743 349,090 -0- 11,872,339 -0-
Constellation 3,563,197 338,897 996,262 -0- 36,085,089 -0-
Demographic Trends 17,793 1,740 4,932 -0- 97,645 -0-
Large Cap Basic Value -0- -0- -0- -0- -0- -0-
Large Cap Growth 3,306 156 866 -0- 8,831 -0-
Weingarten $2,249,745 $216,357 $648,786 -0- $19,446,474 -0-
</TABLE>
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<PAGE> 223
An estimate by category of actual fees paid by the following Funds
under the Class B Plan during the year ended October 31, 1999, were allocated as
follows:
<TABLE>
<CAPTION>
CLASS B COMPENSATION COMPENSATION COMPENSATION
PRINTING TO TO TO
ADVERTISING AND MAILING SEMINARS UNDERWRITERS DEALERS SALES PERSONNEL
----------- ----------- -------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth 5,446 539 1,995 57,074 11,045 -0-
Blue Chip 844,375 82,717 255,301 10,377,957 2,276,926 -0-
Capital Development 261,463 23,437 65,746 3,736,332 894,797 -0-
Charter 544,048 52,114 155,553 13,973,314 3,906,056 -0-
Constellation 341,062 32,532 94,612 3,274,298 623,226 -0-
Demographic Trends 28,034 2,724 7,690 269,251 51,302 -0-
Large Cap Basic Value -0- -0- -0- -0- -0- -0-
Large Cap Growth 941 -0- -0- 12,100 3,092 -0-
Weingarten $339,789 $35,042 $113,321 $ 7,787,178 $2,107,574 -0-
</TABLE>
An estimate by category of actual fees paid by the following Funds
under the Class A and C Plan during the fiscal year ended October 31, 1999, were
allocated as follows:
<TABLE>
<CAPTION>
CLASS C COMPENSATION COMPENSATION COMPENSATION
PRINTING TO TO TO
ADVERTISING AND MAILING SEMINARS UNDERWRITERS DEALERS SALES PERSONNEL
----------- ----------- -------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth 705 45 500 17,998 2,750 -0-
Blue Chip 9,155 941 3,024 1,300,000 932,560 -0-
Capital Development 5,473 567 1,576 311,000 233,676 -0-
Charter 5,333 536 1,736 514,000 287,720 -0-
Constellation 7,671 794 2,385 598,000 566,366 -0-
Demographic Trends 6,091 583 1,716 85,000 10,813 -0-
Large Cap Basic Value -0- -0- -0- -0- -0- -0-
Large Cap Growth -0- -0- -0- -0- -0- -0-
Weingarten 6,507 644 1,842 385,912 199,008 -0-
</TABLE>
The Plans require AIM Distributors to provide the Board of Trustees at
least quarterly with a written report of the amounts expended pursuant to the
Plans and the purposes for which such expenditures were made. The Board of
Trustees reviews these reports in connection with their decisions with respect
to the Plans.
As required by Rule 12b-1, the Plans and related forms of Shareholder
Service Agreements were 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 Plans or in any agreements related to the Plans ("Qualified Trustees").
In approving the Plans in accordance with the requirements of Rule 12b-1, the
trustees considered various factors and determined that there is a reasonable
likelihood that the Plans would benefit each class of the Fund and its
respective shareholders.
The Plans do not obligate the Fund to reimburse AIM Distributors for
the actual expenses AIM Distributors may incur in fulfilling its obligations
under the Plans. Thus, even if AIM Distributors' actual expenses exceed the fee
payable to AIM Distributors thereunder at any given time, the Fund will not be
obligated to pay more than that fee. If AIM Distributors' expenses are less than
the fee it receives, AIM Distributors will retain the full amount of the fee.
Unless the Plans are terminated earlier in accordance with their terms,
the Plans continue in effect from year to year as long as such continuance is
specifically approved at least annually by the Board of Trustees, including a
majority of the Qualified Trustees.
The Plans may be terminated by the vote of a majority of the Qualified
Trustees, or, with respect to a particular class, by the vote of a majority of
the outstanding voting securities of that class.
Any change in the Plans that would increase materially the distribution
expenses paid by the applicable class requires shareholder approval; otherwise,
it may be amended by the trustees, including a
45
<PAGE> 224
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 Plans are in
effect, the selection or nomination of the Qualified Trustees is committed to
the discretion of the Qualified Trustees. In the event the Class A and C Plan is
amended in a manner which the Board of Trustees determines would materially
increase the charges paid by holders of Class A shares under the Class A and C
Plan, the Class B shares of the Fund will no longer convert into Class A shares
of the Fund unless the Class B shares, voting separately, approve such
amendment. If the Class B shareholders do not approve such amendment, the Board
of Trustees will (i) create a new class of shares of the Fund which is identical
in all material respects to the Class A shares as they existed prior to the
implementation of the amendment, and (ii) ensure that the existing Class B
shares of the Fund will be exchanged or converted into such new class of shares
no later than the date the Class B shares were scheduled to convert into Class A
shares.
The principal differences between the Class A and C Plan and the Class
B Plan are: (i) the Class A and C Plan allows payment to AIM Distributors or to
dealers or financial institutions of up to 0.35% of average daily net assets of
Blue Chip, Capital Development, Demographic Trends, Emerging Growth, Large Cap
Basic Value and Large Cap Growth's Class A shares, 0.30% of average daily net
assets of Charter, Constellation, Mid Cap and Weingarten's Class A shares and up
to 0.25% of average daily net assets of Aggressive Growth's Class A shares as
compared to 1.00% of such assets of Aggressive Growth, Blue Chip, Capital
Development, Charter, Constellation, Demographic Trends, Emerging Growth, Large
Cap Basic Value, Large Cap Growth, Mid Cap and Weingarten's Class B shares; (ii)
the Class B Plan obligates the Class B shares to continue to make payments to
AIM Distributors following termination of the Class B shares Distribution
Agreement with respect to Class B shares sold by or attributable to the
distribution efforts of AIM Distributors unless there has been a complete
termination of the Class B Plan (as defined in such Plan); and (iii) the Class B
Plan expressly authorizes AIM Distributors to assign, transfer or pledge its
rights to payments pursuant to the Class B Plan.
THE DISTRIBUTOR
The Trust has entered into distribution arrangements with AIM
Distributors, P.O. Box 4739, Houston, TX 77210-4739, a registered broker-dealer
and a wholly owned subsidiary of AIM, to act as the distributor in the
continuous offering of Class A, Class B and Class C shares of the Funds. Certain
trustees and officers of the Trust are affiliated with AIM Distributors. The
Trust has entered into a Master Distribution Agreement with AIM Distributors
relating to the Class A shares and Class C shares of the Funds and a Master
Distribution Agreement with AIM Distributors relating to the Class B shares of
the Funds. Both such Master Distribution Agreements are hereinafter
collectively, referred to as the "Distribution Agreements."
The Distribution Agreements provide AIM Distributors with the exclusive
right to distribute shares of the Retail Classes of the Funds directly and
through institutions with whom AIM Distributors has entered into selected dealer
agreements. Under the Distribution Agreement for the Class B shares, AIM
Distributors sells Class B shares of the Funds at net asset value subject to a
contingent deferred sales charge established by AIM Distributors. AIM
Distributors is authorized to advance to institutions through whom Class B
shares are sold a sales commission under schedules established by AIM
Distributors. The Distribution Agreement for the Class B shares provides that
AIM Distributors (or its assignee or transferee) will receive 0.75% (of the
total 1.00% payable under the distribution plan applicable to Class B shares) of
each Fund's average daily net assets attributable to Class B shares attributable
to the sales efforts of AIM Distributors.
The Distribution Agreements provide that AIM Distributors will bear the
expenses of printing from the final proof and distributing prospectuses and
statements of additional information of the Funds relating to public offerings
made by AIM Distributors pursuant to the Distribution Agreements (other than
those prospectuses and statements of additional information distributed to
existing shareholders of the Funds), and any promotional or sales literature
used by AIM Distributors or furnished by AIM Distributors to dealers in
connection with the public offering of the Funds' shares, including expenses of
advertising in
46
<PAGE> 225
connection with such public offerings. AIM Distributors has not undertaken to
sell any specified number of shares of any classes of the Funds.
AIM Distributors expects to pay sales commissions from its own
resources to dealers and institutions who sell Class B shares of the Funds and
Class C shares of the Funds at the time of such sales. Payments with respect to
Class B shares will equal 4.00% of the purchase price of the Class B shares sold
by the dealer or institution, and will consist of a sales commission equal to
3.75% of the purchase price of the Class B shares sold plus an advance of the
first year service fee of 0.25% with respect to such shares. The portion of the
payments to AIM Distributors under the Class B Plan which constitutes an
asset-based sales charge (0.75%) is intended in part to permit AIM Distributors
to recoup a portion of such sales commissions plus financing costs. AIM
Distributors anticipates that it will require a number of years to recoup from
Class B Plan payments the sales commissions paid to dealers and institutions in
connection with sales of Class B shares.
In the future, if multiple distributors serve Aggressive Growth, Blue
Chip, Capital Development, Charter, Constellation, Demographic Trends, Emerging
Growth, Large Cap Basic Value, Large Cap Growth, Mid Cap or Weingarten, each
such distributor (or its assignee or transferee) would receive a share of the
payments under the Class B Plan based on the portion of such Fund's Class B
shares sold by or attributable to the distribution efforts of that distributor.
AIM Distributors may pay sales commissions to dealers and institutions
who sell Class C shares of the AIM Funds at the time of such sales. Payments
with respect to Class C shares will equal 1.00% of the purchase price of the
Class C shares sold by the dealer or institution, and will consist of a sales
commission of 0.75% of the purchase price of the Class C shares sold plus an
advance of the first year service fee of 0.25% with respect to such shares. AIM
Distributors will retain all payments received by it relating to Class C shares
for the first year after they are purchased. The portion of the payments to AIM
Distributors under the Class A and C Plan attributable to Class C shares which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
AIM Distributors to recoup a portion of on-going sales commissions to dealers
plus financing costs, if any. After the first full year, AIM Distributors will
make such payments quarterly to dealers and institutions based on the average
net asset value of Class C shares which are attributable to shareholders for
whom the dealers and institutions are designated as dealers of record.
The Trust (on behalf of any class of the Funds) or AIM Distributors may
terminate the Distribution Agreements on sixty (60) days' written notice without
penalty. The Distribution Agreements will terminate in the event of their
assignment. In the event the Class B shares Distribution Agreement is
terminated, AIM Distributors would continue to receive payments of asset-based
distribution fees in respect of the outstanding Class B shares attributable to
the distribution efforts of AIM Distributors; provided, however, that a complete
termination of the Class B Plan (as defined in such Plan) would terminate all
payments to AIM Distributors. Termination of the Class B Plan or Distribution
Agreement does not effect the obligations of Class B shareholders to pay
contingent deferred sales charges.
From time to time, AIM Distributors may transfer and sell its right to
payments under the Distribution Agreement relating to Class B shares in order to
finance distribution expenditures in respect of Class B shares.
The following chart reflects the total sales charges paid in connection
with the sale of Class A shares of each Fund and the amount retained by AIM
Distributors for the years or periods ended October 31, 1999, 1998 and 1997:
47
<PAGE> 226
<TABLE>
<CAPTION>
1999 1998 1997
SALES AMOUNT SALES AMOUNT SALES AMOUNT
CHARGES RETAINED CHARGES RETAINED CHARGES RETAINED
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth $ 4,577,455 $ 11,447 $ 4,551,806 $ 763,601 $42,392,109 $ 5,850,410
Blue Chip 17,947,219 2,766,794 9,984,437 1,557,995 7,418,585 1,139,512
Capital Development 2,418,486 386,856 10,092,451 1,536,318 7,852,157 1,212,125
Charter 13,015,260 2 030,454 12,198,981 1,892,699 13,683,388 2,129,799
Constellation 20,107,015 3,182,696 34,242,618 5,261,392 68,714,717 10,566,898
Demographic Trends* 3,822,764 551,702 N/A N/A N/A N/A
Large Cap Basic Value* -0- -0- N/A N/A N/A N/A
Large Cap Growth *80,087 12,562 N/A N/A N/A N/A
Weingarten 13,839,324 2,209,013 10,455,825 1,654,675 9,534,039 1,521,630
</TABLE>
- -------------------
* Class A shares of Demographic Trends, Large Cap Basic Value and Large Cap
Growth commenced operations on June 7, 1999, June 30, 1999 and March 1, 1999,
respectively.
The following chart reflects the contingent deferred sales charges paid by
Class A, Class B and Class C shareholders for the fiscal years or periods ended
October 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Aggressive Growth* ........ $ 45,944 $ 86,211 N/A
Blue Chip* ................ 177,813 61,498 $ 50,289
Capital Development* ...... 120,769 108,532 14,049
Charter* .................. 96,080 161,792 62,653
Constellation* ............ 605,519 510,316 253,473
Demographic Trends* ....... 3,886 N/A N/A
Large Cap Basic Value ..... -0- N/A N/A
Large Cap Growth* ......... 373. N/A N/A
Weingarten ................ 156,642 55,685 38,015
</TABLE>
- ----------------
* Class A shares of Demographic Trends, Large Cap Basic Value and Large Cap
Growth commenced operations on June 7, 1999, June 30, 1999 and March 1, 1999,
respectively.
Class B shares of Aggressive Growth, Constellation, Demographic Trends and Large
Cap Growth commenced operations on March 1, 1999, November 3, 1997, June 7, 1999
and April 5, 1999, respectively.
Class C shares of Aggressive Growth, Blue Chip, Capital Development, Charter,
Constellation, Demographic Trends, Large Cap Growth and Weingarten commenced
operations on March 1, 1997, August 4, 1997, August 4, 1997, August 4, 1997,
August 4, 1997, June 7, 1999, April 5, 1999 and August 4, 1997, respectively.
SALES CHARGES AND DEALER CONCESSIONS
CATEGORY I. Certain AIM Funds are currently sold with a sales charge
ranging from 5.50% to 2.00% of the offering price on purchases of less than
$1,000,000. These AIM Funds include Class A shares of each of AIM Advisor Flex
Fund, AIM Advisor International Value Fund, AIM Advisor Large Cap Value Fund,
AIM Aggressive Growth Fund, AIM Asian Growth Fund, AIM Basic Value Fund, AIM
Blue Chip Fund, AIM Capital Development Fund, AIM Charter Fund, AIM
Constellation Fund, AIM Dent Demographic Trends Fund, AIM Emerging Growth Fund,
AIM European Development Fund, AIM Euroland Growth Fund, AIM Global Utilities
Fund, AIM Global Growth & Income Fund, AIM International
48
<PAGE> 227
Equity Fund, AIM Japan Growth Fund, AIM Large Cap Basic Value Fund, AIM Large
Cap Growth Fund, AIM Large Cap Opportunities Fund, AIM Mid Cap Equity Fund, AIM
Mid Cap Growth Fund, AIM Mid Cap Opportunities Fund, AIM New Pacific Growth
Fund, AIM Select Growth Fund, AIM Small Cap Growth Fund, AIM Small Cap
Opportunities Fund, AIM Value Fund and AIM Weingarten Fund.
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge ----------
----------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction(1) Price Invested Price
--------------------- ------------- ----------- -----------
<S> <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>
- ------------------
(1) AIM Small Cap Opportunities Fund will not accept any single
purchase in excess of $250,000.
CATEGORY II. Certain AIM Funds are currently sold with a sales charge
ranging from 4.75% to 2.00% of the offering price on purchases of less than
$1,000,000. These AIM Funds are: the Class A shares of each of AIM Advisor Real
Estate Fund, AIM Balanced Fund, AIM Developing Markets Fund, AIM Emerging
Markets Debt Fund, AIM Global Aggressive Growth Fund, AIM Global Consumer
Products and Services Fund, AIM Global Financial Services Fund, AIM Global
Government Income Fund, AIM Global Growth Fund, AIM Global Health Care Fund, AIM
Global Income Fund, AIM Global Infrastructure Fund, AIM Global Resources Fund,
AIM Global Telecommunications and Technology Fund, AIM Global Trends Fund, AIM
High Income Municipal Fund, AIM High Yield Fund, AIM High Yield Fund II, AIM
Income Fund, AIM Intermediate Government Fund, AIM Latin American Growth Fund,
AIM Municipal Bond Fund, AIM Strategic Income Fund and AIM Tax-Exempt Bond Fund
of Connecticut.
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge ----------
----------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
---------------------- ------------- ----------- -----------
<S> <C> <C> <C>
Less than $ 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>
CATEGORY 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 the Class A shares of each of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund.
49
<PAGE> 228
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge ----------
----------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
---------------------- ------------- ----------- -----------
<S> <C> <C> <C>
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $1,000,000 0.50 0.50 0.40
</TABLE>
There is no sales charge on purchases of $1,000,000 or more of Category
I, II or III funds; however, AIM Distributors may pay a dealer concession and/or
advance a service fee on such transactions as set forth below.
ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the
entire initial sales charge to dealers for all sales with respect to which
orders are placed with AIM Distributors during a particular period. Dealers to
whom substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of
the initial sales charge paid by investors, AIM Distributors may, from time to
time, at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive to dealers who sell a minimum dollar amount of the shares of the AIM
Funds during a specified period of time. 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 Class A shares of each of AIM Limited Maturity Treasury
Fund and AIM Tax-Free Intermediate Fund 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. AIM Distributors may make payments to dealers
and institutions who are dealers of record for purchases of $1 million or more
of Class A shares (or shares which normally involve payment of initial sales
charges), and which are sold at net asset value and are not subject to a
contingent deferred sales charge, in an amount up to 0.10% of such purchases of
Class A shares of AIM Limited Maturity Treasury Fund, and in an amount up to
0.25% of such purchases of Class A shares of AIM Tax-Free Intermediate Fund.
AIM Distributors may pay sales commissions to dealers and institutions
who sell Class B shares of the AIM Funds at the time of such sales. Payments
with respect to Class B shares will equal 4.00% of the purchase price of the
Class B shares sold by the dealer or institution, and will consist of a sales
commission equal to 3.75% of the purchase price of the Class B shares sold plus
an advance of the first year service fee of 0.25% with respect to such shares.
The portion of the payments to AIM Distributors under the Class B Plan which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
AIM Distributors to recoup a portion of such sales commissions plus financing
costs.
50
<PAGE> 229
AIM Distributors may pay sales commissions to dealers and institutions
who sell Class C shares of the AIM Funds at the time of such sales. Payments
with respect to Class C shares will equal 1.00% of the purchase price of the
Class C shares sold by the dealer or institution, and will consist of a sales
commission of 0.75% of the purchase price of the Class C shares sold plus an
advance of the first year service fee of 0.25% with respect to such shares. AIM
Distributors will retain all payments received by it relating to Class C shares
for the first year after they are purchased. The portion of the payments to AIM
Distributors under the Class A and C Plan attributable to Class C shares which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
AIM Distributors to recoup a portion of on-going sales commissions to dealers
plus financing costs, if any. After the first full year, AIM Distributors will
make such payments quarterly to dealers and institutions based on the average
net asset value of Class C shares which are attributable to shareholders for
whom the dealers and institutions are designated as dealers of record. These
commissions are not paid on sales to investors exempt from the CDSC, including
shareholders of record of AIM Advisor Funds, Inc. on April 30, 1995, who
purchase additional shares in any of the Funds on or after May 1, 1995, and in
circumstances where AIM Distributors grants an exemption on particular
transactions.
Exchanges of AIM Cash Reserve Shares of AIM Money Market Fund for Class
B shares or Class C shares are considered sales of such Class B shares or Class
C shares for purposes of the sales charges and dealer concessions discussed
above.
AIM Distributors may pay investment dealers or other financial service
firms for share purchases (measured on an annual basis) of Class A Shares of all
AIM Funds except AIM Limited Maturity Treasury Fund, AIM Tax-Free Intermediate
Fund and AIM Tax-Exempt Cash Fund sold at net asset value to an employee benefit
plan as follows: 1% of the first $2 million of such purchases, plus 0.80% of the
next $1 million of such purchases, plus 0.50% of the next $17 million of such
purchases, plus 0.25% of amounts in excess of $20 million of such purchases and
up to 0.10% of the net asset value of any Class A shares of AIM Limited Maturity
Treasury Fund sold at net asset value to an employee benefit plan in accordance
with this paragraph.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge
tables (quantity discounts) apply to purchases of shares of the AIM Funds that
are otherwise subject to an initial sales charge, provided that such purchases
are made by a "purchaser" as hereinafter defined. Purchases of Class A shares of
AIM Tax-Exempt Cash Fund, AIM Cash Reserve Shares of AIM Money Market Fund and
Class B and Class C shares of the AIM Funds 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 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, Roth 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);
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"), if:
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
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<PAGE> 230
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 Simplified Employee Pension (SEP), Salary Reduction and
other Elective Simplified Employee Pension account (SAR-SEP)
or a Savings Incentive Match Plans for Employees IRA (SIMPLE
IRA), where the employer has notified the distributor in
writing that all of its related employee SEP, SAR-SEP or
SIMPLE IRA accounts should be linked; or
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.
Investors or dealers seeking to qualify orders for a reduced initial
sales charge must identify such orders and, if necessary, support their
qualification for the reduced charge. AIM Distributors reserves the right to
determine whether any purchaser is entitled, by virtue of the foregoing
definition, to the reduced sales charge. No person or entity may distribute
shares of the AIM Funds without payment of the applicable sales charge other
than to persons or entities who qualify for a reduction in the sales charge as
provided herein.
1. LETTERS OF INTENT. A purchaser, as previously defined, may pay
reduced initial sales charges by completing the appropriate section of the
account application and by fulfilling a Letter of Intent ("LOI"). The LOI
privilege is also available to holders of the Connecticut General Guaranteed
Account, established for tax qualified group annuities, for contracts purchased
on or before June 30, 1992. The LOI confirms such purchaser's intention as to
the total investment to be made in shares of the AIM Funds (except for (i) Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund, (ii) Class B and Class C shares of the AIM Funds and (iii) shares
of AIM Floating Rate Fund) 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
52
<PAGE> 231
dollar amount (computed to the nearest full share). All dividends and any
capital gain distributions on the escrowed shares will be credited to the
purchaser. All shares purchased, including those escrowed, will be registered in
the purchaser's name. If the total investment specified under this LOI is
completed within the 13-month period, the escrowed shares will be promptly
released. If the intended investment is not completed, the purchaser will pay
the Transfer Agent the difference between the sales charge on the specified
amount and the amount actually purchased. If the purchaser does not pay such
difference within 20 days of the expiration date, he irrevocably constitutes and
appoints the Transfer Agent as his attorney to surrender for redemption any or
all shares, to make up such difference within 60 days of the expiration date.
If at any time before completing the LOI Program, the purchaser wishes
to cancel the agreement, he must give written notice to AIM Distributors. If at
any time before completing the LOI Program the purchaser requests the Transfer
Agent to liquidate or transfer beneficial ownership of his total shares, a
cancellation of the LOI will automatically be effected. If the total amount
purchased is less than the amount specified in the LOI, the Transfer Agent will
redeem an appropriate number of escrowed shares equal to the difference between
the sales charge actually paid and the sales charge that would have been paid if
the total purchases had been made at a single time.
2. RIGHTS OF ACCUMULATION. A "purchaser," as previously defined, may
also qualify for reduced initial sales charges based upon such purchaser's
existing investment in shares of any of the AIM Funds (except for (i) Class A
shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund and (ii) Class B and Class C shares of the AIM Funds and (iii)
shares of AIM Floating Rate Fund) at the time of the proposed purchase. Rights
of Accumulation are also available to holders of the Connecticut General
Guaranteed Account, established for tax-qualified group annuities, for contracts
purchased on or before June 30, 1992. To determine whether or not a reduced
initial sales charge applies to a proposed purchase, AIM Distributors takes into
account not only the money which is invested upon such proposed purchase, but
also the value of all shares of the AIM Funds (except for (i) Class A shares of
AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money Market Fund,
(ii) Class B and Class C shares of the AIM Funds and (iii) shares of AIM
Floating Rate Fund) 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; (b) exchanges of shares of certain funds; (c) use of the
reinstatement privilege; or (d) a merger, consolidation or acquisition of assets
of a fund.
The following purchasers will not pay initial sales charges on
purchases of Class A shares because there is a reduced sales effort involved in
sales to these purchasers:
o AIM Management and its affiliates, or their clients;
o Any current or retired officer, director or employee (and
members of their immediate family) of AIM Management, its
affiliates or The AIM Family of Funds(R), and any foundation,
trust or employeE benefit plan established exclusively for the
benefit of, or by, such persons;
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<PAGE> 232
o Any current or retired officer, director, or employee (and
members of their immediate family), of CIGNA Corporation or
its affiliates, or of First Data Investor Services Group; and
any deferred compensation plan for trustees of investment
companies sponsored by CIGNA Investments, Inc. or its
affiliates;
o Sales representatives and employees (and members of their
immediate family) of selling group members or financial
institutions that have arrangements with such selling group
members;
o Purchases through approved fee-based programs;
o Employee benefit plans designated as purchasers as defined
above, and non-qualified plans offered in conjunction
therewith, provided the initial investment in the plan(s) is
at least $1 million; the sponsor signs a $1 million LOI; the
employer-sponsored plan(s) has at least 100 eligible
employees; or all plan transactions are executed through a
single omnibus account per Fund and the financial institution
or service organization has entered into the appropriate
agreements with the distributor. Section 403(b) plans
sponsored by public educational institutions are not eligible
for a sales charge exception based on the aggregate investment
made by the plan or the number of eligible employees.
Purchases of AIM Small Cap Opportunities Fund by such plans
are subject to initial sales charges;
o Shareholders of record or discretionary advised clients of any
investment advisor holding shares of AIM Weingarten Fund or
AIM Constellation Fund on September 8, 1986, or of AIM Charter
Fund on November 17, 1986, who have continuously owned shares
having a market value of at least $500 and who purchase
additional shares of the same Fund;
o Shareholders of record of Advisor Class shares of AIM
International Growth Fund or AIM Worldwide Growth Fund on
February 12, 1999 who have continuously owned shares of the
AIM Funds.
o Unitholders of G/SET series unit investment trusts investing
proceeds from such trusts in shares of AIM Weingarten Fund or
AIM Constellation Fund; provided, however, prior to the
termination date of the trusts, a unitholder may invest
proceeds from the redemption or repurchase of his units only
when the investment in shares of AIM Weingarten Fund and AIM
Constellation Fund is effected within 30 days of the
redemption or repurchase;
o A shareholder of a fund that merges or consolidates with an
AIM Fund or that sells its assets to an AIM Fund in exchange
for shares of an AIM Fund;
o Shareholders of the GT Global funds as of April 30, 1987 who
since that date continually have owned shares of one or more
of these funds;
o Certain former AMA Investment Advisers' shareholders who
became shareholders of the AIM Global Health Care Fund in
October 1989, and who have continuously held shares in the GT
Global funds since that time; and
o Shareholders of record of Advisor Class shares of an AIM Fund
on February 11, 2000 who have continuously owned shares of
that AIM Fund, and who purchase additional shares of that AIM
Fund.
As used above, immediate family includes an individual and his or her
spouse, children, parents and parents of spouse.
54
<PAGE> 233
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS
Former GT Global funds Class A shares that are subject to a contingent
deferred sales charge and that were purchased before June 1, 1998 are entitled
to the following waivers from the contingent deferred sales charge otherwise due
upon redemption: (1) minimum required distributions made in connection with an
IRA, Keogh Plan or custodial account under Section 403(b) of the Code or other
retirement plan following attainment of age 70 1/2; (2) total or partial
redemptions resulting from a distribution following retirement in the case of a
tax-qualified employer-sponsored retirement plan; (3) when a redemption results
from a tax-free return of an excess contribution pursuant to Section 408(d)(4)
or (5) of the Code or from the death or disability of the employee; (4)
redemptions pursuant to a Fund's right to liquidate a shareholder's account
involuntarily; (5) redemptions pursuant to distributions from a tax-qualified
employer-sponsored retirement plan, which is invested in the former GT Global
funds, which are permitted to be made without penalty pursuant to the Code,
other than tax-free rollovers or transfers of assets, and the proceeds of which
are reinvested in the former GT Global funds; (6) redemptions made in connection
with participant-directed exchanges between options in an employer-sponsored
benefit plan; (7) redemptions made for the purpose of providing cash to fund a
loan to a participant in a tax-qualified retirement plan; (8) redemptions made
in connection with a distribution from any retirement plan or account that is
permitted in accordance with the provisions of Section 72(t)(2) of the Code, and
the regulations promulgated thereunder; (9) redemptions made in connection with
a distribution from any retirement plan or account that involves the return of
an excess deferral amount pursuant to Section 401(k)(8) or Section 402(g)(2) of
the Code; (10) redemptions made in connection with a distribution from a
qualified profit-sharing or stock bonus plan described in Section 401(k) of the
Code to a participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code
upon hardship of the covered employee (determined pursuant to Treasury
Regulation Section 1.401(k)-1(d)(2)); and (11) redemptions made by or for the
benefit of certain states, counties or cities, or any instrumentalities,
departments or authorities thereof where such entities are prohibited or limited
by applicable law from paying a sales charge or commission.
Former GT Global funds Class B shares purchased before June 1, 1998 are
subject to the following waivers from the contingent deferred sales charge
otherwise due upon redemption: (1) total or partial redemptions resulting from a
distribution following retirement in the case of a tax-qualified
employer-sponsored retirement; (2) minimum required distributions made in
connection with an IRA, Keogh Plan or custodial account under Section 403(b) of
the Code or other retirement plan following attainment of age 70 1/2; (3)
redemptions pursuant to distributions from A tax-qualified employer-sponsored
retirement plan, which is invested in the former GT Global funds, which are
permitted to be made without penalty pursuant to the Code, other than tax-free
rollovers or transfers of assets, and the proceeds of which are reinvested in
the former GT Global funds; (4) redemptions made in connection with
participant-directed exchanges between options in an employer-sponsored benefit
plan; (5) redemptions made for the purpose of providing cash to fund a loan to a
participant in a tax-qualified retirement plan; (6) redemptions made in
connection with a distribution from any retirement plan or account that is
permitted in accordance with the provisions of Section 72(t)(2) of the Code, and
the regulations promulgated thereunder; (7) redemptions made in connection with
a distribution from a qualified profit-sharing or stock bonus plan described in
Section 401(k) of the Code to a participant or beneficiary under Section
401(k)(2)(B)(IV) of the Code upon hardship of the covered employee (determined
pursuant to Treasury Regulation Section 1.401(k)-1(d)(2)); and (8) redemptions
made by or for the benefit of certain states, counties or cities, or any
instrumentalities, departments or authorities thereof where such entities are
prohibited or limited by applicable law from paying a sales charge or
commission.
CDSCs will not apply to the following:
o Additional purchases of Class C shares of AIM Advisor Flex
Fund, AIM Advisor International Value Fund, AIM Advisor Large
Cap Value Fund and AIM Advisor Real Estate Fund by
shareholders of record on April 30, 1995, of these Funds,
except that shareholders whose broker-dealers maintain a
single omnibus account with AFS on behalf of those
shareholders, perform sub-accounting functions with respect to
those shareholders, and are unable to segregate shareholders
of record prior to April 30, 1995,
55
<PAGE> 234
from shareholders whose accounts were opened after that date
will be subject to a CDSC on all purchases made after March 1,
1996;
o Redemptions following the death or post-purchase disability of
(1) any registered shareholders on an account or (2) a settlor
of a living trust, of shares held in the account at the time
of death or initial determination of post-purchase disability;
o Certain distributions from individual retirement accounts,
Section 403(b) retirement plans, Section 457 deferred
compensation plans and Section 401 qualified plans, where
redemptions result from (i) required minimum distributions to
plan participants or beneficiaries who are age 70-1/2 or
older, and only with respect to that portion of such
distributions that does not exceed 12% annually of the
participant's or beneficiary's account value in a particular
AIM Fund; (ii) in kind transfers of assets where the
participant or beneficiary notifies the distributor of the
transfer no later than the time the transfer occurs; (iii)
tax-free rollovers or transfers of assets to another plan of
the type described above invested in Class B or Class C shares
of one or more of the AIM Funds; (iv) tax-free returns of
excess contributions or returns of excess deferral amounts;
and (v) distributions on the death or disability (as defined
in the Internal Revenue Code of 1986, as amended) of the
participant or beneficiary;
o Amounts from a Systematic Withdrawal Plan of up to an annual
amount of 12% of the account value on a per fund basis, at the
time the withdrawal plan is established, provided the investor
reinvests his dividends;
o Liquidation by the Fund when the account value falls below the
minimum required account size of $500;
o Investment account(s) of AIM; and
o Class C shares where the investor's dealer of record notifies
the distributor prior to the time of investment that the
dealer waives the payment otherwise payable to him.
Upon the redemption of shares of funds in sales charge Categories I and
II (see "Sales Charges and Dealer Concessions") purchased in amounts of $1
million or more, no CDSC will be applied in the following situations:
o Shares held more than 18 months;
o Redemptions from employee benefit plans designated as
qualified purchasers, as defined above, where the redemptions
are in connection with employee terminations or withdrawals,
provided the total amount invested in the plan is at least
$1,000,000; the sponsor signs a $1 million LOI; or the
employer-sponsored plan has at least 100 eligible employees;
provided, however, that 403(b) plans sponsored by public
educational institutions shall qualify for the CDSC waiver 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;
o Private foundations or endowment funds;
o Redemption of shares by the investor where the investor's
dealer waives the amounts otherwise payable to it by the
distributor and notifies the distributor prior to the time of
investment; and
o Shares acquired by exchange from Class A shares of funds in
sales charge Categories I and II unless the shares acquired by
exchange are redeemed within 18 months of the original
purchase of the Class A shares.
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<PAGE> 235
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner by which shares of the Funds may
be purchased appears in each Prospectus under the caption "Purchasing Shares -
How to Purchase Shares."
The sales charge normally deducted on purchases of Class A shares of
the Funds 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
Funds or with AIM and its affiliates, are familiar with the Funds, or whose
programs for purchase involve little expense (e.g., because of the size of the
transaction and shareholder records required), AIM Distributors believes that it
is appropriate and in the Funds' best interests that such persons be permitted
to purchase Class A shares of the Funds through AIM Distributors without payment
of a sales charge. The persons who may purchase Class A shares of the Funds
without a sales charge are listed under the caption "Reductions in Initial Sales
Charges - Purchases at Net Asset Value."
Complete information concerning the method of exchanging shares of the
Funds for shares of the other mutual funds managed or advised by AIM is set
forth in each Prospectus under the caption "Exchanging Shares."
Information concerning redemption of the Funds' shares is set forth in
the Prospectuses under the caption "Redeeming Shares - 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 Funds' obligation 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 Funds at (800) 959-4246 and guarantee
delivery of all required documents in good order. A repurchase is effected at
the net asset value of the Fund next determined after such order is received.
Such arrangement is subject to timely receipt by AFS 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 Funds or by AIM Distributors (other than any applicable
CDSC) when shares are redeemed or repurchased, dealers may charge a fair service
fee for handling the transaction. AIM intends to redeem all shares of the Funds
in cash.
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.
BACKUP WITHHOLDING
Accounts submitted without a correct, certified taxpayer identification
number or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8
(for non-resident aliens) or Form W-9 (certifying exempt status) accompanying
the registration information will generally be subject to 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
taxpayer identification number "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
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(2) the IRS notifies the Fund that the investor furnished an
incorrect TIN, or
(3) the investor or the Fund 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
non-exempt mutual fund accounts opened after 1983.
Interest and dividend payments are subject to backup withholding in all
five situations discussed above. Redemption proceeds and long-term gain
distributions are subject to backup withholding only if (1) (2) or (5) above
applies.
Certain payees and payments are exempt from backup withholding and
information reporting. A complete listing of such exempt entities appears in the
Instructions for the Requester of Form W-9 (which can be obtained from the IRS)
and includes, among others, the following:
o a corporation
o an organization exempt from tax under Section 501(a), an individual
retirement plan (IRA), or a custodial account under Section 403(b)(7)
o the United States or any of its agencies or instrumentalities
o a state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities
o a foreign government or any of its political subdivisions, agencies or
instrumentalities
o an international organization or any of its agencies or
instrumentalities
o a foreign central bank of issue
o a dealer in securities or commodities required to register in the U.S.
or a possession of the U.S.
o a futures commission merchant registered with the Commodity Futures
Trading Commission
o a real estate investment trust
o an entity registered at all times during the tax year under the 1940 Act
o a common trust fund operated by a bank under Section 584(a)
o a financial institution
o 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
o 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.
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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 calendar years beginning with
the calendar year in which it is received by the Fund. Such shareholders may,
however, be subject to federal income tax withholding at a 30% rate on ordinary
income dividends and distributions 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.
NET ASSET VALUE DETERMINATION
The net asset value of a share of each Fund is determined once daily as
of the close of the customary trading session of the NYSE (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. For
purposes of determining net asset value per share, futures and options contract
closing prices which are available fifteen (15) minutes after the close of the
customary trading session of the NYSE will generally be used. The net asset
values per share of the Retail Classes and the Institutional Class will differ
because different expenses are attributable to each class. The income or loss
and the expenses (except those listed below) of a Fund are allocated to each
class on the basis of the net assets of the Fund allocable to each such class,
calculated as of the close of business on the previous business day, as adjusted
for the current day's shareholder activity of each class. Distribution and
service fees and transfer agency fees (to the extent different rates are charged
to different classes) are allocated only to the class to which such expenses
relate. The net asset value per share of a class is determined by subtracting
the liabilities (e.g., the expenses) of the Fund allocated to the class from the
assets of the Fund allocated to the class and dividing the result by the total
number of shares outstanding of such class. Determination of each Fund's net
asset value per share is made in accordance with generally accepted accounting
principles.
A security listed or traded on an exchange (except convertible bonds)
is valued at its last sales price on the exchange where the security is
principally traded or, lacking any sales on a particular day, the security is
valued at the closing bid price on that day, prior to the determination of net
asset value. Each security traded in the over-the-counter market (but not
including securities reported on the NASDAQ National Market system) is valued on
the basis of prices provided by independent pricing services. Each security
reported on the NASDAQ National Market System is valued at the last sales price
on the valuation date, or lacking a last sale, at the closing bid price on that
day; option contracts are valued at the mean between the closing bid and asked
prices on the exchange where the contracts are principally traded; futures
contracts are valued at final settlement price quotations from the primary
exchange on which they are traded. Debt obligations (including convertible
bonds) are valued on the basis of prices provided by an independent pricing
service. Prices provided by an independent pricing service may be determined
without exclusive reliance on quoted prices and may reflect appropriate factors
such as dividend rate, yield, type of issue, coupon rate and maturity date.
Securities for which market quotations are not readily available or for which
market quotations are not reflective of fair value 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 of the Trust.
Short-term obligations having sixty (60) days or less to maturity are valued at
amortized cost, which approximates market value. (See also "Purchasing
Shares"How to Purchase Shares," and "Redeeming Shares"How to Redeem Shares" and
"Pricing of Shares" in each Prospectus.)
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Generally, trading in foreign securities, as well as corporate bonds,
U.S. Government securities and money market instruments, is substantially
completed each day at various times prior to the close of the NYSE. The values
of such securities used in computing the net asset value of a 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 they are determined and the close of the customary trading session of the
NYSE which will not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur during
such period, then these securities will be valued at their fair value as
determined in good faith by or under the supervision of the Board of Trustees.
Fund securities primarily traded in foreign markets may be traded in
such markets on days which are not business days of the Fund. Because the net
asset value per share of each Fund is determined only on business days of the
Fund, the net asset value per share of a Fund may be significantly affected on
days when an investor can not exchange or redeem shares of the Fund.
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 each 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, subject to the
terms and conditions set forth in the Prospectus under the caption "Special
Plans"Automatic Dividend Investment." If a shareholder's account does not have
any shares in it on a dividend or capital gains distribution payment date, the
dividend or distribution will be paid in cash whether or not the shareholder has
elected to have such dividends or distributions reinvested.
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Funds and their shareholders that are not
described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of each Fund or its shareholders, and the
discussion here and in the Prospectus is not intended as a substitute for
careful tax planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
Each Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Code. As a regulated investment company, each Fund is
not subject to federal income tax on the portion of its net investment income
(i.e., taxable interest, dividends and other taxable ordinary income, net of
expenses) and capital gain net income (i.e., the excess of capital gains over
capital losses) that it distributes to shareholders, provided that it
distributes at least 90% of its investment company taxable income (i.e., net
investment income and the excess of net short-term capital gain over net
long-term capital loss) for the taxable year (the "Distribution Requirement"),
and satisfies certain other requirements of the Code that are described below.
Distributions by a Fund made during the taxable year or, under specified
circumstances, within twelve 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.
Each Fund may use "equalization accounting" in determining the portion
of its net investment income and capital gain net income that has been
distributed. A Fund that elects to use equalization accounting will allocate a
portion of its realized investment income and capital gains to redemptions of
Fund shares and will reduce the amount of such income and gains that it
distributes in cash. However, each Fund intends to make cash distributions for
each taxable year in an aggregate amount that is sufficient to satisfy the
Distribution Requirement without taking into account its use of equalization
accounting. The Internal Revenue Service has not published any guidance
concerning the methods to be
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used in allocating investment income and capital gains to redemptions of shares.
In the event that the Internal Revenue Service determines that a Fund is using
an improper method of allocation and has underdistributed its net investment
income and capital gain net income for any taxable year, such Fund may be liable
for additional federal income tax.
In addition to satisfying the Distribution Requirement, a regulated
investment company must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans, gains from the sale
or other disposition of stock or securities or foreign currencies (to the extent
such currency gains are directly related to the regulated investment company's
principal business of investing in stock or securities) and other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies (the "Income Requirement").
In addition to satisfying the requirements described above, each 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 each 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
companies, and securities of other issuers, 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 a 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 such 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.
DETERMINATION OF TAXABLE INCOME OF A REGULATED INVESTMENT COMPANY
In general, gain or loss recognized by a 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 a 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 unless the
Fund made an election to accrue market discount into income. In addition, under
the rules of Code Section 988, gain or loss recognized on the disposition of a
debt obligation denominated in a foreign currency or an option with respect
thereto (but only to the extent attributable to changes in foreign currency
exchange rates), and gain or loss recognized on the disposition of a foreign
currency forward contract or of foreign currency itself, will generally be
treated as ordinary income or loss.
In general, for purposes of determining whether capital gain or loss
recognized by a Fund on the disposition of an asset is long-term or short-term,
the holding period of the asset may be affected if (a) 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, (b) the
asset is otherwise held by the Fund as part of a "straddle", or (c) the asset is
stock and the Fund grants certain call options with respect thereto. In
addition, a 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 a Fund on
the lapse of, or any gain or loss recognized by a Fund from a closing
transaction with respect to, an option written by the Fund will generally be
treated as a short-term capital gain or loss. In the case of covered options,
gain or loss may be long-term.
Other hedging transactions that may be engaged in by certain of the
Funds (such as short sales "against the box") may be subject to special tax
treatment as "constructive sales" under Section 1259 of
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the Code if a Fund holds certain "appreciated financial positions" (defined
generally as any interest (including a futures or forward contract, short sale
or option) with respect to stock, certain debt instruments, or partnership
interests if there would be a gain were such interest sold, assigned, or
otherwise terminated at its fair market value). Upon entering into a
constructive sales transaction with respect to an appreciated financial
position, a Fund will be deemed to have constructively sold such appreciated
financial position and will recognize gain as if such position were sold,
assigned, or otherwise terminated at its fair market value on the date of such
constructive sale (and will take into account any gain for the taxable year
which includes such date) unless the closed transaction exception applies.
Some of the forward foreign currency exchange contracts, options and
futures contracts that certain of the Funds may enter into 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
combined with any other gain or loss that was previously recognized upon the
termination of Section 1256 contracts during that taxable year. The net amount
of such gain or loss for the entire taxable year (including gain or loss arising
as a consequence of the year-end deemed sale of such contracts) is deemed to be
60% long-term (taxable at a maximum rate of 20% for non-corporate shareholders)
and 40% short-term gain or loss. However, in the case of Section 1256 contracts
that are forward foreign currency exchange contracts, the net gain or loss is
separately determined and (as discussed above) generally treated as ordinary
income or loss.
Because application of the rules governing Section 1256 contracts and
constructive sales may affect the character of gains or losses and/or accelerate
the recognition of gains or losses from the affected investment positions, the
amount which must be distributed to shareholders and which will be taxed to
shareholders as ordinary income or long-term capital gain may be increased as
compared to a fund that did not engage in transactions involving Section 1256
contracts or constructive sales.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails 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
(a) 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 (b) exclude
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).
Each 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,
in the event that the Internal Revenue Service determines that a Fund is using
an improper method of allocation for purposes of equalization accounting (as
discussed above), such Fund may be liable for excise tax. Moreover, investors
should note that a Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
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FUND DISTRIBUTIONS
Each Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal income
tax purposes, but they will qualify for the 70% dividends received deduction for
corporations only to the extent discussed below.
A Fund may either retain or distribute to shareholders its net capital
gain for each taxable year. Each 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. A shareholder of a Fund electing to use equalization
accounting, however, is likely to be taxed on less gain recognized prior to the
date the shareholder acquires his shares since such gain will in many cases have
been allocated to shares of the Fund that have previously been redeemed.
Conversely, if a Fund elects to retain its net capital gain, the Fund will be
taxed thereon (except to the extent of any available capital loss carry
forwards) at the 35% corporate tax rate. If a Fund elects to retain its net
capital gain, it is expected that the Fund also will elect to have shareholders
treated as if each received a distribution of its pro rata share of such gain,
with the result that each shareholder will be required to report its pro rata
share of such gain on its tax return as long-term capital gain, will receive a
refundable tax credit for its 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.
Ordinary income dividends paid by the Fund with respect to a taxable
year will qualify for the 70% dividends received deduction generally available
to corporations (other than corporations, such as "S" corporations, which are
not eligible for the deduction because of their special characteristics and
other than for purposes of special taxes such as the accumulated earnings tax
and the personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
A dividend received by the Fund will not be treated as a qualifying dividend (a)
if it has been received with respect to any share of stock that the Fund has
held for less than 46 days (91 days in the case of certain preferred stock),
excluding for this purpose under the rules of Code Section 246(c)(3)and(4) (i)
any day more than 45 days (or 90 days in the case of certain preferred stock)
after the date on which the stock becomes ex-dividend, and (ii) any period
during which the Fund has an option to sell, is under a contractual obligation
to sell, has made and not closed a short sale of, has granted certain options to
buy or has otherwise diminished its risk of loss by holding other positions with
respect to, such (or substantially identical) stock; (b) to the extent that the
Fund is under an obligation (pursuant to a short sale or otherwise) to make
related payments with respect to positions in substantially similar or related
property; or (c) to the extent the stock on which the dividend is paid is
treated as debt-financed under the rules of Code Section 246A. Moreover, the
dividends received deduction for a corporate shareholder may be disallowed or
reduced (a) if the corporate shareholder fails to satisfy the foregoing
requirements with respect to its shares of the Fund, or (b) by application of
Code Section 246(b) which in general limits the dividends received deduction to
70% of the shareholder's taxable income (determined without regard to the
dividends received deduction and certain other items).
Alternative minimum tax ("AMT") is imposed in addition to, but only to
the extent it exceeds, the regular tax and is computed at a maximum rate of 28%
for non-corporate taxpayers and 20% for corporate taxpayers on the excess of the
taxpayer's alternative minimum taxable income ("AMTI") over an exemption amount.
The corporate dividends received deduction is not itself an item of tax
preference that must be added back to taxable income or is otherwise disallowed
in determining a corporation's AMTI. However, corporate shareholders will
generally be required to take the full amount of any dividend received from the
Fund into account (without a dividend received deduction) in determining their
adjusted current earnings, which are used in computing an additional corporate
preference item (i.e., 75% of the excess of a corporate taxpayer's adjusted
current earnings over its AMTI (determined without regard to this item and the
AMTI net operating loss deduction)) that is includable in AMTI. For taxable
years beginning after 1997, however, certain small corporations are wholly
exempt from the AMT.
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Investment income that may be received by certain of the Funds from
sources within foreign countries may be subject to foreign taxes withheld at the
source. The United States has entered into tax treaties with many foreign
countries which entitle any such Funds to a reduced rate of, or exemption from,
taxes on such income. It is impossible to determine the effective rate of
foreign tax in advance since the amount of any such Fund's assets to be invested
in various countries is not known.
Distributions by a 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 a 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 of another Fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date.
In addition, if the net asset value at the time a shareholder purchases
shares of a 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 a Fund
into account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year
in accordance with the guidance that has been provided by the IRS.
The Funds will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of ordinary income dividends and capital gain dividends,
and the proceeds of redemption of shares, paid to any shareholder (a) who has
provided either an incorrect tax identification number or no number at all, (b)
who is subject to backup withholding by the IRS for failure to report the
receipt of interest or dividend income properly, or (c) who has failed to
certify to a Fund that it is not subject to backup withholding or that it is a
corporation or other "exempt recipient."
SALE OR REDEMPTION OF SHARES
A shareholder will recognize gain or loss on the sale or redemption of
shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within thirty (30) days before or after the
sale or redemption. In general, any gain or loss arising from (or treated as
arising from) the sale or redemption of shares of a 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. Currently, any long-term capital gain
recognized by a non-corporate shareholder will be subject to tax at a maximum
rate of 20%. 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) (discussed above in connection with the dividends received deduction for
corporations) 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 that in some cases may be 19.6% 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 non-corporate taxpayer,
$3,000 of ordinary income.
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If a shareholder (a) incurs a sales load in acquiring shares of a Fund, (b)
disposes of such shares less than 91 days after they are acquired, and (c)
subsequently acquires shares of the Fund 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.
REINSTATEMENT PRIVILEGE
For federal income tax purposes, exercise of your reinstatement privilege
may increase the amount of gain or reduce the amount of loss recognized in the
original redemption transaction, because the initial sales charge will not be
taken into account in determining such gain or loss to the extent there has been
a reduction in the initial sales charge. Loss may be deferred if you reinstate
by purchasing shares of the same fund within 30 days of your original redemption
(i.e., the wash sale rules will apply).
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 a Fund
is "effectively connected" with a U.S. trade or business carried on by such
shareholder. If the income from a Fund is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, dividends and return of
capital distributions (other than distributions of long-term capital gain) 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
of shares of a Fund, capital gain dividends and amounts retained by a Fund that
are designated as undistributed net capital gains.
If the income from a 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, a Fund may be required
to withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding tax (or taxable at a reduced treaty rate)
unless such shareholders furnish the Fund with proper notification of their
foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a Fund,
including the applicability of foreign taxes.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS
The foregoing general discussion of U.S. federal income tax consequences is
based on the Code and the regulations issued thereunder as in effect on the date
of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation for ordinary income dividends and capital
gain dividends from regulated investment companies often differ from the rules
for U.S. federal income taxation described above. Shareholders are urged to
consult their tax advisers as to the consequences of these and other state and
local tax rules affecting investment in the Funds.
65
<PAGE> 244
SHAREHOLDER INFORMATION
This information supplements the discussion in each Fund's Prospectus under
the title "Shareholder Information."
TIMING OF PURCHASE ORDERS. 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. If a check used to purchase
shares does not clear, or if any investment order must be canceled due to
nonpayment, the investor will be responsible for any resulting loss to an AIM
Fund or to AIM Distributors.
SHARE CERTIFICATES. Shareholders of the Funds do not have the right to
demand or require the Trust to issue share certificates, although the Trust in
its sole discretion may issue them.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, all shares
are to be held by the Transfer Agent and all dividends and distributions are
reinvested in shares of the applicable AIM Fund by the Transfer Agent. To
provide funds for payments made under the Systematic Withdrawal Plan, the
Transfer Agent redeems sufficient full and fractional shares at their net asset
value in effect at the time of each such redemption.
Payments under a Systematic Withdrawal Plan constitute taxable events.
Since such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary
income. Because sales charges are imposed on additional purchases of shares
(other than Class B or Class C Shares of the AIM Funds and AIM Cash Reserve
Shares of AIM Money Market Fund), it is disadvantageous to effect such purchases
while a Systematic Withdrawal Plan is in effect.
Each AIM Fund bears its share of the cost of operating the Systematic
Withdrawal Plan.
TERMS AND CONDITIONS OF EXCHANGES. 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, 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.
EXCHANGES BY TELEPHONE. 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 the close of the customary trading
session of the NYSE. The Transfer Agent and AIM Distributors 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.
66
<PAGE> 245
By signing an account application form, an investor appoints the Transfer
Agent as his true and lawful attorney-in-fact to surrender for redemption any
and all unissued shares held by the Transfer Agent in the designated account(s),
or in any other account with any of the AIM Funds, present or future, which has
the identical registration as the designated account(s), with full power of
substitution in the premises. The Transfer Agent and AIM Distributors are
thereby authorized and directed to accept and act upon any telephone redemptions
of shares held in any of the account(s) listed, from any person who requests the
redemption proceeds to be applied to purchase shares in any one or more of the
AIM Funds, provided that such fund is available for sale and provided that the
registration and mailing address of the shares to be purchased are identical to
the registration of the shares being redeemed. An investor acknowledges by
signing the form that he understands and agrees that the Transfer Agent and AIM
Distributors may not be liable for any loss, expense or cost arising out of any
telephone exchange requests effected in accordance with the authorization set
forth in these instructions if they reasonably believe such request to be
genuine, but may in certain cases be liable for losses due to unauthorized or
fraudulent transactions. Procedures for verification of telephone transactions
may include recordings of telephone transactions (maintained for six months),
requests for confirmation of the shareholder's Social Security Number and
current address, and mailings of confirmations promptly after the transaction.
The Transfer Agent reserves the right to modify or terminate the telephone
exchange 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.
REDEMPTIONS BY TELEPHONE. By signing an 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 transaction. The Transfer Agent reserves the
right to cease to act as attorney-in-fact subject to this appointment, and AIM
Distributors reserves the right to modify or terminate the telephone 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
redemptions must be effected in writing by the investor.
SIGNATURE GUARANTEES. In addition to those circumstances listed in the
"Shareholder Information" section of each Fund's prospectus, signature
guarantees are required in the following situations: (1) requests to transfer
the registration of shares to another owner; (2) telephone exchange and
telephone redemption authorization forms; (3) changes in previously designated
wiring or electronic funds transfer instructions; and (4) 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.
AIM Funds may waive or modify any signature guarantee requirements at any time.
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 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
67
<PAGE> 246
qualifies as an "eligible guarantor institution," an investor should contact the
Client Services Department of AFS.
TRANSACTIONS BY INTERNET. An investor may effect transactions in his
account through the Internet by selecting the AIM Internet Connect option on his
completed account application form or completing an AIM Internet Connect
Authorization Form. By signing either form the investor acknowledges and agrees
that the Transfer Agent and AIM Distributors will not be liable for any loss,
expense or cost arising out of any internet transaction effected in accordance
with the instructions set forth in the forms if they reasonably believe such
request to be genuine. Procedures for verification of internet transactions
include requests for confirmation of the shareholder's personal identification
number and mailing of confirmations promptly after the transactions. The
investor also acknowledges that (1) if he no longer wants the AIM Internet
Contract option, he will notify the Transfer Agent in writing, and (2) the AIM
Internet Connect option may be terminated at any time by the AIM Funds.
DIVIDENDS AND DISTRIBUTIONS. 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.
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.
Dividends on Class B and Class C shares are expected to be lower than those
for Class A shares or AIM Cash Reserve Shares because of higher distribution
fees paid by Class B and Class C shares. Dividends on all shares may also be
affected by other class-specific expenses.
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.
MISCELLANEOUS INFORMATION
CHARGES FOR CERTAIN ACCOUNT INFORMATION
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.
AUDIT REPORTS
The Board of Trustees will issue semi-annual reports of the transactions of
the Funds to the shareholders. Financial statements, audited by independent
auditors, will be issued annually. The firm of KPMG LLP, 700 Louisiana, Bank of
America Building, Houston, Texas 77002, currently serves as the auditors of each
Fund.
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<PAGE> 247
LEGAL MATTERS
Certain legal matters for the Trust have been passed upon by Ballard Spahr
Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, Pennsylvania 19103.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company (the "Custodian"), 225 Franklin Street,
Boston, Massachusetts 02110, is custodian of all securities and cash of the
Funds. The Custodian attends to the collection of principal and income, pays and
collects all monies for securities bought and sold by the Funds and performs
certain other ministerial duties. A I M Fund Services, Inc., a wholly owned
subsidiary of AIM, P. O. Box 4739, Houston, Texas 77210-4739, acts as transfer
and dividend disbursing agent for the Funds. These services do not include any
supervisory function over management or provide any protection against any
possible depreciation of assets. The Funds pay the Custodian and the Transfer
Agent such compensation as may be agreed upon from time to time.
Chase Bank of Texas, N.A., 712 Main, Houston, Texas 77002, serves as
Sub-Custodian for retail purchases of the AIM Funds.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") has entered
into an agreement with the Trust (and certain other AIM Funds), First Data
Investor Service Group and Financial Data Services, Inc., pursuant to which
MLPF&S has agreed to perform certain shareholder sub-accounting services for its
customers who beneficially own shares of the Fund(s).
PRINCIPAL HOLDERS OF SECURITIES
AGGRESSIVE GROWTH
To the best knowledge of the Trust, the names and addresses of the holders
of 5% or more of the outstanding Class A, Class B and Class C shares of
Aggressive Growth as of March 1, 2000, and the amount of the outstanding shares
held of record and beneficially owned by such holders, are set forth below:
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
- --------------- ------------ ------------
<S> <C> <C>
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 14.33% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
The Manufacturers Life Insurance Co. 6.13% - 0 -
C/O Manulife Financial USA
Attn: Rosie Chuck Srs. Acctg.
250 Bloor Street East 7th Floor
Toronto, Ontario, Canada M4W 1E5
</TABLE>
- --------------------------------------
. The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
69
<PAGE> 248
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
- --------------- ------------ ------------
<S> <C> <C>
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 9.39% -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 27.58% -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246
</TABLE>
BLUE CHIP
To the best of the knowledge of the Trust, the names and addresses of the
holders of 5% or more of the outstanding Class A, Class B and Class C shares of
Blue Chip as of March 1, 2000, and the amount of the outstanding shares held of
record and beneficially owned by such holders are set forth below:
<TABLE>
<S> <C> <C>
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 8.10% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 10.88% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246
</TABLE>
- --------------------------------------
. The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
70
<PAGE> 249
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
- --------------- ------------ ------------
<S> <C> <C>
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 21.09% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Banc One Securities Corp. FBO 6.61% -0-
The One Investment Solution
733 Greencrest Drive
Westerville, OH 43081
</TABLE>
CAPITAL DEVELOPMENT
To the best of the knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding Class A, Class B and Class C shares
of Capital Development as of March 1, 2000, and the amount of the outstanding
shares held of record and beneficially owned by such holders are set forth
below:
<TABLE>
<S> <C> <C>
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 10.78% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 14.79% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
</TABLE>
- --------------------------------------
. The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
71
<PAGE> 250
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
- --------------- ------------ ------------
<S> <C> <C>
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 19.40% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Coastgear & Company 7.16% -0-
State Street Bank & Trust
Attn: Kevin Smith
125 Rosemont Avenue
Westwood, MA 02090
</TABLE>
CHARTER
To the best of the knowledge of the Trust, the names and addresses of the
holders of 5% or more of the outstanding Class A, Class B and Class C shares of
Charter as of March 1, 2000, and the Institutional Class of Charter as of
March 1, 2000, and the amount of the outstanding shares held of record and
beneficially owned by such holders, are set forth below:
<TABLE>
<S> <C> <C>
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 13.21% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Great-West Life and Annuity Insurance Co. 7.04% - 0 -
401(k) Unit Valuations
Attn: Mutual Fund Trading 2T2
8515 E. Orchard
Englewood, CO 80111
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 8.57% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
</TABLE>
- --------------------------------------
. The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
72
<PAGE> 251
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
- --------------- ------------ ------------
<S> <C> <C>
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 19.40% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Institutional Class
Commonwealth of Massachusetts 96.09% - 0 -
One Ashburton Place
12th Floor
Boston, MA 02108
</TABLE>
CONSTELLATION
To the best of the knowledge of the Trust, the names and addresses of the
holders of 5% or more of the outstanding Class A, Class B and Class C shares of
Constellation as of March 1, 2000, and of the Institutional Class of
Constellation as of March 1, 2000, and the amount of the outstanding shares
held of record and beneficially owned by such holders, are set forth below:
<TABLE>
<S> <C> <C>
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 16.45% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 7.41% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 23.20% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
</TABLE>
- --------------------------------------
. The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
73
<PAGE> 252
<TABLE>
<CAPTION>
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
- --------------- ------------ ------------
<S> <C> <C>
Banc One Securities Corp. FBO 8.71% -0-
The One Investment Solution
733 Greencrest Drive
Westerville, OH 43081
Institutional Class
Nationwide Ohio Variable Account 39.14% - 0 -
P.O. Box 182029
C/O IPO Portfolio Accounting
Columbus, Ohio 43218
Commonwealth of Massachusetts 35.27% - 0 -
Deferred Compensation Plan Trust
One Ashburton Place
12th Floor
Boston, MA 02108
Frontier Trust FBO NDC's Retirement 6.66% - 0 -
Plans - NR
Attn: Reconciliation Dept.
P. O. Box 20629
Columbus, OH 43220-0629
</TABLE>
DEMOGRAPHIC TRENDS
To the best of the knowledge of the Trust, the names and addresses of the
holders of 5% or more of the outstanding Class A, Class B and Class C shares of
Demographic Trends as of March 1, 2000, and the amount of the outstanding shares
held of record and beneficially owned by such holders, are set forth below:
<TABLE>
<S> <C> <C>
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 8.38% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 18.25% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
</TABLE>
- --------------------------------------
. The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
74
<PAGE> 253
<TABLE>
<CAPTION>
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
- --------------- ------------ ------------
<S> <C> <C>
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 21.86% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
</TABLE>
EMERGING GROWTH
AIM provided the initial capitalization of Emerging Growth and,
accordingly, as of the date of this Statement of Additional Information, owned
more than 25% of the issued and outstanding shares of that Fund and therefore
could be deemed to "control" that Fund as that term is defined in the 1940 Act.
It is anticipated that after commencement of the public offering of the Fund's
shares, AIM will cease to control the Fund for purposes of the 1940 Act.
LARGE CAP BASIC VALUE
To the best of the knowledge of the Trust, the names and addresses of the
holders of 5% or more of the outstanding Class A shares of Large Cap Basic Value
as of March 1, 2000, and the amount of the outstanding shares held of record and
beneficially owned by such holders, are set forth below:
<TABLE>
<S> <C> <C>
Retail Class A Shares
A I M Advisors, Inc. 91.62%** - 0 -
Attn: David Hessel
11 Greenway Plaza, Suite 100
Houston, TX 77046
</TABLE>
LARGE CAP GROWTH
To the best of the knowledge of the Trust, the names and addresses of the
holders of 5% or more of the outstanding Class A, Class B and Class C shares of
Large Cap Growth as of March 1, 2000, and the amount of the outstanding shares
held of record and beneficially owned by such holders, are set forth below:
<TABLE>
<S> <C> <C>
Retail Class A Shares
A I M Advisors, Inc. 17.82% - 0 -
Attn: David Hessel
11 Greenway Plaza, Suite 100
Houston, TX 77046
</TABLE>
- --------------------------------------
* The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a fund may
be presumed to be in "control" of such fund as defined in the 1940 Act.
75
<PAGE> 254
<TABLE>
<CAPTION>
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
- --------------- ------------ ------------
<S> <C> <C>
Retail Class C Shares
Donaldson Lufkin Jenrette 8.15% - 0 -
Securities Corporation Inc.
P. O. Box 2052
Jersey City, NJ 07303-9998
</TABLE>
MID CAP
To the best of the knowledge of the Trust, the names and addresses of the
holders of 5% or more of the outstanding Class A, Class B and Class C shares of
Mid Cap as of March 1, 2000, and the amount of the outstanding shares held of
record and beneficially owned by such holders, are set forth below:
<TABLE>
<S> <C> <C>
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 11.16%** - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 35.59%** - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 31.76%** - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
</TABLE>
WEINGARTEN
To the best of the knowledge of the Trust, the names and addresses of the
holders of 5% or more of the outstanding Class A, Class B and Class C shares of
Weingarten as of March 1, 2000, and the Institutional Class of Weingarten as of
March 1, 2000, and the amount of the outstanding shares held of record and
beneficially owned by such holders, are set forth below:
- --------------------------------------
* The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a fund may
be presumed to be in "control" of such fund as defined in the 1940 Act.
76
<PAGE> 255
<TABLE>
<CAPTION>
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
- --------------- ------------ ------------
<S> <C> <C>
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 16.72% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Great-West Life and Annuity 5.47% - 0 -
Insurance Co.
401(K) Unit Valuations
Attn: Mutual Fund Trading 2T2
8515 E. Orchard
Englewood, CO 80111
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 9.77% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 19.80% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Institutional Class
Commonwealth of Massachusetts 86.87% - 0 -
Deferred Compensation Plan Trust
One Ashburton Place
12th Floor
Boston, MA 02108
Frontier Trust FBO NDC's 6.67% - 0 -
Retirement Plans - NR
Attn: Reconciliation Dept.
P. O. Box 20629
Columbus, OH 43220-0629
</TABLE>
- --------------------------------------
* The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
77
<PAGE> 256
As of March 1, 2000, the trustees and officers of the Trust as a group
owned beneficially less than 1% of the outstanding shares of each class of
Aggressive Growth, Blue Chip, Capital Development, Charter, Constellation,
Demographic Trends, Large Cap Basic Value, Large Cap Growth, Mid Cap and
Weingarten. As of March 1, 2000, the trustees and officers of the Trust as a
group owned 1.44% of the outstanding Class A shares of Mid Cap.
OTHER INFORMATION
Each Prospectus and this Statement of Additional Information omit certain
information contained in the Registration Statement which the Trust has filed
with the SEC under the 1933 Act and reference is hereby made to the Registration
Statement for further information with respect to the Funds and the securities
offered hereby. The Registration Statement is available for inspection by the
public at the SEC in Washington, D.C.
78
<PAGE> 257
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
STANDARD & POOR'S
Commercial paper rated by Standard & Poor's has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well-established, and the issuer has a strong position
within the industry. The reliability and quality of management are unquestioned.
The relative strength or weakness of the above factors determines whether the
issuer's Commercial Paper is rated A-1 or A-2. A-1 indicates the degree of
safety regarding time of payment is very strong. A-2 indicates that the capacity
for timely payment is strong, but that the relative degree of safety is not as
overwhelming as for issues designated A-1.
MOODY'S
Prime-1 and Prime-2 are the two highest commercial paper ratings assigned
by Moody's Investors Service. Among the factors considered by Moody's in
assigning ratings are the following: (a) evaluation of the management of the
issuer; (b) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (c)
evaluation of the issuer's products in relation to competition and customer
acceptance; (d) liquidity; (e) amount and quality of long-term debt; (f) trend
of earnings over a period of ten years; (g) financial strength of a parent
company and the relationships which exist with the issuer; and (h) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations. Relative
strength or weakness of the above factors determines whether the issuer's
commercial paper is rated Prime-1 or Prime-2.
DESCRIPTION OF CORPORATE BOND RATINGS
STANDARD & POOR'S
AAA -- Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
MOODY'S
AAA -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
AA -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as "high-grade bonds." They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A-1
<PAGE> 258
FINANCIAL STATEMENTS
FS
<PAGE> 259
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Equity Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of AIM Aggressive Growth Fund (a portfolio of
AIM Equity Funds, Inc.), including the schedule of
investments, as of October 31, 1999, 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 five-year period
then ended. 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 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 October 31, 1999, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM
Aggressive Growth Fund as of October 31, 1999, 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 five-year period then ended,
in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
------------
KPMG LLP
December 3, 1999
Houston, Texas
FS-1
<PAGE> 260
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-97.03%
AIR FREIGHT-0.39%
Expeditors International of
Washington, Inc. 300,000 $ 11,212,500
- ---------------------------------------------------------------
AIRLINES-0.58%
Alaska Air Group, Inc.(a) 100,000 3,975,000
- ---------------------------------------------------------------
Ryanair Holdings PLC-ADR
(Ireland)(a) 300,000 12,375,000
- ---------------------------------------------------------------
16,350,000
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.65%
Gentex Corp.(a) 350,000 6,015,625
- ---------------------------------------------------------------
Meritor Automotive, Inc. 403,300 6,830,894
- ---------------------------------------------------------------
Tower Automotive, Inc.(a) 350,000 5,709,375
- ---------------------------------------------------------------
18,555,894
- ---------------------------------------------------------------
BANKS (REGIONAL)-1.57%
Bank United Corp.-Class A 325,000 12,675,000
- ---------------------------------------------------------------
First Republic Bank(a) 300,000 7,500,000
- ---------------------------------------------------------------
Southwest Bancorp. of Texas, Inc.(a) 750,000 13,031,250
- ---------------------------------------------------------------
Trustmark Corp. 500,000 11,437,500
- ---------------------------------------------------------------
44,643,750
- ---------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.32%
Canandaigua Brands, Inc.-Class
A(a) 150,000 9,075,000
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-1.10%
Hispanic Broadcasting Corp.(a) 225,000 18,225,000
- ---------------------------------------------------------------
Radio One, Inc.(a) 260,000 12,967,500
- ---------------------------------------------------------------
31,192,500
- ---------------------------------------------------------------
BUILDING MATERIALS-0.68%
Elcor Corp. 450,000 11,081,250
- ---------------------------------------------------------------
Simpson Manufacturing Co., Inc.(a) 200,000 8,112,500
- ---------------------------------------------------------------
19,193,750
- ---------------------------------------------------------------
CHEMICALS (SPECIALTY)-1.71%
Cambrex Corp. 190,200 5,753,550
- ---------------------------------------------------------------
OM Group, Inc. 500,000 18,750,000
- ---------------------------------------------------------------
Optical Coating Laboratory, Inc. 225,000 24,046,875
- ---------------------------------------------------------------
48,550,425
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-6.99%
ADTRAN, Inc.(a) 1,000,000 37,125,000
- ---------------------------------------------------------------
ANTEC Corp.(a) 200,000 9,700,000
- ---------------------------------------------------------------
Comverse Technology, Inc.(a) 275,000 31,212,500
- ---------------------------------------------------------------
Dycom Industries, Inc.(a) 311,700 10,149,731
- ---------------------------------------------------------------
Harmonic, Inc.(a) 700,000 41,562,500
- ---------------------------------------------------------------
MasTec, Inc.(a) 500,000 16,375,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMUNICATIONS EQUIPMENT-(CONTINUED)
Polycom, Inc.(a) 600,000 $ 30,000,000
- ---------------------------------------------------------------
Proxim, Inc.(a) 250,000 11,703,125
- ---------------------------------------------------------------
Sycamore Networks, Inc.(a) 50,000 10,750,000
- ---------------------------------------------------------------
198,577,856
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-1.64%
National Instruments Corp.(a) 1,000,000 30,062,500
- ---------------------------------------------------------------
Visual Networks, Inc.(a) 400,000 16,650,000
- ---------------------------------------------------------------
46,712,500
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-2.98%
Emulex Corp.(a) 400,000 62,375,000
- ---------------------------------------------------------------
Foundry Networks, Inc.(a) 50,100 9,493,950
- ---------------------------------------------------------------
Gadzoox Networks, Inc. 6,300 299,407
- ---------------------------------------------------------------
VeriSign, Inc.(a) 100,000 12,350,000
- ---------------------------------------------------------------
84,518,357
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-4.33%
Actel Corp.(a) 439,500 8,295,562
- ---------------------------------------------------------------
Cybex Computer Products Corp.(a) 350,000 13,671,875
- ---------------------------------------------------------------
DSP Communications, Inc.(a) 650,000 22,871,875
- ---------------------------------------------------------------
Network Appliance, Inc.(a) 125,000 9,250,000
- ---------------------------------------------------------------
QLogic Corp.(a) 300,000 31,237,500
- ---------------------------------------------------------------
SanDisk Corp.(a) 400,000 24,250,000
- ---------------------------------------------------------------
Xircom, Inc.(a) 264,400 13,335,675
- ---------------------------------------------------------------
122,912,487
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-10.35%
Business Objects S.A.-ADR
(France)(a) 250,000 18,000,000
- ---------------------------------------------------------------
Check Point Software Technologies
Ltd. (Israel)(a) 300,000 34,706,250
- ---------------------------------------------------------------
Citrix Systems, Inc.(a) 250,000 16,031,250
- ---------------------------------------------------------------
Concord Communications, Inc.(a) 150,000 7,790,625
- ---------------------------------------------------------------
Electronics for Imaging, Inc.(a) 400,000 16,125,000
- ---------------------------------------------------------------
Gemstar International Group Ltd.(a) 200,000 17,375,000
- ---------------------------------------------------------------
ISS Group, Inc.(a) 200,000 7,625,000
- ---------------------------------------------------------------
Macromedia, Inc.(a) 225,000 14,498,437
- ---------------------------------------------------------------
Mercury Interactive Corp.(a) 300,000 24,337,500
- ---------------------------------------------------------------
Micromuse, Inc.(a) 125,000 13,359,375
- ---------------------------------------------------------------
Mission Critical Software, Inc.(a) 238,900 14,065,237
- ---------------------------------------------------------------
Peregrine Systems, Inc.(a) 250,000 10,968,750
- ---------------------------------------------------------------
QRS Corp.(a) 152,550 8,485,594
- ---------------------------------------------------------------
Rational Software Corp.(a) 550,000 23,512,500
- ---------------------------------------------------------------
ScanSource, Inc.(a) 200,000 6,775,000
- ---------------------------------------------------------------
Symantec Corp.(a) 250,000 11,937,500
- ---------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 261
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
Transaction Systems Architects,
Inc.- Class A(a) 200,000 $ 6,150,000
- ---------------------------------------------------------------
VERITAS Software Corp.(a) 200,000 21,575,000
- ---------------------------------------------------------------
Verity, Inc.(a) 300,000 20,662,500
- ---------------------------------------------------------------
293,980,518
- ---------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.44%
Fossil, Inc.(a) 450,000 12,431,250
- ---------------------------------------------------------------
CONSUMER FINANCE-0.27%
AmeriCredit Corp.(a) 250,000 4,343,750
- ---------------------------------------------------------------
Doral Financial Corp. 251,200 3,218,500
- ---------------------------------------------------------------
7,562,250
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-0.53%
Patterson Dental Co.(a) 335,900 15,136,494
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-4.79%
Black Box Corp.(a) 300,000 15,225,000
- ---------------------------------------------------------------
CommScope, Inc.(a) 500,000 19,937,500
- ---------------------------------------------------------------
Cree Research, Inc.(a) 600,000 25,612,500
- ---------------------------------------------------------------
DII Group, Inc.(a) 350,000 12,600,000
- ---------------------------------------------------------------
Pinnacle Systems, Inc.(a) 400,000 11,100,000
- ---------------------------------------------------------------
Sanmina Corp.(a) 200,000 18,012,500
- ---------------------------------------------------------------
Sawtek, Inc.(a) 400,000 16,400,000
- ---------------------------------------------------------------
Vishay Intertechnology, Inc.(a) 700,000 17,106,250
- ---------------------------------------------------------------
135,993,750
- ---------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS)-0.56%
C-COR.net Corp.(a) 150,000 5,887,500
- ---------------------------------------------------------------
Power-One, Inc.(a) 500,000 10,000,000
- ---------------------------------------------------------------
15,887,500
- ---------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.14%
Aeroflex, Inc.(a) 700,000 3,893,750
- ---------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-2.50%
Alpha Industries, Inc.(a) 899,950 49,722,237
- ---------------------------------------------------------------
Waters Corp.(a) 400,000 21,250,000
- ---------------------------------------------------------------
70,972,237
- ---------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-9.92%
ANADIGICS, Inc.(a) 400,000 15,400,000
- ---------------------------------------------------------------
Applied Micro Circuits Corp.(a) 500,000 38,906,250
- ---------------------------------------------------------------
ATMI, Inc.(a) 500,000 13,468,750
- ---------------------------------------------------------------
Burr-Brown Corp.(a) 300,000 11,793,750
- ---------------------------------------------------------------
Dallas Semiconductor Corp. 350,000 20,606,250
- ---------------------------------------------------------------
Micrel, Inc.(a) 300,000 16,312,500
- ---------------------------------------------------------------
Microchip Technology, Inc.(a) 750,000 49,968,750
- ---------------------------------------------------------------
PMC-Sierra, Inc.(a) 200,000 18,850,000
- ---------------------------------------------------------------
SDL, Inc.(a) 300,000 36,993,750
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (SEMICONDUCTORS)-(CONTINUED)
Semtech Corp.(a) 600,000 $ 22,987,500
- ---------------------------------------------------------------
Texas Instruments, Inc. 251,150 22,540,712
- ---------------------------------------------------------------
TranSwitch Corp.(a) 100,000 4,706,250
- ---------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 200,000 9,175,000
- ---------------------------------------------------------------
281,709,462
- ---------------------------------------------------------------
ENTERTAINMENT-0.18%
Cinar Films, Inc.-Class B
(Canada)(a) 300,000 5,212,500
- ---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-2.54%
Advanced Energy Industries, Inc.(a) 400,000 16,450,000
- ---------------------------------------------------------------
Asyst Technologies, Inc.(a) 500,000 19,375,000
- ---------------------------------------------------------------
Brooks Automation, Inc.(a) 200,000 3,800,000
- ---------------------------------------------------------------
Credence Systems Corp.(a) 300,000 13,687,500
- ---------------------------------------------------------------
Cymer, Inc.(a) 200,000 7,387,500
- ---------------------------------------------------------------
Etec Systems, Inc.(a) 300,000 11,456,250
- ---------------------------------------------------------------
72,156,250
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-0.73%
NCO Group, Inc.(a) 200,000 8,475,000
- ---------------------------------------------------------------
SEI Investments Co. 125,000 12,183,594
- ---------------------------------------------------------------
20,658,594
- ---------------------------------------------------------------
FOODS-0.44%
Hain Food Group, Inc. (The)(a) 500,000 12,531,250
- ---------------------------------------------------------------
FOOTWEAR-0.50%
Steven Madden, Ltd.(a) 500,000 6,125,000
- ---------------------------------------------------------------
Vans, Inc.(a)(b) 718,400 8,082,000
- ---------------------------------------------------------------
14,207,000
- ---------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-0.43%
Station Casinos, Inc.(a) 500,000 12,093,750
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-1.22%
Alpharma, Inc.-Class A 495,834 17,447,159
- ---------------------------------------------------------------
Biovail Corporation International
(Canada)(a) 175,000 9,657,813
- ---------------------------------------------------------------
Medicis Pharmaceutical
Corp.-Class A(a) 243,000 7,411,500
- ---------------------------------------------------------------
34,516,472
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.30%
Health Management Associates,
Inc.-Class A(a) 500,000 4,437,500
- ---------------------------------------------------------------
Province Healthcare Co.(a) 250,000 4,031,250
- ---------------------------------------------------------------
8,468,750
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.56%
Express Scripts, Inc.-Class A(a) 325,000 15,965,625
- ---------------------------------------------------------------
</TABLE>
FS-3
<PAGE> 262
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.77%
ResMed, Inc.(a) 250,000 $ 8,656,250
- ---------------------------------------------------------------
Sybron International Corp.(a) 250,000 5,953,125
- ---------------------------------------------------------------
Syncor International Corp.(a) 132,000 4,834,500
- ---------------------------------------------------------------
VISX, Inc.(a) 250,000 15,640,625
- ---------------------------------------------------------------
Xomed Surgical Products, Inc.(a) 250,000 15,203,125
- ---------------------------------------------------------------
50,287,625
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-1.51%
Advance Paradigm, Inc.(a) 100,000 4,262,500
- ---------------------------------------------------------------
Hooper Holmes, Inc. 600,000 16,125,000
- ---------------------------------------------------------------
OEC Medical Systems, Inc.(a) 350,000 12,468,750
- ---------------------------------------------------------------
Res-Care, Inc.(a) 150,000 2,184,375
- ---------------------------------------------------------------
Techne Corp.(a) 200,000 7,875,000
- ---------------------------------------------------------------
42,915,625
- ---------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.52%
Hambrecht & Quist Group(a) 300,000 14,812,500
- ---------------------------------------------------------------
INVESTMENT MANAGEMENT-0.47%
Affiliated Managers Group,
Inc.(a) 100,000 2,675,000
- ---------------------------------------------------------------
Eaton Vance Corp. 316,100 10,806,669
- ---------------------------------------------------------------
13,481,669
- ---------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.66%
International Speedway
Corp.-Class A 195,100 10,072,038
- ---------------------------------------------------------------
Speedway Motorsports, Inc.(a) 200,000 8,725,000
- ---------------------------------------------------------------
18,797,038
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-0.92%
Kopin Corp.(a) 248,900 10,453,800
- ---------------------------------------------------------------
Pentair, Inc. 150,000 5,643,750
- ---------------------------------------------------------------
Spartech Corp. 350,000 10,018,750
- ---------------------------------------------------------------
26,116,300
- ---------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.45%
Astec Industries, Inc.(a) 300,000 7,031,250
- ---------------------------------------------------------------
Jore Corp.(a) 500,000 5,812,500
- ---------------------------------------------------------------
12,843,750
- ---------------------------------------------------------------
NATURAL GAS-0.46%
Kinder Morgan, Inc. 650,000 13,081,250
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-2.41%
Cal Dive International, Inc.(a) 200,000 6,725,000
- ---------------------------------------------------------------
Core Laboratories N.V.
(Netherlands)(a) 750,000 13,781,250
- ---------------------------------------------------------------
Global Industries Ltd.(a) 400,000 3,200,000
- ---------------------------------------------------------------
Marine Drilling Companies, Inc.(a) 600,000 9,712,500
- ---------------------------------------------------------------
Maverick Tube Corp.(a)(b) 1,000,000 18,500,000
- ---------------------------------------------------------------
National-Oilwell, Inc.(a) 250,000 3,390,625
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT)-(CONTINUED)
Patterson Energy, Inc.(a) 1,000,000 $ 12,812,500
- ---------------------------------------------------------------
Varco International, Inc.(a) 28,300 298,919
- ---------------------------------------------------------------
68,420,794
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-1.20%
Cabot Oil & Gas Corp.-Class A 250,000 4,031,250
- ---------------------------------------------------------------
Evergreen Resources, Inc.(a) 375,000 8,109,375
- ---------------------------------------------------------------
Newfield Exploration Co.(a) 500,000 14,718,750
- ---------------------------------------------------------------
Stone Energy Corp.(a) 150,000 7,293,750
- ---------------------------------------------------------------
34,153,125
- ---------------------------------------------------------------
PERSONAL CARE-0.11%
Steiner Leisure Ltd.(a) 162,500 3,077,344
- ---------------------------------------------------------------
PUBLISHING-0.38%
IDG Books Worldwide, Inc.-Class
A(a) 400,000 7,150,000
- ---------------------------------------------------------------
Meredith Corp. 100,000 3,568,750
- ---------------------------------------------------------------
10,718,750
- ---------------------------------------------------------------
RAILROADS-0.21%
MotivePower Industries, Inc.(a) 500,000 5,968,750
- ---------------------------------------------------------------
RESTAURANTS-2.28%
CEC Entertainment, Inc.(a) 800,000 25,650,000
- ---------------------------------------------------------------
Jack in the Box, Inc.(a) 600,000 14,437,500
- ---------------------------------------------------------------
Papa John's International, Inc.(a) 100,000 3,737,500
- ---------------------------------------------------------------
Sonic Corp.(a) 750,000 21,000,000
- ---------------------------------------------------------------
64,825,000
- ---------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-1.63%
CDW Computer Centers, Inc.(a) 750,000 46,312,500
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.43%
99 Cents Only Stores(a) 411,381 12,290,007
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.62%
Wild Oats Markets, Inc.(a) 500,000 17,625,000
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-4.12%
BOWLIN Outdoor Advertising &
Travel Centers Inc.(a) 179,200 851,200
- ---------------------------------------------------------------
Cost Plus, Inc.(a) 375,000 13,687,500
- ---------------------------------------------------------------
Footstar, Inc.(a) 150,000 5,250,000
- ---------------------------------------------------------------
Hibbett Sporting Goods, Inc.(a) 200,000 3,187,500
- ---------------------------------------------------------------
Linens 'n Things, Inc.(a) 450,000 17,887,500
- ---------------------------------------------------------------
Michaels Stores, Inc.(a) 600,000 20,137,500
- ---------------------------------------------------------------
O'Reilly Automotive, Inc.(a) 750,000 32,718,750
- ---------------------------------------------------------------
Sunglass Hut International, Inc.(a) 353,200 4,260,475
- ---------------------------------------------------------------
Tuesday Morning Corp.(a) 150,000 3,450,000
- ---------------------------------------------------------------
</TABLE>
FS-4
<PAGE> 263
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY)-(CONTINUED)
Zale Corp.(a) 375,000 $ 15,703,125
- ---------------------------------------------------------------
117,133,550
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-5.56%
American Eagle Outfitters, Inc.(a) 749,350 32,081,547
- ---------------------------------------------------------------
AnnTaylor Stores Corp.(a) 450,000 19,153,125
- ---------------------------------------------------------------
Buckle, Inc. (The)(a) 750,000 12,375,000
- ---------------------------------------------------------------
Children's Place Retail Stores,
Inc. (The)(a) 500,000 13,031,250
- ---------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 1,500,000 32,906,250
- ---------------------------------------------------------------
Pacific Sunwear of California(a) 600,000 18,112,500
- ---------------------------------------------------------------
Talbots, Inc. (The) 350,000 16,471,875
- ---------------------------------------------------------------
Too Inc.(a) 870,400 13,926,400
- ---------------------------------------------------------------
158,057,947
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.33%
Queens County Bancorp, Inc. 300,000 9,431,250
- ---------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.30%
Metris Companies, Inc. 250,000 8,609,375
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-1.61%
Championship Auto Racing Teams,
Inc.(a) 100,000 2,293,750
- ---------------------------------------------------------------
Copart, Inc.(a) 300,000 6,900,000
- ---------------------------------------------------------------
G & K Services, Inc.-Class A 250,000 9,390,625
- ---------------------------------------------------------------
Iron Mountain, Inc.(a) 200,000 6,050,000
- ---------------------------------------------------------------
Provant, Inc.(a) 250,000 4,406,250
- ---------------------------------------------------------------
Regis Corp. 595,000 11,044,688
- ---------------------------------------------------------------
Ritchie Bros. Auctioneers, Inc.
(Canada)(a) 155,100 5,564,213
- ---------------------------------------------------------------
45,649,526
- ---------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-1.67%
Insight Enterprises, Inc.(a) 1,000,000 37,375,000
- ---------------------------------------------------------------
Sykes Enterprises, Inc.(a) 322,400 9,954,100
- ---------------------------------------------------------------
47,329,100
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-4.65%
Affiliated Computer Services,
Inc.-Class A(a) 500,000 19,000,000
- ---------------------------------------------------------------
CheckFree Holdings Corp.(a) 250,000 9,343,750
- ---------------------------------------------------------------
Concord EFS, Inc.(a) 2,000,000 54,125,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (DATA PROCESSING)-(CONTINUED)
FactSet Research Systems, Inc. 87,250 $ 5,796,672
- ---------------------------------------------------------------
MedQuist, Inc.(a) 300,000 9,600,000
- ---------------------------------------------------------------
National Computer Systems, Inc. 550,000 20,796,875
- ---------------------------------------------------------------
NOVA Corp.(a) 514,500 13,377,000
- ---------------------------------------------------------------
132,039,297
- ---------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.30%
Select Appointments Holdings
PLC-ADR (United Kingdom)(a) 250,000 8,500,000
- ---------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL)-0.08%
Tetra Tech, Inc.(a) 150,000 2,381,250
- ---------------------------------------------------------------
SPECIALTY PRINTING-0.23%
Valassis Communications, Inc.(a) 150,000 6,450,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-1.86%
Powerwave Technologies, Inc.(a) 650,000 42,290,625
- ---------------------------------------------------------------
Western Wireless Corp.-Class A(a) 200,000 10,575,000
- ---------------------------------------------------------------
52,865,625
- ---------------------------------------------------------------
TEXTILES (APPAREL)-0.50%
Quicksilver, Inc.(a) 1,000,000 14,125,000
- ---------------------------------------------------------------
TRUCKERS-0.45%
M.S. Carriers, Inc.(a) 100,000 2,825,000
- ---------------------------------------------------------------
Swift Transportation Co., Inc.(a) 565,050 9,853,059
- ---------------------------------------------------------------
12,678,059
- ---------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$1,689,695,716) 2,755,849,427
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
MONEY MARKET FUNDS-3.06%
STIC Liquid Assets Portfolio(c) 43,505,394 43,505,394
- ---------------------------------------------------------------
STIC Prime Portfolio(c) 43,505,394 43,505,394
- ---------------------------------------------------------------
Total Money Market Funds
(Cost $87,010,788) 87,010,788
- ---------------------------------------------------------------
TOTAL INVESTMENTS-100.09% 2,842,860,215
- ---------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(0.09%) (2,688,333)
- ---------------------------------------------------------------
NET ASSETS-100.00% $2,840,171,882
===============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Affiliated issuers are those in which the Funds's holdings of an issuer
represent 5% or more of the outstanding voting securities of the issuer. The
Fund has not owned enough of the outstanding voting securities of any issuer
to have control (as defined in the Investment Co. Act of 1940) of that
issuer. The aggregate market value of affiliated issuers as of 10/31/99 was
$26,582,000 which represented 0.94% of the Fund's net assets.
(c) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-5
<PAGE> 264
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$1,776,706,504) $2,842,860,215
- --------------------------------------------------------
Receivables for:
Investments sold 17,937,284
- --------------------------------------------------------
Capital stock sold 2,011,926
- --------------------------------------------------------
Dividends and interest 830,933
- --------------------------------------------------------
Investment for deferred compensation
plan 59,470
- --------------------------------------------------------
Other assets 10,582
- --------------------------------------------------------
Total assets 2,863,710,410
- --------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 14,775,635
- --------------------------------------------------------
Capital stock reacquired 5,415,822
- --------------------------------------------------------
Deferred compensation 59,470
- --------------------------------------------------------
Accrued advisory fees 1,481,082
- --------------------------------------------------------
Accrued administrative services fees 15,920
- --------------------------------------------------------
Accrued distribution fees 857,774
- --------------------------------------------------------
Accrued directors' fees 2,918
- --------------------------------------------------------
Accrued transfer agent fees 398,490
- --------------------------------------------------------
Accrued operating expenses 531,417
- --------------------------------------------------------
Total liabilities 23,538,528
- --------------------------------------------------------
Net assets applicable to shares
outstanding $2,840,171,882
========================================================
NET ASSETS:
Class A $2,808,450,928
- --------------------------------------------------------
Class B $ 24,913,645
- --------------------------------------------------------
Class C $ 6,807,309
- --------------------------------------------------------
CAPITAL STOCK, $0.001 PAR VALUE PER
SHARE:
Class A:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 50,506,475
========================================================
Class B:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 450,958
========================================================
Class C:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 123,217
========================================================
Class A:
Net asset value and redemption price
per share $ 55.61
- --------------------------------------------------------
Offering price per share:
(Net asset value of $55.61
divided by 94.50%) $ 58.85
========================================================
Class B:
Net asset value and offering price per
share $ 55.25
========================================================
Class C:
Net asset value and offering price per
share $ 55.25
========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $6,700 foreign
withholding tax) $ 3,562,554
- -------------------------------------------------------
Interest 7,254,618
- -------------------------------------------------------
Total investment income 10,817,172
- -------------------------------------------------------
EXPENSES:
Advisory fees 17,085,022
- -------------------------------------------------------
Administrative services fees 126,956
- -------------------------------------------------------
Custodian fees 254,206
- -------------------------------------------------------
Directors' fees 25,194
- -------------------------------------------------------
Distribution fees-Class A 6,704,485
- -------------------------------------------------------
Distribution fees-Class B 79,099
- -------------------------------------------------------
Distribution fees-Class C 21,997
- -------------------------------------------------------
Transfer agent fees-Class A 4,294,353
- -------------------------------------------------------
Transfer agent fees-Class B 26,683
- -------------------------------------------------------
Transfer agent fees-Class C 6,528
- -------------------------------------------------------
Other 931,386
- -------------------------------------------------------
Total expenses 29,555,909
- -------------------------------------------------------
Less: Expenses paid indirectly (57,022)
- -------------------------------------------------------
Net expenses 29,498,887
- -------------------------------------------------------
Net investment income (loss) (18,681,715)
- -------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM
INVESTMENT SECURITIES:
Net realized gain from investment
securities 401,315,614
- -------------------------------------------------------
Change in net unrealized appreciation of
investment securities 514,158,866
- -------------------------------------------------------
Net gain from investment
securities 915,474,480
- -------------------------------------------------------
Net increase in net assets resulting from
operations $896,792,765
=======================================================
</TABLE>
See Notes to Financial Statements.
FS-6
<PAGE> 265
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED OCTOBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment (loss) $ (18,681,715) $ (21,818,881)
- ---------------------------------------------------------------------------------------------
Net realized gain from investment securities, futures and
option contracts 401,315,614 22,492,829
- ---------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, futures and option contracts 514,158,866 (542,787,104)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 896,792,765 (542,113,156)
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains-Class
A (25,067,232) (135,730,479)
- ---------------------------------------------------------------------------------------------
Share transactions--net:
Class A (697,955,629) (548,376,018)
- ---------------------------------------------------------------------------------------------
Class B 22,307,605 --
- ---------------------------------------------------------------------------------------------
Class C 6,056,717 --
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 202,134,226 (1,226,219,653)
- ---------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 2,638,037,656 3,864,257,309
- ---------------------------------------------------------------------------------------------
End of period $2,840,171,882 $2,638,037,656
=============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,384,638,292 $2,060,980,954
- ---------------------------------------------------------------------------------------------
Undistributed net investment (loss) (148,328) (117,968)
- ---------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, futures and option contracts 389,528,207 25,179,825
- ---------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, futures
and option contracts 1,066,153,711 551,994,845
- ---------------------------------------------------------------------------------------------
$2,840,171,882 $2,638,037,656
=============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-7
<PAGE> 266
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Aggressive Growth Fund (the "Fund") is a series portfolio of AIM Equity
Funds, Inc. (the "Company"). The Company is a Maryland corporation registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of ten separate
portfolios. The Fund currently offers three different classes of shares: Class A
shares, Class B shares and Class C shares. Class A shares are sold with a
front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is to achieve long-term growth of
capital by investing primarily in common stocks of companies whose earnings the
Fund's portfolio managers expect to grow more than 15% per year.
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 the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) 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 any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in the
case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. 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
Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities 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 the 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 they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date. On October 31,
1999, undistributed net investment income increased by $18,651,355,
undistributed net realized gains decreased by $11,900,000 and paid in
capital decreased $6,751,355 as a result of equalization credits and net
operating loss reclassifications in order to comply with the requirements of
the American Institute of Certified Public Accountants Statement of Position
93-2. Net assets of the Fund were unaffected by the reclassification
discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Expenses -- Distribution expenses and transfer agency expenses directly
attributable to a class of shares are charged to that class' operations. All
other expenses which are attributable to more than one class are allocated
among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.80% of
the first $150 million of the Fund's average daily net assets, plus 0.625% of
the Fund's average daily net assets in excess of $150 million.
FS-8
<PAGE> 267
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1999, AIM was
paid $126,956 for such services.
The Fund, pursuant to a transfer agency 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 Fund. During the year ended October 31, 1999, AFS
was paid $2,216,555 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted a plan
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund ,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.25% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and C shares. Of these amounts, the Fund may
pay a service fee of 0.25% of the average daily net assets of the Class A, Class
B or Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. The Plans also
impose a cap on the total sales charges, including asset-based sales charges
that may be paid by the respective classes. During the year ended October 31,
1999, the Class A, Class B and Class C shares paid AIM Distributors $6,704,485,
$79,099 and $21,997, respectively, as compensation under the Plans.
AIM Distributors received commissions of $711,447 from sales of the
Class A shares of the Fund during the year ended October 31, 1999. Such
commissions are not an expense of the Fund. They are deducted from, and are
not included in, the proceeds from sales of Class A shares. During the year
ended October 31, 1999, AIM Distributors received $45,944 in contingent
deferred sales charges imposed on redemptions of Fund shares. Certain officers
and directors of the Company are officers and directors of AIM, AFS and AIM
Distributors. During the year ended October 31, 1999, the Fund paid legal fees
of $8,655 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as
counsel to the Company's directors. A member of that firm is a director of the
Company.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$32,326 and $24,696, respectively, under expense offset arrangements. The effect
of the above arrangements resulted in a reduction of the Fund's total expenses
of $57,022 during the year ended October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 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. During the year
ended October 31, 1999, 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 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$1,887,305,705 and $2,452,977,749, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $1,126,699,833
- ----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (62,026,958)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $1,064,672,875
==========================================================
</TABLE>
Cost of investments for tax purposes is $1,778,187,340.
FS-9
<PAGE> 268
NOTE 7-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- --------------- ----------- --------------
<S> <C> <C> <C> <C>
Sold:
Class A 20,202,014 $ 945,046,848 40,244,020 $1,856,544,416
- --------------------------------------------------------------------------------------------------------------------------
Class B* 515,321 25,493,142 -- --
- --------------------------------------------------------------------------------------------------------------------------
Class C* 137,866 6,796,692 -- --
- --------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 522,585 23,265,335 2,928,346 126,973,169
- --------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (35,925,286) (1,666,267,812) (54,802,587) (2,531,893,603)
- --------------------------------------------------------------------------------------------------------------------------
Class B* (64,363) (3,185,537) -- --
- --------------------------------------------------------------------------------------------------------------------------
Class C* (14,649) (739,975) -- --
- --------------------------------------------------------------------------------------------------------------------------
(14,626,512) $ (669,591,307) (11,630,221) $ (548,376,018)
==========================================================================================================================
</TABLE>
* Class B shares and Class C shares commenced sales on March 1, 1999.
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the five-year period ended October 31,
1999 and for a share of Class B and Class C capital stock outstanding during the
period March 1, 1999 (date sales commenced) through October 31, 1999.
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 40.15 $ 49.97 $ 44.93 $ 40.13 $ 28.37
- ----------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) (0.37) (0.33) (0.26) (0.32) (0.04)
- ----------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Net gains (losses) on securities (both realized and
unrealized) 16.22 (7.71) 7.60 6.09 11.80
- ----------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Total from investment operations 15.85 (8.04) 7.34 5.77 11.76
- ----------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Less distributions:
Distributions from net realized gains (0.39) (1.78) (2.30) (0.97) --
- ----------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 55.61 $ 40.15 $ 49.97 $ 44.93 $ 40.13
=========================================================== ========== ========== ========== ========== ==========
Total return(a) 39.73% (16.36)% 17.35% 14.77% 41.45%
=========================================================== ========== ========== ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,808,451 $2,638,038 $3,864,257 $2,750,564 $2,245,554
=========================================================== ========== ========== ========== ========== ==========
Ratio of expenses to average net assets(b) 1.09%(c) 1.06% 1.06% 1.11% 1.08%
=========================================================== ========== ========== ========== ========== ==========
Ratio of net investment income (loss) to average net
assets(d) (0.69)%(c) (0.64)% (0.65)% (0.76)% (0.19)%
=========================================================== ========== ========== ========== ========== ==========
Portfolio turnover rate 75% 69% 73% 79% 52%
=========================================================== ========== ========== ========== ========== ==========
</TABLE>
(a) Does not deduct sales charges.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
1.15% for 1995.
(c) Ratios are based on average net assets of $2,681,793,909.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements was (0.26)% for 1995.
<TABLE>
<CAPTION>
CLASS B CLASS C
------- -------
1999 1999
------- -------
<S> <C> <C>
Net asset value, beginning of period $ 43.41 $ 43.41
- ------------------------------------------------------------ ------- -------
Income from investment operations:
Net investment income (loss) (0.28) (0.28)
- ------------------------------------------------------------ ------- -------
Net gains (losses) on securities (both realized and
unrealized) 12.12 12.12
- ------------------------------------------------------------ ------- -------
Total from investment operations 11.84 11.84
- ------------------------------------------------------------ ------- -------
Net asset value, end of period $ 55.25 $ 55.25
============================================================ ======= =======
Total return(a) 27.27% 27.27%
============================================================ ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $24,914 $ 6,807
============================================================ ======= =======
Ratio of expenses to average net assets 2.08%(b) 2.08%(b)
============================================================ ======= =======
Ratio of net investment income (loss) to average net assets (1.68)%(b) (1.68)%(b)
============================================================ ======= =======
Portfolio turnover rate 75% 75%
============================================================ ======= =======
</TABLE>
(a) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(b) Ratios are annualized and based on average net assets of $11,337,167 and
$3,277,217 for Class B and Class C, respectively.
FS-10
<PAGE> 269
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Equity Funds, Inc.:
We have audited the accompanying statements of assets and
liabilities of AIM Blue Chip Fund (a portfolio of AIM
Equity Funds, Inc.), including the schedule of
investments, as of October 31, 1999, 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 financial
highlights for each of the years in the three-year period
then ended, the one month period ended October 31, 1996,
and the year ended September 30, 1996. 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 financial highlights based on
our audits. The financial highlights for each of the
years in the two-year period ended September 30, 1995
were audited by other auditors whose report thereon,
dated October 25, 1995, expressed an unqualified opinion
on those financial highlights.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of October 31, 1999, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Blue
Chip Fund as of October 31, 1999, 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 financial highlights for each of the years
in the three-year period then ended, the one-month ended
October 31, 1996, and the year ended September 30, 1996
in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
------------
KPMG LLP
December 3, 1999
Houston, Texas
FS-11
<PAGE> 270
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-91.18%
AIRLINES-0.27%
Delta Air Lines, Inc. 225,000 $ 12,248,437
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.41%
Lear Corp.(a) 550,000 18,562,500
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-1.83%
Fifth Third Bancorp 450,000 33,215,625
- ---------------------------------------------------------------
State Street Corp. 275,000 20,934,375
- ---------------------------------------------------------------
Wells Fargo Co. 600,000 28,725,000
- ---------------------------------------------------------------
82,875,000
- ---------------------------------------------------------------
BANKS (MONEY CENTER)-2.05%
Bank of America Corp. 325,000 20,921,875
- ---------------------------------------------------------------
Chase Manhattan Corp. (The) 825,000 72,084,375
- ---------------------------------------------------------------
93,006,250
- ---------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-0.59%
Coca-Cola Co. (The) 450,000 26,550,000
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO
& CABLE)-4.83%
AT&T Corp.-Liberty Media
Group-Class A(a) 975,000 38,695,312
- ---------------------------------------------------------------
CBS Corp.(a) 750,000 36,609,375
- ---------------------------------------------------------------
Clear Channel Communications,
Inc.(a) 450,000 36,168,750
- ---------------------------------------------------------------
Comcast Corp.-Class A 1,550,000 65,293,750
- ---------------------------------------------------------------
MediaOne Group, Inc.(a) 600,000 42,637,500
- ---------------------------------------------------------------
219,404,687
- ---------------------------------------------------------------
CHEMICALS-0.53%
Du Pont (E.I.) de Nemours & Co. 375,000 24,164,062
- ---------------------------------------------------------------
CHEMICALS (DIVERSIFIED)-0.49%
Monsanto Co. 575,000 22,137,500
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-4.24%
Lucent Technologies Inc. 1,200,000 77,100,000
- ---------------------------------------------------------------
Nokia Oyj (Finland) 40,000 4,578,942
- ---------------------------------------------------------------
Nokia Oyj-ADR (Finland) 425,000 49,114,062
- ---------------------------------------------------------------
Nortel Networks Corp. (Canada) 1,000,000 61,937,500
- ---------------------------------------------------------------
192,730,504
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-4.25%
Dell Computer Corp.(a) 1,050,000 42,131,250
- ---------------------------------------------------------------
International Business Machines
Corp. 725,000 71,321,875
- ---------------------------------------------------------------
Sun Microsystems, Inc.(a) 750,000 79,359,375
- ---------------------------------------------------------------
192,812,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (NETWORKING)-2.65%
Cisco Systems, Inc.(a) 1,625,000 $ 120,250,000
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-1.45%
EMC Corp.(a) 900,000 65,700,000
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-7.74%
America Online, Inc.(a)(b) 492,900 63,922,969
- ---------------------------------------------------------------
Microsoft Corp.(a) 1,900,000 175,868,750
- ---------------------------------------------------------------
Oracle Corp.(a) 850,000 40,428,125
- ---------------------------------------------------------------
VERITAS Software Corp.(a) 435,000 46,925,625
- ---------------------------------------------------------------
Yahoo! Inc.(a) 135,000 24,173,437
- ---------------------------------------------------------------
351,318,906
- ---------------------------------------------------------------
CONSUMER FINANCE-0.54%
Providian Financial Corp. 225,000 24,525,000
- ---------------------------------------------------------------
ELECTRIC COMPANIES-1.17%
Duke Power Co. 265,000 14,972,500
- ---------------------------------------------------------------
Edison International 800,000 23,700,000
- ---------------------------------------------------------------
Texas Utilities Co. 375,000 14,531,250
- ---------------------------------------------------------------
53,203,750
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-2.99%
General Electric Co. 1,000,000 135,562,500
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-3.44%
Intel Corp. 900,000 69,693,750
- ---------------------------------------------------------------
Texas Instruments, Inc. 550,000 49,362,500
- ---------------------------------------------------------------
Xilinx, Inc.(a) 475,000 37,346,875
- ---------------------------------------------------------------
156,403,125
- ---------------------------------------------------------------
ENTERTAINMENT-1.38%
Time Warner Inc. 900,000 62,718,750
- ---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-0.69%
Applied Materials, Inc.(a) 350,000 31,434,375
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-5.31%
American Express Co. 350,000 53,900,000
- ---------------------------------------------------------------
Citigroup Inc. 1,100,000 59,537,500
- ---------------------------------------------------------------
Fannie Mae 800,000 56,600,000
- ---------------------------------------------------------------
Freddie Mac 1,000,000 54,062,500
- ---------------------------------------------------------------
MBIA, Inc. 300,000 17,118,750
- ---------------------------------------------------------------
241,218,750
- ---------------------------------------------------------------
FOOTWEAR-0.40%
Nike, Inc.-Class B 325,000 18,342,188
- ---------------------------------------------------------------
</TABLE>
FS-12
<PAGE> 271
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (DIVERSIFIED)-6.19%
American Home Products Corp. 700,000 $ 36,575,000
- ---------------------------------------------------------------
Bristol-Myers Squibb Co. 1,125,000 86,414,063
- ---------------------------------------------------------------
Johnson & Johnson 900,000 94,275,000
- ---------------------------------------------------------------
Warner-Lambert Co. 800,000 63,850,000
- ---------------------------------------------------------------
281,114,063
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-4.15%
Lilly (Eli) & Co. 350,000 24,106,250
- ---------------------------------------------------------------
Merck & Co., Inc. 425,000 33,814,063
- ---------------------------------------------------------------
Pfizer, Inc. 1,615,600 63,816,200
- ---------------------------------------------------------------
Schering-Plough Corp. 1,350,000 66,825,000
- ---------------------------------------------------------------
188,561,513
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-2.11%
Guidant Corp. 1,100,000 54,312,500
- ---------------------------------------------------------------
Medtronic, Inc. 1,200,000 41,550,000
- ---------------------------------------------------------------
95,862,500
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS
(NON-DURABLES)-1.67%
Colgate-Palmolive Co. 600,000 36,300,000
- ---------------------------------------------------------------
Procter & Gamble, Co. (The) 375,000 39,328,125
- ---------------------------------------------------------------
75,628,125
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-2.27%
American International Group,
Inc. 1,000,000 102,937,500
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-1.84%
Merrill Lynch & Co., Inc. 325,000 25,512,500
- ---------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 525,000 57,914,063
- ---------------------------------------------------------------
83,426,563
- ---------------------------------------------------------------
LODGING-HOTELS-1.15%
Carnival Corp. 1,175,000 52,287,500
- ---------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.58%
Ingersoll-Rand Co. 500,000 26,125,000
- ---------------------------------------------------------------
MANUFACTURING
(DIVERSIFIED)-2.91%
Tyco International Ltd. 2,400,000 95,850,000
- ---------------------------------------------------------------
United Technologies Corp. 600,000 36,300,000
- ---------------------------------------------------------------
132,150,000
- ---------------------------------------------------------------
NATURAL GAS-1.09%
El Paso Energy Corp. 475,000 19,475,000
- ---------------------------------------------------------------
Enron Corp. 750,000 29,953,125
- ---------------------------------------------------------------
49,428,125
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (DRILLING &
EQUIPMENT)-1.09%
Halliburton Co. 750,000 $ 28,265,625
- ---------------------------------------------------------------
Schlumberger Ltd. 350,000 21,196,875
- ---------------------------------------------------------------
49,462,500
- ---------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-0.28%
Conoco Inc.-Class B 460,657 12,495,321
- ---------------------------------------------------------------
OIL (INTERNATIONAL
INTEGRATED)-1.74%
Exxon Corp. 450,000 33,328,125
- ---------------------------------------------------------------
Mobil Corp. 225,000 21,712,500
- ---------------------------------------------------------------
Royal Dutch Petroleum Co.-New
York Shares-ADR (Netherlands) 400,000 23,975,000
- ---------------------------------------------------------------
79,015,625
- ---------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.93%
Bowater, Inc. 300,000 15,750,000
- ---------------------------------------------------------------
International Paper Co. 500,000 26,312,500
- ---------------------------------------------------------------
42,062,500
- ---------------------------------------------------------------
RAILROADS-0.30%
Canadian National Railway Co.
(Canada) 450,000 13,725,000
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-1.83%
Home Depot, Inc. (The) 1,100,000 83,050,000
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-1.12%
Kroger Co. (The)(a) 1,000,000 20,812,500
- ---------------------------------------------------------------
Safeway, Inc.(a) 850,000 30,015,625
- ---------------------------------------------------------------
50,828,125
- ---------------------------------------------------------------
RETAIL (GENERAL
MERCHANDISE)-3.95%
Costco Wholesale Corp.(a) 500,000 40,156,250
- ---------------------------------------------------------------
Dayton Hudson Corp. 750,000 48,468,750
- ---------------------------------------------------------------
Wal-Mart Stores, Inc. 1,600,000 90,700,000
- ---------------------------------------------------------------
179,325,000
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.85%
Gap, Inc. (The) 750,000 27,843,750
- ---------------------------------------------------------------
TJX Companies, Inc. (The) 400,000 10,850,000
- ---------------------------------------------------------------
38,693,750
- ---------------------------------------------------------------
SERVICES (ADVERTISING/
MARKETING)-0.39%
Interpublic Group of Companies,
Inc. 440,000 17,875,000
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-1.31%
First Data Corp. 900,000 41,118,750
- ---------------------------------------------------------------
Fiserv, Inc.(a) 577,500 18,480,000
- ---------------------------------------------------------------
59,598,750
- ---------------------------------------------------------------
</TABLE>
FS-13
<PAGE> 272
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.79%
Vodafone AirTouch PLC-ADR
(United Kingdom) 750,000 $ 35,953,125
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-2.92%
AT&T Corp. 500,000 23,375,000
- ---------------------------------------------------------------
MCI WorldCom, Inc.(a) 1,275,000 109,410,938
- ---------------------------------------------------------------
132,785,938
- ---------------------------------------------------------------
TELEPHONE-2.47%
BellSouth Corp. 950,000 42,750,000
- ---------------------------------------------------------------
GTE Corp. 350,000 26,250,000
- ---------------------------------------------------------------
SBC Communications, Inc. 850,000 43,296,875
- ---------------------------------------------------------------
112,296,875
- ---------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$3,096,180,214) 4,139,857,182
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES-0.09%
U.S. TREASURY BILLS-0.09%(c)(d)
4.748%, 12/23/99 (Cost
$4,181,906) $ 4,210,000 $ 4,180,825
- ---------------------------------------------------------------
MONEY MARKET FUNDS-8.57%
STIC Liquid Assets Portfolio(e) 194,612,715 194,612,715
- ---------------------------------------------------------------
STIC Prime Portfolio(e) 194,612,715 194,612,715
- ---------------------------------------------------------------
Total Money Market Funds
(Cost $389,225,430) 389,225,430
- ---------------------------------------------------------------
TOTAL INVESTMENTS-99.84% 4,533,263,437
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.16% 7,409,742
- ---------------------------------------------------------------
NET ASSETS-100.00% $4,540,673,179
===============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 7.
(c) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(d) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 8.
(e) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-14
<PAGE> 273
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$3,489,587,550) $4,533,263,437
- ---------------------------------------------------------
Receivables for:
Investments sold 36,197,016
- ---------------------------------------------------------
Capital stock sold 17,637,457
- ---------------------------------------------------------
Dividends and interest 2,956,130
- ---------------------------------------------------------
Variation margin 1,300,000
- ---------------------------------------------------------
Investment for deferred compensation plan 25,701
- ---------------------------------------------------------
Other assets 146,973
- ---------------------------------------------------------
Total assets 4,591,526,714
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 29,463,474
- ---------------------------------------------------------
Capital stock reacquired 7,446,032
- ---------------------------------------------------------
Deferred compensation 25,701
- ---------------------------------------------------------
Options written (Premiums received
$5,063,081) 8,228,238
- ---------------------------------------------------------
Accrued advisory fees 2,312,383
- ---------------------------------------------------------
Accrued administrative services fees 18,976
- ---------------------------------------------------------
Accrued directors' fees 4,732
- ---------------------------------------------------------
Accrued distribution fees 2,712,527
- ---------------------------------------------------------
Accrued transfer agent fees 618,108
- ---------------------------------------------------------
Accrued operating expenses 23,364
- ---------------------------------------------------------
Total liabilities 50,853,535
- ---------------------------------------------------------
Net assets applicable to shares
outstanding $4,540,673,179
=========================================================
</TABLE>
<TABLE>
<S> <C>
NET ASSETS:
Class A $2,299,550,866
- ---------------------------------------------------------
Class B $1,891,170,839
- ---------------------------------------------------------
Class C $ 349,951,474
- ---------------------------------------------------------
CAPITAL STOCK, $0.001 PAR VALUE PER
SHARE:
Class A:
Authorized 750,000,000
- ---------------------------------------------------------
Outstanding 49,473,559
- ---------------------------------------------------------
Class B:
Authorized 750,000,000
- ---------------------------------------------------------
Outstanding 41,426,916
- ---------------------------------------------------------
Class C:
Authorized 750,000,000
- ---------------------------------------------------------
Outstanding 7,668,239
- ---------------------------------------------------------
Class A:
Net asset value and redemption price
per share $ 46.48
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $46.48/ 94.50%) $ 49.19
- ---------------------------------------------------------
Class B:
Net asset value and offering price per
share $ 45.65
- ---------------------------------------------------------
Class C:
Net asset value and offering price per
share $ 45.64
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $160,836 foreign
withholding tax) $ 24,286,072
- --------------------------------------------------------
Interest 17,149,758
- --------------------------------------------------------
Total investment income 41,435,830
- --------------------------------------------------------
EXPENSES:
Advisory fees 21,592,076
- --------------------------------------------------------
Administrative services fees 153,309
- --------------------------------------------------------
Custodian fees 181,652
- --------------------------------------------------------
Directors' fees 25,214
- --------------------------------------------------------
Distribution fees -- Class A 6,217,528
- --------------------------------------------------------
Distribution fees -- Class B 13,837,276
- --------------------------------------------------------
Distribution fees -- Class C 2,245,680
- --------------------------------------------------------
Transfer agent fees -- Class A 2,899,316
- --------------------------------------------------------
Transfer agent fees -- Class B 3,281,701
- --------------------------------------------------------
Transfer agent fees -- Class C 464,980
- --------------------------------------------------------
Other 960,439
- --------------------------------------------------------
Total expenses 51,859,171
- --------------------------------------------------------
Less: Expenses paid indirectly (43,470)
- --------------------------------------------------------
Net expenses 51,815,701
- --------------------------------------------------------
Net investment income (loss) (10,379,871)
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FUTURES AND OPTION
CONTRACTS:
Net realized gain (loss) from:
Investment securities (53,258,921)
- --------------------------------------------------------
Foreign currencies (480,726)
- --------------------------------------------------------
Futures contracts 20,856,520
- --------------------------------------------------------
Option contracts written (2,951,257)
- --------------------------------------------------------
(35,834,384)
- --------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 763,733,398
- --------------------------------------------------------
Foreign currencies (9,454)
- --------------------------------------------------------
Futures contracts (4,034,067)
- --------------------------------------------------------
Option contracts written (3,165,157)
- --------------------------------------------------------
756,524,720
- --------------------------------------------------------
Net gain from investment securities,
foreign currencies, futures and
option contracts 720,690,336
- --------------------------------------------------------
Net increase in net assets resulting from
operations $710,310,465
========================================================
</TABLE>
See Notes to Financial Statements.
FS-15
<PAGE> 274
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (10,379,871) $ 664,009
- ----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, futures and option contracts (35,834,384) 1,200,650
- ----------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies, futures and option
contracts 756,524,720 175,782,639
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 710,310,465 177,647,298
- ----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
Class A (776,772) (1,249,305)
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (3,128,249) (10,987,892)
- ----------------------------------------------------------------------------------------------
Class B (2,256,383) (6,118,620)
- ----------------------------------------------------------------------------------------------
Class C (293,473) (150,526)
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 830,315,460 486,282,009
- ----------------------------------------------------------------------------------------------
Class B 866,521,395 425,444,112
- ----------------------------------------------------------------------------------------------
Class C 220,917,321 81,733,726
- ----------------------------------------------------------------------------------------------
Net increase in net assets 2,621,609,764 1,152,600,802
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,919,063,415 766,462,613
- ----------------------------------------------------------------------------------------------
End of period $4,540,673,179 $1,919,063,415
==============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $3,540,120,284 $1,631,900,085
- ----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (97,169) 706,247
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies, futures and option
contracts (41,676,121) 655,618
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, futures and option contracts 1,042,326,185 285,801,465
- ----------------------------------------------------------------------------------------------
$4,540,673,179 $1,919,063,415
==============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-16
<PAGE> 275
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Blue Chip Fund (the "Fund") is a series portfolio of AIM Equity Funds, Inc.
(the "Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of ten separate portfolios. The
Fund currently offers three different classes of shares: Class A shares, Class B
shares and Class C shares. Class A shares are sold with a front-end sales
charge. Class B shares and Class C shares are sold with a contingent deferred
sales charge. Matters affecting each portfolio or class will be voted on
exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is long-term growth of capital with a secondary
objective of current income.
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 the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) 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 any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in the
case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. 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
Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities 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 the 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 they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, $10,353,227 was reclassified to undistributed net
investment income (loss), $819,250 was reclassified from undistributed gains
and $9,533,977 from paid in capital as a result of equalization credits and
net operating loss reclassifications in order to comply with the
requirements of the American Institute of Certified Public Accountants
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassification discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward of $38,614,682 as of October 31, 1999 which may be carried
forward to offset future taxable gains, if any, which expires, if not
previously utilized, in the year 2007.
D. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions. The
Fund does not separately account for that portion of the results of
operations resulting from changes in
FS-17
<PAGE> 276
foreign exchange rates on investments and the fluctuations arising from
changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from investments.
E. Foreign Currency Contracts -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
F. Futures Contracts -- The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits required
upon entering into futures contracts are satisfied by the segregation of
specific securities as collateral for the account of the broker (the Fund's
agent in acquiring the futures position). During the period the futures
contracts are open, changes in the value of the contracts are recognized as
unrealized gains or losses by "marking to market" on a daily basis to
reflect the market value of the contracts at the end of each day's trading.
Variation margin payments are made or received depending upon whether
unrealized gains or losses are incurred. When the contracts are closed, the
Fund recognizes a realized gain or loss equal to the difference between the
proceeds from, or cost of, the closing transaction and the Fund's basis in
the contract. Risks include the possibility of an illiquid market and that a
change in value of the contracts may not correlate with changes in the value
of the securities being hedged.
G. Covered Call Options -- The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is recorded
as an asset and an equivalent liability. The amount of the liability is
subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the mean
between the last bid and asked prices on that day. If a written call option
expires on the stipulated expiration date, or if the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or a loss if the
closing purchase transaction exceeds the premium received when the option
was written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the
sale of the underlying security and the proceeds of the sale are increased
by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the
call option at any time during the option period. During the option period,
in return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has
retained the risk of loss should the price of the underlying security
decline. During the option period, the Fund may be required at any time to
deliver the underlying security against payment of the exercise price. This
obligation is terminated upon the expiration of the option period or at such
earlier time at which the Fund effects a closing purchase transaction by
purchasing (at a price which may be higher than that received when the call
option was written) a call option identical to the one originally written.
H. Expenses -- Distribution expenses and transfer agency expenses directly
attributable to a class of shares are charged to that class' operations. All
other expenses which are attributable to more than one class are allocated
among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of
the first $350 million of the Fund's average daily net assets, plus 0.625% of
the Fund's average daily net assets in excess of $350 million.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1999, AIM was
paid $153,309 for such services.
The Fund, pursuant to a transfer agency 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 Fund. During the year ended October 31, 1999, AFS
was paid $3,853,483 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted a plan
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.35% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and C shares. Of these amounts, the Fund may
pay a service fee of 0.25% of the average daily net assets of the Class A, Class
B or Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans
FS-18
<PAGE> 277
would constitute an asset-based sales charge. The Plans also impose a cap on the
total sales charges, including asset-based sales charges that may be paid by the
respective classes. During the year ended October 31, 1999, the Class A, Class B
and Class C shares paid AIM Distributors $6,217,528, $13,837,276 and $2,245,680,
respectively, as compensation under the Plans.
AIM Distributors received commissions of $2,766,799 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1999,
AIM Distributors received $177,813 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and directors of the Company are
officers and directors of AIM, AFS and AIM Distributors.
During the year ended October 31, 1999, the Fund paid legal fees of $9,059 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$37,203 and $6,267, respectively, under expense offset arrangements. The effect
of the above arrangements resulted in a reduction of the Fund's total expenses
of $43,470 during the year ended October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 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. During the year
ended October 31, 1999, 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 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$2,389,864,659 and $651,658,838, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $1,077,403,176
- ----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (34,962,485)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $1,042,440,691
==========================================================
Cost of investments for tax purposes is $3,490,822,746.
</TABLE>
FS-19
<PAGE> 278
NOTE 7-CALL OPTION CONTRACTS
Transactions in call options written during the year ended October 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
------ -----------
<S> <C> <C>
Beginning of year -- $ --
- -------------------------------------------------------------------------------------
Written 5,929 8,218,226
- -------------------------------------------------------------------------------------
Closed (3,429) (3,099,518)
- -------------------------------------------------------------------------------------
Exercised (71) (55,627)
- -------------------------------------------------------------------------------------
End of year 2,429 $ 5,063,081
- -------------------------------------------------------------------------------------
</TABLE>
Open call option contracts written at October 31, 1999 were as follows:
<TABLE>
<CAPTION>
OCTOBER 31,
CONTRACT STRIKE NUMBER OF PREMIUMS 1999 UNREALIZED
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE DEPRECIATION
----- -------- ------ --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
America Online, Inc. Jan. 00 $100 2,429 $5,063,081 $8,228,238 $(3,165,157)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 8-FUTURES CONTRACTS
On October 31, 1999, $4,167,000 principal amount of U.S. Treasury obligations
were pledged as collateral to cover margin requirements for open futures
contracts. Open futures contracts were as follows:
<TABLE>
<CAPTION>
NO. OF MONTH/ UNREALIZED
CONTRACT CONTRACTS COMMITMENT APPRECIATION
- -------- --------- ---------- ------------
<S> <C> <C> <C>
S&P 500 Index 200 Dec. 99 $1,817,528
- ---------------------------------------------------------------------------------------------------
</TABLE>
NOTE 9-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 31,555,257 $1,348,329,456 26,179,983 $ 915,652,812
- -----------------------------------------------------------------------------------------------------------------------
Class B 24,939,694 1,053,306,393 14,239,927 492,929,849
- -----------------------------------------------------------------------------------------------------------------------
Class C 6,902,119 292,602,692 2,711,151 95,200,193
- -----------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 93,903 3,711,997 371,504 11,699,310
- -----------------------------------------------------------------------------------------------------------------------
Class B 54,813 2,141,056 184,940 5,805,443
- -----------------------------------------------------------------------------------------------------------------------
Class C 7,197 281,069 3,949 128,203
- -----------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (12,216,671) (521,725,993) (12,601,919) (441,070,113)
- -----------------------------------------------------------------------------------------------------------------------
Class B (4,443,246) (188,926,054) (2,143,627) (73,291,180)
- -----------------------------------------------------------------------------------------------------------------------
Class C (1,692,129) (71,966,440) (392,399) (13,594,670)
- -----------------------------------------------------------------------------------------------------------------------
45,200,937 $1,917,754,176 28,553,509 $ 993,459,847
=======================================================================================================================
</TABLE>
FS-20
<PAGE> 279
NOTE 10-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the three-year period ended October 31,
1999, the one month ended October 31, 1996 and each of the years in the two year
period ended September 30, 1996, for a share of Class B capital stock
outstanding during each of the years in the three-year period ended October 31,
1999 and the period October 1, 1996 (date sales commenced) through October 31,
1996, and for a share of Class C capital stock outstanding during each of the
years in the two year period ended October 31, 1999 and the period August 4,
1997 (date sales commenced) through October 31, 1997.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------
OCTOBER 31, SEPTEMBER 30,
------------------------------------------------- -------------------
1999 1998 1997 1996 1996(a) 1995
---------- ---------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 36.14 $ 30.96 $ 26.08 $ 25.56 $ 23.83 $ 19.22
- ------------------------------------------------------ ---------- ---------- -------- -------- -------- -------
Income from investment operations:
Net investment income 0.02 0.13(b) 0.17(b) -- 0.33 0.14
- ------------------------------------------------------ ---------- ---------- -------- -------- -------- -------
Net gains on securities (both realized and
unrealized) 10.44 5.75 6.93 0.52 4.61 5.05
- ------------------------------------------------------ ---------- ---------- -------- -------- -------- -------
Total from investment operations 10.46 5.88 7.10 0.52 4.94 5.19
- ------------------------------------------------------ ---------- ---------- -------- -------- -------- -------
Less distributions:
Dividends from net investment income (0.02) (0.07) (0.05) -- (0.21) (0.12)
- ------------------------------------------------------ ---------- ---------- -------- -------- -------- -------
Distributions from net realized gains (0.10) (0.63) (2.17) -- (3.00) (0.46)
- ------------------------------------------------------ ---------- ---------- -------- -------- -------- -------
Total distributions (0.12) (0.70) (2.22) -- (3.21) (0.58)
- ------------------------------------------------------ ---------- ---------- -------- -------- -------- -------
Net asset value, end of period $ 46.48 $ 36.14 $ 30.96 $ 26.08 $ 25.56 $ 23.83
====================================================== ========== ========== ======== ======== ======== =======
Total return(c) 29.01% 19.36% 29.68% 2.04% 22.39% 27.84%
====================================================== ========== ========== ======== ======== ======== =======
Ratios/supplement data:
Net assets, end of period (000s omitted) $2,299,551 $1,085,648 $498,178 $120,448 $106,415 $71,324
====================================================== ========== ========== ======== ======== ======== =======
Ratio of expenses to average net assets(d) 1.19%(e) 1.22%() 1.31% 1.30%(f) 1.26% 1.3%
====================================================== ========== ========== ======== ======== ======== =======
Ratio of net investment income to average net
assets(g) 0.03%(e) 0.33%() 0.50% 0.12%(f) 0.53% 0.7%
====================================================== ========== ========== ======== ======== ======== =======
Portfolio turnover rate 22% 27% 43% 10% 58% 17%
====================================================== ========== ========== ======== ======== ======== =======
</TABLE>
(a) The Fund changed investment advisors on June 3, 1996.
(b) Calculated using average shares outstanding.
(c) Does not deduct sales charges and is not annualized for periods less than
one year.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.32%, 1.37% (annualized) and 1.28% for the periods 1997-1996 and September
30, 1996.
(e) Ratios are based on average net assets of $1,776,436,482.
(f) Annualized.
(g) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 0.49%, 0.05% (annualized) and 0.51% for the periods
1997-1996 and September 30, 1996.
<TABLE>
<CAPTION>
CLASS B CLASS C
-------------------------------------------------- ---------------------------------
1999 1998 1997 1996 1999 1998 1997
---------- -------- -------- -------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 35.73 $ 30.76 $ 26.07 $ 25.56 $ 35.72 $ 30.75 $ 31.72
- ------------------------------------- ---------- -------- -------- -------- -------- ------- -------
Income from investment operations:
Net investment income (loss) (0.29)(a) (0.12) (0.03)(a) (0.01) (0.29)(a) (0.12)(a) (0.01)(a)
- ------------------------------------- ---------- -------- -------- -------- -------- ------- -------
Net gains (losses) on securities
(both realized and unrealized) 10.31 5.72 6.92 0.52 10.31 5.72 (0.96)
- ------------------------------------- ---------- -------- -------- -------- -------- ------- -------
Total from investment
operations 10.02 5.60 6.89 0.51 10.02 5.60 (0.97)
- ------------------------------------- ---------- -------- -------- -------- -------- ------- -------
Less distributions:
Dividends from net investment
income -- -- (0.03) -- -- -- --
- ------------------------------------- ---------- -------- -------- -------- -------- ------- -------
Distributions from net realized
gains (0.10) (0.63) (2.17) -- (0.10) (0.63) --
- ------------------------------------- ---------- -------- -------- -------- -------- ------- -------
Total distributions (0.10) (0.63) (2.20) -- (0.10) (0.63) --
- ------------------------------------- ---------- -------- -------- -------- -------- ------- -------
Net asset value, end of period $ 45.65 $ 35.73 $ 30.76 $ 26.07 $ 45.64 $ 35.72 $ 30.75
===================================== ========== ======== ======== ======== ======== ======= =======
Total return(b) 28.08% 18.52% 28.81% 2.00% 28.09% 18.52% (3.06)%
===================================== ========== ======== ======== ======== ======== ======= =======
Ratios/supplement data:
Net assets, end of period (000s
omitted) $1,891,171 $745,862 $264,337 $ 8,101 $349,951 $87,554 $ 3,947
===================================== ========== ======== ======== ======== ======== ======= =======
Ratio of expenses to average net
assets(c) 1.91%(d) 1.94% 2.10% 2.01%(e) 1.90%(d) 1.94% 2.10%(e)
===================================== ========== ======== ======== ======== ======== ======= =======
Ratio of net investment income (loss)
to average net assets(f) (0.68)%(d) (0.38)% (0.28)% (0.58)%(e) (0.68)%(d) (0.38)% (0.28)%(e)
===================================== ========== ======== ======== ======== ======== ======= =======
Portfolio turnover rate 22% 27% 43% 10% 22% 27% 43%
===================================== ========== ======== ======== ======== ======== ======= =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) After fee waivers and/or expense reimbursement. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.12% and 2.08% (annualized) for 1997-1996 for Class B and 2.12%
(annualized) for 1997 for Class C.
(d) Ratios are based on average net assets of $1,383,727,625 and $224,568,052
for Class B and Class C, respectively.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (0.31)% and (0.65)% (annualized) for 1997-1996 for Class
B and (0.31)% (annualized) for 1997 for Class C.
FS-21
<PAGE> 280
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
AIM Equity Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of AIM Capital Development Fund (a series
portfolio of AIM Equity Funds, Inc.), including the
schedule of investments, as of October 31, 1999, 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 financial
highlights for each of the years in the three-year period
then ended and the period June 17, 1996 (date operations
commenced) through October 31, 1996. 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 financial highlights based on
our audit.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of October 31, 1999, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of the AIM
Capital Development Fund as of October 31, 1999, 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 three-year period then ended
and the period June 17, 1996 (date operations commenced)
through October 31, 1996, in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
------------
KPMG LLP
December 3, 1999
Houston, Texas
FS-22
<PAGE> 281
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-95.70%
AEROSPACE/DEFENSE-0.44%
HEICO Corp. 200,000 $ 3,037,500
- ---------------------------------------------------------------
Kroll-O'Gara Co. (The)(a) 110,000 1,746,250
- ---------------------------------------------------------------
4,783,750
- ---------------------------------------------------------------
AIRLINES-0.46%
Ryanair Holdings PLC-ADR
(Ireland)(a) 121,000 4,991,250
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.56%
Dura Automotive Systems, Inc.(a) 160,000 3,000,000
- ---------------------------------------------------------------
Stoneridge, Inc.(a) 200,000 3,100,000
- ---------------------------------------------------------------
6,100,000
- ---------------------------------------------------------------
BANKS (REGIONAL)-2.31%
Bank United Corp.-Class A 119,000 4,641,000
- ---------------------------------------------------------------
Colonial BancGroup, Inc. (The) 499,600 5,963,975
- ---------------------------------------------------------------
Independence Community Bank Corp. 452,000 5,395,750
- ---------------------------------------------------------------
North Fork Bancorporation, Inc. 349,500 7,230,281
- ---------------------------------------------------------------
UCBH Holdings, Inc.(a) 100,000 1,881,250
- ---------------------------------------------------------------
25,112,256
- ---------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.68%
Canandaigua Brands, Inc.-Class
A(a) 121,800 7,368,900
- ---------------------------------------------------------------
BIOTECHNOLOGY-0.22%
IDEXX Laboratories, Inc.(a) 160,000 2,420,000
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-5.59%
Citadel Communications Corp.(a) 149,400 7,217,887
- ---------------------------------------------------------------
Cox Radio, Inc.-Class A(a) 115,000 8,050,000
- ---------------------------------------------------------------
Emmis Broadcasting Corp.-Class
A(a) 100,000 7,212,500
- ---------------------------------------------------------------
Entercom Communications Corp.(a) 191,500 9,539,094
- ---------------------------------------------------------------
Hispanic Broadcasting Corp.(a) 60,000 4,860,000
- ---------------------------------------------------------------
Insight Communications Company,
Inc.(a) 316,300 7,472,587
- ---------------------------------------------------------------
Radio Unica Corp.(a) 25,000 715,625
- ---------------------------------------------------------------
Sinclair Broadcast Group, Inc.(a) 373,700 3,737,000
- ---------------------------------------------------------------
Univision Communications,
Inc.-Class A(a) 54,000 4,593,375
- ---------------------------------------------------------------
Westwood One, Inc.(a) 157,500 7,264,687
- ---------------------------------------------------------------
60,662,755
- ---------------------------------------------------------------
BUILDING MATERIALS-0.69%
TJ International, Inc. 160,000 4,960,000
- ---------------------------------------------------------------
White Cap Industries, Inc.(a) 180,000 2,542,500
- ---------------------------------------------------------------
7,502,500
- ---------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.41%
W.R. Grace & Co.(a) 295,400 4,412,537
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-3.54%
Adtran, Inc.(a) 139,600 5,182,650
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMUNICATIONS EQUIPMENT-(CONTINUED)
Comverse Technology, Inc.(a)(b) 59,700 $ 6,775,950
- ---------------------------------------------------------------
Davox Corp.(a) 300,000 3,862,500
- ---------------------------------------------------------------
Digital Microwave Corp.(a) 300,000 4,462,500
- ---------------------------------------------------------------
Gilat Satellite Networks Ltd.
(Israel)(a) 82,400 4,295,100
- ---------------------------------------------------------------
NorthEast Optic Network, Inc.(a) 101,100 3,677,512
- ---------------------------------------------------------------
PairGain Technologies, Inc.(a) 100,000 1,225,000
- ---------------------------------------------------------------
REMEC, Inc.(a) 160,700 1,677,306
- ---------------------------------------------------------------
Scientific-Atlanta, Inc. 126,000 7,213,500
- ---------------------------------------------------------------
38,372,018
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-1.30%
DSP Communications, Inc.(a) 215,000 7,565,312
- ---------------------------------------------------------------
QLogic Corp.(a) 63,000 6,559,875
- ---------------------------------------------------------------
14,125,187
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-11.10%
AppNet Systems, Inc.(a) 100,400 4,373,675
- ---------------------------------------------------------------
Check Point Software Technologies
Ltd. (Israel)(a) 105,000 12,147,187
- ---------------------------------------------------------------
Dendrite International, Inc.(a) 122,700 3,849,712
- ---------------------------------------------------------------
Digital Insight Corp.(a) 70,000 2,773,750
- ---------------------------------------------------------------
Documentum, Inc.(a) 82,900 2,352,287
- ---------------------------------------------------------------
Eclipsys Corp.(a) 260,000 4,127,500
- ---------------------------------------------------------------
HNC Software, Inc.(a) 100,000 3,993,750
- ---------------------------------------------------------------
Hyperion Solutions Corp.(a) 195,000 4,753,125
- ---------------------------------------------------------------
InfoCure Corp.(a) 376,200 5,925,150
- ---------------------------------------------------------------
Interleaf, Inc.(a) 100,000 2,456,250
- ---------------------------------------------------------------
Keynote Systems, Inc.(a) 89,300 4,051,987
- ---------------------------------------------------------------
Mercury Interactive Corp.(a) 74,500 6,043,812
- ---------------------------------------------------------------
Navidec, Inc.(a) 250,000 2,546,875
- ---------------------------------------------------------------
PC-Tel, Inc.(a) 55,700 1,671,000
- ---------------------------------------------------------------
Peregrine Systems, Inc.(a) 115,500 5,067,562
- ---------------------------------------------------------------
Rational Software Corp.(a) 240,000 10,260,000
- ---------------------------------------------------------------
Sterling Software, Inc.(a) 340,000 7,458,750
- ---------------------------------------------------------------
Symantec Corp.(a) 300,000 14,325,000
- ---------------------------------------------------------------
Tanning Technology Corp.(a) 194,900 6,845,862
- ---------------------------------------------------------------
Titan Corp. (The)(a) 300,000 5,025,000
- ---------------------------------------------------------------
Transaction Systems Architects,
Inc.- Class A(a) 174,000 5,350,500
- ---------------------------------------------------------------
Trizetto Group, Inc. (The)(a) 335,400 3,354,000
- ---------------------------------------------------------------
Unigraphics Solutions, Inc.(a) 80,000 1,725,000
- ---------------------------------------------------------------
120,477,734
- ---------------------------------------------------------------
CONSUMER FINANCE-1.90%
American Capital Strategies, Ltd. 403,100 8,439,906
- ---------------------------------------------------------------
</TABLE>
FS-23
<PAGE> 282
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONSUMER FINANCE-(CONTINUED)
AmeriCredit Corp.(a) 559,500 $ 9,721,312
- ---------------------------------------------------------------
Cash America International, Inc. 255,000 2,406,562
- ---------------------------------------------------------------
20,567,780
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD &
HEALTH)-0.44%
Performance Food Group Co.(a) 175,000 4,746,875
- ---------------------------------------------------------------
ELECTRIC COMPANIES-0.66%
Avista Corp. 365,000 6,570,000
- ---------------------------------------------------------------
Plug Power, Inc.(a) 38,200 611,200
- ---------------------------------------------------------------
7,181,200
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-4.09%
American Power Conversion
Corp.(a) 285,000 6,394,687
- ---------------------------------------------------------------
Conexant Systems, Inc.(a) 85,000 7,936,875
- ---------------------------------------------------------------
Cree Research, Inc.(a) 246,000 10,501,125
- ---------------------------------------------------------------
DII Group, Inc.(a) 214,900 7,736,400
- ---------------------------------------------------------------
Pinnacle Systems, Inc.(a) 145,000 4,023,750
- ---------------------------------------------------------------
Sawtek, Inc.(a) 150,000 6,150,000
- ---------------------------------------------------------------
SLI, Inc.(a) 150,200 1,614,650
- ---------------------------------------------------------------
44,357,487
- ---------------------------------------------------------------
ELECTRONICS (COMPONENT
DISTRIBUTORS)-0.51%
Power-One, Inc.(a) 275,000 5,500,000
- ---------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.19%
Aeroflex, Inc.(a) 371,700 2,067,581
- ---------------------------------------------------------------
ELECTRONICS
(INSTRUMENTATION)-2.29%
Alpha Industries, Inc.(a) 152,800 8,442,200
- ---------------------------------------------------------------
Methode Electronics, Inc.-Class A 304,500 4,872,000
- ---------------------------------------------------------------
Varian Inc.(a) 500,000 9,437,500
- ---------------------------------------------------------------
Varian Medical Systems, Inc. 100,000 2,106,250
- ---------------------------------------------------------------
24,857,950
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-4.18%
Amkor Technology, Inc.(a) 332,900 6,720,419
- ---------------------------------------------------------------
Celestica Inc. (Canada)(a) 95,000 5,284,375
- ---------------------------------------------------------------
Fairchild Semiconductor Corp.(a) 200,000 5,050,000
- ---------------------------------------------------------------
Micrel, Inc.(a) 140,000 7,612,500
- ---------------------------------------------------------------
Microchip Technology, Inc.(a) 175,100 11,666,037
- ---------------------------------------------------------------
QuickLogic Corp.(a) 178,100 3,272,587
- ---------------------------------------------------------------
Sipex Corp.(a) 100,000 1,150,000
- ---------------------------------------------------------------
Zoran Corp.(a) 159,900 4,617,112
- ---------------------------------------------------------------
45,373,030
- ---------------------------------------------------------------
ENTERTAINMENT-1.39%
LodgeNet Entertainment Corp.(a) 85,200 1,565,550
- ---------------------------------------------------------------
SFX Entertainment, Inc.(a) 198,400 6,931,600
- ---------------------------------------------------------------
ValueVision International,
Inc.(a) 200,000 6,537,500
- ---------------------------------------------------------------
15,034,650
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
EQUIPMENT (SEMICONDUCTOR)-0.94%
Etec Systems, Inc.(a) 134,000 $ 5,117,125
- ---------------------------------------------------------------
Novellus Systems, Inc.(a) 65,000 5,037,500
- ---------------------------------------------------------------
10,154,625
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-0.44%
MicroFinancial, Inc. 170,000 1,859,375
- ---------------------------------------------------------------
SEI Investments Co. 30,000 2,924,062
- ---------------------------------------------------------------
4,783,437
- ---------------------------------------------------------------
FOODS-0.82%
American Italian Pasta Co.-Class
A(a) 177,700 4,464,713
- ---------------------------------------------------------------
Keebler Foods Co.(a) 140,500 4,487,219
- ---------------------------------------------------------------
8,951,932
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-1.35%
Alpharma, Inc.-Class A 180,000 6,333,750
- ---------------------------------------------------------------
Jones Pharma, Inc. 268,000 8,308,000
- ---------------------------------------------------------------
14,641,750
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL
MANAGEMENT)-0.71%
LifePoint Hospitals, Inc.(a) 650,100 7,679,306
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.44%
Express Scripts, Inc.-Class A(a) 60,000 2,947,500
- ---------------------------------------------------------------
Trigon Healthcare, Inc.(a) 63,100 1,790,463
- ---------------------------------------------------------------
4,737,963
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-0.75%
Cyberonics, Inc.(a) 130,000 1,828,125
- ---------------------------------------------------------------
Lifecore Biomedical, Inc.(a) 200,000 2,500,000
- ---------------------------------------------------------------
Sybron International Corp.(a) 160,100 3,812,381
- ---------------------------------------------------------------
8,140,506
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED
SERVICES)-2.12%
Advance Paradigm, Inc.(a) 92,000 3,921,500
- ---------------------------------------------------------------
MAXIMUS, Inc.(a) 201,800 4,679,238
- ---------------------------------------------------------------
Orthodontic Centers of America,
Inc.(a) 349,900 4,811,125
- ---------------------------------------------------------------
United Payors & United Providers,
Inc.(a) 270,000 4,539,375
- ---------------------------------------------------------------
Veterinary Centers of America,
Inc.(a) 430,000 5,052,500
- ---------------------------------------------------------------
23,003,738
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-2.12%
Annuity and Life Reassurance,
Ltd. (Bermuda) 254,300 5,976,050
- ---------------------------------------------------------------
Clarica Life Insurance Co.
(Canada)(a) 337,900 5,462,216
- ---------------------------------------------------------------
Nationwide Financial Services,
Inc.-Class A 117,400 4,446,525
- ---------------------------------------------------------------
UICI(a) 269,200 7,133,800
- ---------------------------------------------------------------
23,018,591
- ---------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-0.78%
CNA Surety Corp. 249,700 2,871,550
- ---------------------------------------------------------------
</TABLE>
FS-24
<PAGE> 283
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (PROPERTY-CASUALTY)-(CONTINUED)
Radian Group, Inc. 106,660 $ 5,632,981
- ---------------------------------------------------------------
8,504,531
- ---------------------------------------------------------------
INVESTMENT MANAGEMENT-0.46%
Affiliated Managers Group,
Inc.(a) 185,000 4,948,750
- ---------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.62%
Applied Power, Inc.-Class A 231,700 6,733,781
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-0.40%
Spartech Corp. 150,000 4,293,750
- ---------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-1.62%
Alpine Group, Inc. (The)(a) 530,000 6,989,375
- ---------------------------------------------------------------
Armor Holdings, Inc.(a) 399,500 3,870,156
- ---------------------------------------------------------------
Mettler-Toledo International,
Inc.(a) 227,000 6,767,438
- ---------------------------------------------------------------
17,626,969
- ---------------------------------------------------------------
NATURAL GAS-0.39%
Kinder Morgan, Inc. 210,000 4,226,250
- ---------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.54%
School Specialty, Inc.(a) 393,000 5,821,313
- ---------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-3.21%
BJ Services Co.(a) 198,000 6,793,875
- ---------------------------------------------------------------
Cooper Cameron Corp.(a) 173,800 6,723,888
- ---------------------------------------------------------------
Key Energy Services, Inc.(a)(b) 1,978,800 8,904,600
- ---------------------------------------------------------------
Newpark Resources, Inc.(a) 325,000 2,092,188
- ---------------------------------------------------------------
Pride International, Inc.(a) 145,900 2,006,125
- ---------------------------------------------------------------
Tidewater, Inc. 219,000 6,570,000
- ---------------------------------------------------------------
Transocean Offshore, Inc. 62,600 1,701,938
- ---------------------------------------------------------------
34,792,614
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-3.68%
Apache Corp. 100,100 3,903,900
- ---------------------------------------------------------------
Basin Exploration, Inc.(a) 250,000 4,109,375
- ---------------------------------------------------------------
Devon Energy Corp. 158,700 6,169,463
- ---------------------------------------------------------------
Kerr-McGee Corp.-5.50% Pfd. DECS 180,000 6,772,500
- ---------------------------------------------------------------
Newfield Exploration Co.(a) 140,000 4,121,250
- ---------------------------------------------------------------
Nuevo Energy Co.(a) 348,000 4,937,250
- ---------------------------------------------------------------
Santa Fe Snyder Corp.(a) 295,000 2,544,375
- ---------------------------------------------------------------
Spinnaker Exploration Co.(a) 500,000 7,375,000
- ---------------------------------------------------------------
39,933,113
- ---------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.22%
Potlatch Corp. 56,600 2,387,813
- ---------------------------------------------------------------
PUBLISHING-0.18%
IDG Books Worldwide, Inc.-Class
A(a) 107,100 1,914,413
- ---------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUSTS-1.10%
AMRESCO Capital Trust, Inc. 215,500 1,885,625
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS-(CONTINUED)
Apartment Investment & Management
Co. 111,790 $ 4,206,099
- ---------------------------------------------------------------
Colonial Properties Trust 105,100 2,680,050
- ---------------------------------------------------------------
Correctional Properties Trust 237,400 3,130,713
- ---------------------------------------------------------------
11,902,487
- ---------------------------------------------------------------
RESTAURANTS-1.15%
CEC Entertainment, Inc.(a) 302,500 9,698,906
- ---------------------------------------------------------------
Dave & Buster's, Inc.(a) 129,800 1,257,438
- ---------------------------------------------------------------
Rainforest Cafe, Inc.(a) 350,000 1,575,000
- ---------------------------------------------------------------
12,531,344
- ---------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-1.15%
CDW Computer Centers, Inc.(a) 137,700 8,502,975
- ---------------------------------------------------------------
InterTAN, Inc.(a) 175,000 3,937,500
- ---------------------------------------------------------------
12,440,475
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.81%
Ames Department Stores, Inc.(a) 170,000 5,386,875
- ---------------------------------------------------------------
Family Dollar Stores, Inc. 163,600 3,374,250
- ---------------------------------------------------------------
8,761,125
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-1.47%
BJ's Wholesale Club, Inc.(a) 195,000 6,008,438
- ---------------------------------------------------------------
Grand Union Co. (The)(a) 400,000 5,000,000
- ---------------------------------------------------------------
Wild Oats Markets, Inc.(a)(b) 140,000 4,935,000
- ---------------------------------------------------------------
15,943,438
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-3.87%
CSK Auto Corp.(a) 282,400 5,047,900
- ---------------------------------------------------------------
Linens 'n Things, Inc.(a) 170,300 6,769,425
- ---------------------------------------------------------------
Lithia Motors, Inc.-Class A(a) 110,000 2,193,125
- ---------------------------------------------------------------
Michaels Stores, Inc.(a) 247,000 8,289,938
- ---------------------------------------------------------------
Rainbow Rentals, Inc.(a) 110,200 978,025
- ---------------------------------------------------------------
Rent-A-Center, Inc.(a) 262,000 4,797,875
- ---------------------------------------------------------------
Rent-Way, Inc.(a) 287,190 4,774,534
- ---------------------------------------------------------------
Sunglass Hut International,
Inc.(a) 183,700 2,215,881
- ---------------------------------------------------------------
Zale Corp.(a) 165,000 6,909,375
- ---------------------------------------------------------------
41,976,078
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-1.82%
American Eagle Outfitters,
Inc.(a) 130,000 5,565,625
- ---------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 246,200 5,401,013
- ---------------------------------------------------------------
Too Inc.(a) 373,700 5,979,200
- ---------------------------------------------------------------
Wet Seal, Inc.-Class A(a) 200,000 2,800,000
- ---------------------------------------------------------------
19,745,838
- ---------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-2.10%
Circle.com(a) 43,750 634,375
- ---------------------------------------------------------------
Lamar Advertising Co.(a) 145,000 7,830,000
- ---------------------------------------------------------------
Snyder Communications, Inc.(a) 175,000 2,231,250
- ---------------------------------------------------------------
TeleTech Holdings, Inc.(a) 360,000 5,107,500
- ---------------------------------------------------------------
</TABLE>
FS-25
<PAGE> 284
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (ADVERTISING/MARKETING)-(CONTINUED)
Young & Rubicam, Inc. 153,500 $ 7,022,625
- ---------------------------------------------------------------
22,825,750
- ---------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-3.77%
Central Parking Corp. 160,000 4,290,000
- ---------------------------------------------------------------
Copart, Inc.(a) 200,000 4,600,000
- ---------------------------------------------------------------
F.Y.I., Inc.(a) 134,800 4,448,400
- ---------------------------------------------------------------
Iron Mountain, Inc.(a) 250,000 7,562,500
- ---------------------------------------------------------------
Pegasus Systems, Inc.(a) 100,000 4,275,000
- ---------------------------------------------------------------
Pre-Paid Legal Services, Inc.(a) 100,000 2,425,000
- ---------------------------------------------------------------
Quanta Services, Inc.(a) 270,000 7,526,250
- ---------------------------------------------------------------
Regis Corp. 312,700 5,804,494
- ---------------------------------------------------------------
40,931,644
- ---------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-2.43%
E-Stamp Corp.(a) 125,600 2,920,200
- ---------------------------------------------------------------
Insight Enterprises, Inc.(a) 200,000 7,475,000
- ---------------------------------------------------------------
Safeguard Scientifics, Inc.(a) 76,200 6,410,325
- ---------------------------------------------------------------
SunGard Data Systems, Inc.(a) 185,000 4,520,938
- ---------------------------------------------------------------
Sykes Enterprises, Inc.(a)(b) 161,900 4,998,663
- ---------------------------------------------------------------
26,325,126
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-3.40%
4Front Technologies, Inc.(a) 230,000 3,133,750
- ---------------------------------------------------------------
BISYS Group, Inc. (The)(a) 135,000 6,885,000
- ---------------------------------------------------------------
Concord EFS, Inc.(a) 219,000 5,926,688
- ---------------------------------------------------------------
CSG Systems International,
Inc.(a) 340,800 11,693,700
- ---------------------------------------------------------------
Lason Holdings, Inc.(a) 141,400 5,253,894
- ---------------------------------------------------------------
MedQuist, Inc.(a) 125,000 4,000,000
- ---------------------------------------------------------------
36,893,032
- ---------------------------------------------------------------
SERVICES (EMPLOYMENT)-1.52%
Heidrick & Struggles
International, Inc.(a) 425,000 9,775,000
- ---------------------------------------------------------------
Korn/Ferry International(a) 300,000 6,675,000
- ---------------------------------------------------------------
16,450,000
- ---------------------------------------------------------------
SERVICES (FACILITIES &
ENVIRONMENTAL)-1.01%
Cornell Corrections, Inc.(a) 274,600 3,552,638
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (FACILITIES &
ENVIRONMENTAL)-(CONTINUED)
Tetra Tech, Inc.(a) 244,375 $ 3,879,453
- ---------------------------------------------------------------
Wackenhut Corrections Corp.(a) 279,700 3,583,656
- ---------------------------------------------------------------
11,015,747
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-2.41%
Arch Communications, Inc.(a) 1,368,200 6,841,000
- ---------------------------------------------------------------
Powerwave Technologies, Inc.(a) 210,000 13,663,125
- ---------------------------------------------------------------
Western Wireless Corp.-Class A(a) 105,900 5,599,463
- ---------------------------------------------------------------
26,103,588
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-1.74%
CapRock Communications Corp.(a) 160,100 4,612,881
- ---------------------------------------------------------------
ITC DeltaCom, Inc.(a) 225,000 5,400,000
- ---------------------------------------------------------------
IXC Communications, Inc.(a) 125,000 5,398,438
- ---------------------------------------------------------------
Network Plus Corp.(a) 281,900 3,488,513
- ---------------------------------------------------------------
18,899,832
- ---------------------------------------------------------------
TEXTILES (SPECIALTY)-0.45%
Polymer Group, Inc.(a) 250,000 4,890,625
- ---------------------------------------------------------------
WASTE MANAGEMENT-0.76%
Catalytica, Inc.(a) 383,600 4,818,975
- ---------------------------------------------------------------
Safety-Kleen Corp.(a) 300,000 3,431,250
- ---------------------------------------------------------------
8,250,225
- ---------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$817,213,729) 1,038,196,939
- ---------------------------------------------------------------
MONEY MARKET FUNDS-5.01%
STIC Liquid Assets Portfolio(c) 27,206,331 27,206,331
- ---------------------------------------------------------------
STIC Prime Portfolio(c) 27,206,331 27,206,331
- ---------------------------------------------------------------
Total Money Market Funds
(Cost $54,412,662) 54,412,662
- ---------------------------------------------------------------
TOTAL INVESTMENTS-100.71% 1,092,609,601
- ---------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(0.71%) (7,755,403)
- ---------------------------------------------------------------
NET ASSETS-100.00% $1,084,854,198
===============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
DECS - Dividend Enhanced Convertible Stock
Pfd. - Preferred
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of these securities are subject to call options written. See note
7.
(c) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-26
<PAGE> 285
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$871,626,391) $1,092,609,601
- ------------------------------------------------------------
Receivables for:
Investments sold 6,415,287
- ------------------------------------------------------------
Capital stock sold 840,723
- ------------------------------------------------------------
Dividends and interest 628,709
- ------------------------------------------------------------
Investment for deferred compensation plan 20,604
- ------------------------------------------------------------
Other assets 50,800
- ------------------------------------------------------------
Total assets 1,100,565,724
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 7,829,939
- ------------------------------------------------------------
Capital stock reacquired 4,662,280
- ------------------------------------------------------------
Deferred compensation 20,604
- ------------------------------------------------------------
Options written (Premiums received
$1,725,877) 1,358,566
- ------------------------------------------------------------
Accrued advisory fees 598,454
- ------------------------------------------------------------
Accrued administrative services fees 11,335
- ------------------------------------------------------------
Accrued directors' fees 7,298
- ------------------------------------------------------------
Accrued distribution fees 777,268
- ------------------------------------------------------------
Accrued transfer agent fees 298,326
- ------------------------------------------------------------
Accrued operating expenses 147,456
- ------------------------------------------------------------
Total liabilities 15,711,526
- ------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $1,084,854,198
============================================================
NET ASSETS:
Class A $ 579,513,715
============================================================
Class B $ 451,508,436
============================================================
Class C $ 53,832,047
============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 38,038,314
============================================================
Class B:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 30,307,455
============================================================
Class C:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 3,615,539
============================================================
Class A:
Net asset value and redemption price per
share $ 15.24
- ------------------------------------------------------------
Offering price per share:
(Net assets value of $15.24 / 94.50%) $ 16.13
============================================================
Class B:
Net asset value and offering price per
share $ 14.90
============================================================
Class C:
Net asset value and offering price per
share $ 14.89
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $7,896 foreign withholding
tax) $ 5,122,516
- ------------------------------------------------------------
Interest 3,156,458
- ------------------------------------------------------------
Total investment income 8,278,974
- ------------------------------------------------------------
EXPENSES:
Advisory fees 8,102,504
- ------------------------------------------------------------
Administrative services fees 111,632
- ------------------------------------------------------------
Custodian fees 142,592
- ------------------------------------------------------------
Directors' fees 23,177
- ------------------------------------------------------------
Distribution fees-Class A 2,355,478
- ------------------------------------------------------------
Distribution fees-Class B 4,981,777
- ------------------------------------------------------------
Distribution fees-Class C 552,292
- ------------------------------------------------------------
Transfer agent fees-Class A 1,906,743
- ------------------------------------------------------------
Transfer agent fees-Class B 1,868,026
- ------------------------------------------------------------
Transfer agent fees-Class C 209,129
- ------------------------------------------------------------
Other 738,152
- ------------------------------------------------------------
Total expenses 20,991,502
- ------------------------------------------------------------
Less: Expenses paid indirectly (40,231)
- ------------------------------------------------------------
Net expenses 20,951,271
- ------------------------------------------------------------
Net investment income (loss) (12,672,297)
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 68,479,789
- ------------------------------------------------------------
Foreign currencies (317)
- ------------------------------------------------------------
Option contracts written (158,316)
- ------------------------------------------------------------
68,321,156
- ------------------------------------------------------------
Change in net unrealized appreciation of:
Investment securities 142,652,463
- ------------------------------------------------------------
Option contracts written 367,311
- ------------------------------------------------------------
143,019,774
- ------------------------------------------------------------
Net gain from investment securities and
option contracts 211,340,930
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $198,668,633
============================================================
</TABLE>
See Notes to Financial Statements.
FS-27
<PAGE> 286
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (12,672,297) $ (8,332,574)
- ---------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment
securities, foreign currencies, futures and option
contracts 68,321,156 (67,636,533)
- ---------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies, futures and
option contracts 143,019,774 (114,227,472)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 198,668,633 (190,196,579)
- ---------------------------------------------------------------------------------------------
Share transactions-net:
Class A (251,714,847) 242,830,301
- ---------------------------------------------------------------------------------------------
Class B (119,088,321) 274,584,791
- ---------------------------------------------------------------------------------------------
Class C (2,560,814) 44,827,215
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (174,695,349) 372,045,728
- ---------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,259,549,547 887,503,819
- ---------------------------------------------------------------------------------------------
End of period $1,084,854,198 $1,259,549,547
=============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 874,112,818 $1,260,398,710
- ---------------------------------------------------------------------------------------------
Undistributed net investment income (loss) 170,513 (21,335)
- ---------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities, foreign currencies, futures and
option contracts (10,779,655) (79,158,576)
- ---------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, futures and option contracts 221,350,522 78,330,748
- ---------------------------------------------------------------------------------------------
$1,084,854,198 $1,259,549,547
=============================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Capital Development Fund (the "Fund") is a series portfolio of AIM Equity
Funds, Inc. (the "Company"). The Company is a Maryland corporation registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of ten separate
portfolios. The Fund currently offers three different classes of shares: Class A
shares, Class B shares and Class C shares. Class A shares are sold with a
front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is long-term growth of capital.
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 the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the
last sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) 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 any of the above methods are valued based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value
FS-28
<PAGE> 287
as determined in good faith by or under the supervision of the Company's
officers in a manner specifically authorized by the Board of Directors of
the Company. Short-term obligations having 60 days or less to maturity are
valued at amortized cost which approximates market value. For purposes of
determining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the New
York Stock Exchange ("NYSE").
Generally, trading in foreign securities 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 the 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 they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair
value as determined in good faith by or under the supervision of the Board
of Directors.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was increased by
$12,864,145, undistributed net realized gains increased by $57,765 and
paid-in capital decreased by $12,921,910 as a result of differing book/tax
treatment of foreign currency transactions and net operating loss
reclassifications in order to comply with the requirements of the American
Institute of Certified Public Accountants Statement of Position 93-2. Net
assets of the Fund were unaffected by the reclassification discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward of $8,826,774 as of October 31, 1999 which may be carried
forward to offset future taxable gains, if any, which expires, if not
previously utilized, in the year 2006.
D. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
E. Futures Contracts -- The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits
required upon entering into futures contracts are satisfied by the
segregation of specific securities as collateral for the account of the
broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and that a change in value of the
contracts may not correlate with changes in the value of the securities
being hedged.
F. Foreign Currency Contracts -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
G. Covered Call Options -- The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying
FS-29
<PAGE> 288
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the
sale of the underlying security and the proceeds of the sale are increased
by the premium originally received.
A call option gives the purchaser of such option the right to buy, and
the writer (the Fund) the obligation to sell, the underlying security at
the stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the
call option at any time during the option period. During the option period,
in return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has
retained the risk of loss should the price of the underlying security
decline. During the option period, the Fund may be required at any time to
deliver the underlying security against payment of the exercise price. This
obligation is terminated upon the expiration of the option period or at
such earlier time at which the Fund effects a closing purchase transaction
by purchasing (at a price which may be higher than that received when the
call option was written) a call option identical to the one originally
written.
H. Expenses -- Distribution expenses and transfer agency expenses directly
attributable to a class of shares are charged to that class' operations.
All other expenses which are attributable to more than one class are
allocated among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of
the first $350 million of the Fund's average daily net assets, plus 0.625% of
the Fund's average daily net assets in excess of $350 million.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1999, AIM was
paid $111,632 for such services.
The Fund, pursuant to a transfer agency 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 Fund. During the year ended October 31, 1999, AFS
was paid $2,293,295 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted a plan
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund ,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.35% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and C shares. Of these amounts, the Fund may
pay a service fee of 0.25% of the average daily net assets of the Class A, Class
B or Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. The Plans also
impose a cap on the total sales charges, including asset-based sales charges
that may be paid by the respective classes. During the year ended October 31,
1999, the Class A, Class B and Class C shares paid AIM Distributors $2,355,478,
$4,981,777 and $552,292, respectively, as compensation under the Plans.
AIM Distributors received commissions of $386,856 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1999,
AIM Distributors received $120,769 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and directors of the Company are
officers and directors of AIM, AFS and AIM Distributors.
During the year ended October 31, 1999, the Fund paid legal fees of $5,896 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$14,979 and $25,252, respectively, under expense offset arrangements. The effect
of the above arrangements resulted in a reduction of the Fund's total expenses
of $40,231 during the year ended October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 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. During the year
ended October 31, 1999, 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 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
FS-30
<PAGE> 289
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$1,362,900,625 and $1,707,625,394, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $273,125,832
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (54,095,503)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $219,030,329
===========================================================================
</TABLE>
Cost of investments for tax purposes is $873,579,272.
NOTE 7-CALL OPTION CONTRACTS
Transactions in call options written during the year ended October 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ----------
<S> <C> <C>
Beginning of period -- --
- ------------------------------------------------------------------------------------
Written 11,878 $3,353,921
- ------------------------------------------------------------------------------------
Closed (3,698) (468,477)
- ------------------------------------------------------------------------------------
Exercised (2,198) (401,105)
- ------------------------------------------------------------------------------------
Expired (1,000) (758,462)
- ------------------------------------------------------------------------------------
End of period 4,982 $1,725,877
====================================================================================
</TABLE>
Open call option contracts written at October 31, 1999 were as follows:
<TABLE>
<CAPTION>
NUMBER OCTOBER 31, UNREALIZED
CONTRACT STRIKE OF PREMIUMS 1999 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
- ----- -------- ------ --------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Comverse Technology, Inc. Nov. 99 $105 597 $ 381,917 $ 597,000 $(215,083)
- ---------------------------------------------------------------------------------------------------------------------------------
Key Energy Group, Inc. Jan. 00 5 1,991 170,225 93,328 76,897
- ---------------------------------------------------------------------------------------------------------------------------------
Sykes Enterprises, Inc. Dec. 99 30 994 269,365 291,988 (22,623)
- ---------------------------------------------------------------------------------------------------------------------------------
Wild Oats Markets, Inc. Dec. 99 35 1,400 904,370 376,250 528,120
- ---------------------------------------------------------------------------------------------------------------------------------
4,982 $1,725,877 $1,358,566 $ 367,311
=================================================================================================================================
</TABLE>
NOTE 8-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
Sold:
Class A 25,404,762 $ 358,048,933 101,121,530 $1,487,557,560
- ------------------------------------------------------------------------------------------------------------------------
Class B 7,763,785 107,015,784 25,176,788 370,811,453
- ------------------------------------------------------------------------------------------------------------------------
Class C 2,461,885 34,429,174 4,336,475 62,530,399
- ------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Reacquired:
Class A (43,024,621) (609,763,780) (85,122,675) (1,244,727,259)
- ------------------------------------------------------------------------------------------------------------------------
Class B (16,362,323) (226,104,105) (6,860,398) (96,226,662)
- ------------------------------------------------------------------------------------------------------------------------
Class C (2,650,984) (36,989,988) (1,375,616) (17,703,184)
- ------------------------------------------------------------------------------------------------------------------------
(26,407,496) $(373,363,982) 37,276,104 $ 562,242,307
========================================================================================================================
</TABLE>
FS-31
<PAGE> 290
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the three-year period ended October 31,
1999 and the period June 17, 1996 (date operations commenced) through October
31, 1996, for a share of Class B capital stock outstanding during each of the
years in the three-year period ended October 31, 1999 and the period October 1,
1996 (date sales commenced) through October 31, 1996 and for a share of Class C
capital stock outstanding during each of the two years in the period ended
October 31, 1999 and the period August 4, 1997 (date sales commenced) through
October 31, 1997.
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------------ ------------------------------------------
1999 1998 1997 1996 1999 1998 1997 1996
-------- -------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 12.89 $14.57 $11.09 $10.00 $ 12.70 $14.46 $11.08 $11.26
- ---------------------------- -------- -------- -------- -------- -------- -------- -------- -------
Income from investment
operations:
Net investment income
(loss) (0.10)(a) (0.06)(a) (0.10)(a) (0.01)(a) (0.20)(a) (0.16)(a) (0.20)(a) (0.01)(a)
- ---------------------------- -------- -------- -------- -------- -------- -------- -------- -------
Net gains (losses) on
securities (both
realized and
unrealized) 2.45 (1.62) 3.58 1.10 2.40 (1.60) 3.58 (0.17)
- ---------------------------- -------- -------- -------- -------- -------- -------- -------- -------
Total from
investment
operations 2.35 (1.68) 3.48 1.09 2.20 (1.76) 3.38 (0.18)
- ---------------------------- -------- -------- -------- -------- -------- -------- -------- -------
Net asset value, end of
period $ 15.24 $12.89 $14.57 $11.09 $ 14.90 $12.70 $14.46 $11.08
============================ ======== ======== ======== ======== ======== ======== ======== =======
Total return(b) 18.23% (11.53)% 31.38% 10.90% 17.32% (12.17)% 30.51% (1.60)%
============================ ======== ======== ======== ======== ======== ======== ======== =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) $579,514 $717,263 $577,685 $251,253 $451,508 $493,993 $297,623 $22,435
- ---------------------------- -------- -------- -------- -------- -------- -------- -------- -------
Ratio of expenses to average
net assets(c) 1.38%(d) 1.28% 1.33% 1.35%(e) 2.12%(d) 2.02% 2.09% 1.89%(e)
============================ ======== ======== ======== ======== ======== ======== ======== =======
Ratio of net investment
income (loss) to average
net assets(f) (0.70)%(d) (0.40)% (0.83)% (0.29)%(e) (1.44)%(d) (1.14)%(d) (1.59)% (0.83)%(e)
============================ ======== ======== ======== ======== ======== ======== ======== =======
Portfolio turnover rate 117% 78% 41% 13% 117% 78% 41% 13%
============================ ======== ======== ======== ======== ======== ======== ======== =======
<CAPTION>
CLASS C
--------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning
of period $ 12.69 $14.45 $13.48
- ---------------------------- ------- ------- -------
Income from investment
operations:
Net investment income
(loss) (0.20)(a) (0.16) (0.06)(a)
- ---------------------------- ------- ------- -------
Net gains (losses) on
securities (both
realized and
unrealized) 2.40 (1.60) 1.03
- ---------------------------- ------- ------- -------
Total from
investment
operations 2.20 (1.76) 0.97
- ---------------------------- ------- ------- -------
Net asset value, end of
period $ 14.89 $12.69 $14.45
============================ ======= ======= =======
Total return(b) 17.34% (12.18)% 7.20%
============================ ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) $53,832 $48,293 $12,195
- ---------------------------- ------- ------- -------
Ratio of expenses to average
net assets(c) 2.12%(d) 2.02% 2.14%(e)
============================ ======= ======= =======
Ratio of net investment
income (loss) to average
net assets(f) (1.44)%(d) (1.14)% (1.64)%(e)
============================ ======= ======= =======
Portfolio turnover rate 117% 78% 41%
============================ ======= ======= =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and is not annualized for
periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratios of
expenses to average net assets prior to fee waivers and/or
expense reimbursements were 1.38% and 1.60% (annualized) for
1997-1996 for Class A, 2.14% and 2.28% (annualized) for
1997-1996 for Class B and 2.19% (annualized) for 1997 for
Class C.
(d) Ratios are based on average net assets of $672,993,650,
$498,177,719 and $55,229,231 for Class A, Class B and Class
C, respectively.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of
net investment income (loss) to average net assets prior to
fee waivers and/or expense reimbursements were (0.88)% and
(0.54)% (annualized) for 1997-1996 for Class A, (1.64)% and
(1.22)% (annualized) for 1997-1996 for Class B and (1.69)%
(annualized) for 1997 for Class C.
FS-32
<PAGE> 291
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Equity Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of the AIM Charter Fund (a portfolio of AIM
Equity Funds, Inc.), including the schedule of
investments, as of October 31, 1999, 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 five-year period
then ended. 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 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 October 31, 1999, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Charter
Fund as of October 31, 1999, 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 five-year period then ended, in conformity
with generally accepted accounting principles.
/s/ KPMG LLP
------------
KPMG LLP
December 3, 1999
Houston, Texas
FS-33
<PAGE> 292
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-92.27%
BANKS (MONEY CENTER)-2.97%
Chase Manhattan Corp. (The) 2,500,000 $ 218,437,500
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO
& CABLE)-4.67%
AT&T Corp.-Liberty Media
Group-Class A(a) 1,000,000 39,687,500
- ---------------------------------------------------------------
Comcast Corp.-Class A 3,000,000 126,375,000
- ---------------------------------------------------------------
MediaOne Group, Inc.(a) 2,500,000 177,656,250
- ---------------------------------------------------------------
343,718,750
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-4.90%
Corning, Inc. 500,000 39,312,500
- ---------------------------------------------------------------
Lucent Technologies Inc. 1,755,000 112,758,750
- ---------------------------------------------------------------
Motorola, Inc. 850,000 82,821,875
- ---------------------------------------------------------------
Nokia Oyj-ADR (Finland) 800,000 92,450,000
- ---------------------------------------------------------------
QUALCOMM, Inc.(a) 150,000 33,412,500
- ---------------------------------------------------------------
360,755,625
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-6.27%
Dell Computer Corp.(a) 1,500,000 60,187,500
- ---------------------------------------------------------------
International Business Machines
Corp.(b) 2,250,000 221,343,750
- ---------------------------------------------------------------
Sun Microsystems, Inc.(a) 1,700,000 179,881,250
- ---------------------------------------------------------------
461,412,500
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-2.51%
Cisco Systems, Inc.(a) 2,500,000 185,000,000
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-2.33%
EMC Corp.(a) 1,250,000 91,250,000
- ---------------------------------------------------------------
Lexmark International Group,
Inc.-Class A(a) 1,024,500 79,975,031
- ---------------------------------------------------------------
171,225,031
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-10.27%
America Online, Inc.(a) 600,000 77,812,500
- ---------------------------------------------------------------
Microsoft Corp.(a) 3,800,000 351,737,500
- ---------------------------------------------------------------
Novell, Inc.(a) 11,000,000 220,687,500
- ---------------------------------------------------------------
VERITAS Software Corp.(a) 650,000 70,118,750
- ---------------------------------------------------------------
Yahoo! Inc.(a) 200,000 35,812,500
- ---------------------------------------------------------------
756,168,750
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONSUMER FINANCE-0.74%
Providian Financial Corp. 500,000 $ 54,500,000
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-2.76%
General Electric Co. 1,500,000 203,343,750
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-1.55%
Linear Technology Corp. 600,000 41,962,500
- ---------------------------------------------------------------
Texas Instruments, Inc. 800,000 71,800,000
- ---------------------------------------------------------------
113,762,500
- ---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-0.82%
Applied Materials, Inc.(a) 500,000 44,906,250
- ---------------------------------------------------------------
Teradyne, Inc.(a) 400,000 15,400,000
- ---------------------------------------------------------------
60,306,250
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-7.81%
American Express Co. 1,500,000 231,000,000
- ---------------------------------------------------------------
Citigroup, Inc. 2,300,000 124,487,500
- ---------------------------------------------------------------
Fannie Mae 1,000,000 70,750,000
- ---------------------------------------------------------------
Freddie Mac 2,750,000 148,671,875
- ---------------------------------------------------------------
574,909,375
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-7.55%
American Home Products Corp. 1,400,000 73,150,000
- ---------------------------------------------------------------
Bristol-Myers Squibb Co. 2,000,000 153,625,000
- ---------------------------------------------------------------
Johnson & Johnson 1,500,001 157,125,084
- ---------------------------------------------------------------
Warner-Lambert Co. 2,150,000 171,596,875
- ---------------------------------------------------------------
555,496,959
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-4.05%
Pfizer, Inc. 3,750,000 148,125,000
- ---------------------------------------------------------------
Pharmacia & Upjohn, Inc. 950,000 51,240,625
- ---------------------------------------------------------------
Schering-Plough Corp. 2,000,000 99,000,000
- ---------------------------------------------------------------
298,365,625
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.64%
Guidant Corp. 1,750,000 86,406,250
- ---------------------------------------------------------------
Medtronic, Inc. 1,000,000 34,625,000
- ---------------------------------------------------------------
121,031,250
- ---------------------------------------------------------------
</TABLE>
FS-34
<PAGE> 293
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (MULTI-LINE)-2.80%
American International Group,
Inc. 2,000,000 $ 205,875,000
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-3.74%
Goldman Sachs Group, Inc. (The) 150,000 10,650,000
- ---------------------------------------------------------------
Merrill Lynch & Co., Inc. 500,000 39,250,000
- ---------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 1,250,000 137,890,625
- ---------------------------------------------------------------
Schwab (Charles) Corp. (The) 2,250,000 87,609,375
- ---------------------------------------------------------------
275,400,000
- ---------------------------------------------------------------
LODGING-HOTELS-0.76%
Carnival Corp. 1,250,000 55,625,000
- ---------------------------------------------------------------
MANUFACTURING
(DIVERSIFIED)-5.19%
Tyco International Ltd.(b) 8,650,000 345,459,375
- ---------------------------------------------------------------
United Technologies Corp. 600,000 36,300,000
- ---------------------------------------------------------------
381,759,375
- ---------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-1.50%
Baker Hughes, Inc. 1,250,000 34,921,875
- ---------------------------------------------------------------
Halliburton Co. 800,000 30,150,000
- ---------------------------------------------------------------
Schlumberger Ltd. 750,000 45,421,875
- ---------------------------------------------------------------
110,493,750
- ---------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-0.33%
Conoco, Inc.-Class B 900,000 24,412,500
- ---------------------------------------------------------------
OIL (INTERNATIONAL
INTEGRATED)-1.18%
Mobil Corp. 900,000 86,850,000
- ---------------------------------------------------------------
RAILROADS-0.48%
Kansas City Southern Industries,
Inc. 750,000 35,578,125
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-1.89%
Home Depot, Inc. (The) 749,993 56,624,472
- ---------------------------------------------------------------
Lowe's Companies, Inc. 1,500,000 82,500,000
- ---------------------------------------------------------------
139,124,472
- ---------------------------------------------------------------
RETAIL (COMPUTERS &
ELECTRONICS)-2.13%
Best Buy Co., Inc.(a) 1,400,000 77,787,500
- ---------------------------------------------------------------
Tandy Corp. 1,250,000 78,671,875
- ---------------------------------------------------------------
156,459,375
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.54%
Kroger Co. (The)(a) 1,916,900 39,895,481
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (GENERAL
MERCHANDISE)-5.38%
Costco Wholesale Corp.(a) 400,000 $ 32,125,000
- ---------------------------------------------------------------
Dayton Hudson Corp. 3,000,000 193,875,000
- ---------------------------------------------------------------
Wal-Mart Stores, Inc. 3,000,000 170,062,500
- ---------------------------------------------------------------
396,062,500
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-0.48%
Amazon.com, Inc.(a) 500,000 35,312,500
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-1.33%
Concord EFS, Inc.(a) 1,500,000 40,593,750
- ---------------------------------------------------------------
First Data Corp. 1,250,000 57,109,375
- ---------------------------------------------------------------
97,703,125
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-2.33%
MCI WorldCom, Inc.(a) 2,000,000 171,625,000
- ---------------------------------------------------------------
TELEPHONE-1.37%
GTE Corp. 500,000 37,500,000
- ---------------------------------------------------------------
SBC Communications, Inc. 1,250,000 63,671,875
- ---------------------------------------------------------------
101,171,875
- ---------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$4,615,196,054) 6,791,781,943
- ---------------------------------------------------------------
CONVERTIBLE PREFERRED
STOCKS-2.32%
BROADCASTING (TELEVISION, RADIO
& CABLE)-0.76%
Mediaone Group, Inc.-$2.25
Series D Conv. Pfd. 400,000 56,200,000
- ---------------------------------------------------------------
ELECTRIC COMPANIES-1.56%
Houston Industries, Inc.-$3.29
Conv. Pfd. 1,000,000 114,750,000
- ---------------------------------------------------------------
Total Convertible Preferred
Stocks (Cost $123,420,376) 170,950,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE BONDS & NOTES-2.09%
COMPUTERS (HARDWARE)-0.30%
Candescent Technology Corp.,
Conv. Sr. Sub. Deb., 7.00%,
05/01/03 (Acquired
04/17/98-11/30/98; Cost
$27,943,750)(c) $ 28,300,000 22,074,000
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-0.94%
VERITAS Software Corp., Conv.
Notes, 5.25%, 11/01/04 13,500,000 69,001,875
- ---------------------------------------------------------------
</TABLE>
FS-35
<PAGE> 294
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
RETAIL (SPECIALTY)-0.51%
Amazon.com, Inc., Conv. Sub.
Deb., 4.75%, 02/01/09 $ 35,000,000 $ 37,275,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.34%
Global Telesystems Group, Inc.,
Conv. Sr. Unsec. Sub. Notes,
8.75%, 06/30/00 (Acquired
02/05/98; Cost $13,002,080)(c) 10,000,000 25,025,000
- ---------------------------------------------------------------
Total Convertible Bonds &
Notes
(Cost $95,916,763) 153,375,875
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS-4.93%
STIC Liquid Assets Portfolio(d) 181,461,397 $ 181,461,397
- ---------------------------------------------------------------
STIC Prime Portfolio(d) 181,461,397 181,461,397
- ---------------------------------------------------------------
Total Money Market Funds
(Cost $362,922,794) 362,922,794
- ---------------------------------------------------------------
TOTAL INVESTMENTS-101.61% 7,479,030,612
- ---------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(1.61%) (118,345,314)
- ---------------------------------------------------------------
NET ASSETS-100.00% $7,360,685,298
===============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
Pfd. - Preferred
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 7.
(c) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with the procedures established by the Board of Directors. The
aggregate market value of these securities at 10/31/99 was $47,099,000 which
represented 0.64% of the Fund's net assets.
(d) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-36
<PAGE> 295
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$5,197,455,987) $7,479,030,612
- ------------------------------------------------------------
Receivables for:
Investments sold 11,818,345
- ------------------------------------------------------------
Capital stock sold 10,408,480
- ------------------------------------------------------------
Dividends and interest 7,301,796
- ------------------------------------------------------------
Investment for deferred compensation plan 83,490
- ------------------------------------------------------------
Other assets 140,597
- ------------------------------------------------------------
Total assets 7,508,783,320
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 105,957,126
- ------------------------------------------------------------
Capital stock reacquired 8,011,254
- ------------------------------------------------------------
Deferred compensation 83,490
- ------------------------------------------------------------
Options written (Premiums received
$25,481,560) 25,656,250
- ------------------------------------------------------------
Accrued advisory fees 3,634,922
- ------------------------------------------------------------
Accrued administrative services fees 27,618
- ------------------------------------------------------------
Accrued directors' fees 3,913
- ------------------------------------------------------------
Accrued distribution fees 3,681,163
- ------------------------------------------------------------
Accrued transfer agent fees 637,952
- ------------------------------------------------------------
Accrued operating expenses 404,334
- ------------------------------------------------------------
Total liabilities 148,098,022
- ------------------------------------------------------------
Net assets applicable to shares outstanding $7,360,685,298
============================================================
NET ASSETS:
Class A $4,948,665,737
============================================================
Class B $2,206,751,605
============================================================
Class C $ 138,467,127
============================================================
Institutional Class $ 66,800,829
============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 288,328,877
============================================================
Class B:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 130,030,549
============================================================
Class C:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 8,139,220
============================================================
Institutional Class:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 3,855,460
============================================================
Class A:
Net asset value and redemption price per
share $ 17.16
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $17.16 / 94.50%) $ 18.16
============================================================
Class B:
Net asset value and offering price per
share $ 16.97
============================================================
Class C:
Net asset value and offering price per
share $ 17.01
============================================================
Institutional Class:
Net asset value, offering and redemption
price per share $ 17.33
============================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $157,812 foreign
withholding tax) $ 49,869,261
- ------------------------------------------------------------
Interest 25,693,052
- ------------------------------------------------------------
Total investment income 75,562,313
- ------------------------------------------------------------
EXPENSES:
Advisory fees 41,014,707
- ------------------------------------------------------------
Administrative services fees 235,274
- ------------------------------------------------------------
Custodian fees 364,030
- ------------------------------------------------------------
Directors' fees 50,623
- ------------------------------------------------------------
Distribution fees-Class A 13,556,239
- ------------------------------------------------------------
Distribution fees-Class B 18,631,086
- ------------------------------------------------------------
Distribution fees-Class C 809,325
- ------------------------------------------------------------
Transfer agent fees-Class A 4,930,725
- ------------------------------------------------------------
Transfer agent fees-Class B 3,087,342
- ------------------------------------------------------------
Transfer agent fees-Class C 149,576
- ------------------------------------------------------------
Transfer agent fees-Institutional Class 6,136
- ------------------------------------------------------------
Other 1,214,166
- ------------------------------------------------------------
Total expenses 84,049,229
- ------------------------------------------------------------
Less: Fees waived by advisor (1,130,089)
- ------------------------------------------------------------
Expenses paid indirectly (149,110)
- ------------------------------------------------------------
Net expenses 82,770,030
- ------------------------------------------------------------
Net investment income (loss) (7,207,717)
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES
AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 668,004,945
- ------------------------------------------------------------
Foreign currencies (1,105,968)
- ------------------------------------------------------------
Option contracts written (9,533,983)
- ------------------------------------------------------------
657,364,994
- ------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 1,116,385,588
- ------------------------------------------------------------
Foreign currencies (47,768)
- ------------------------------------------------------------
Option contracts written 214,221
- ------------------------------------------------------------
1,116,552,041
- ------------------------------------------------------------
Net gain from investment securities,
foreign currencies and option contracts 1,773,917,035
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $1,766,709,318
============================================================
</TABLE>
See Notes to Financial Statements.
FS-37
<PAGE> 296
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED OCTOBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
--------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (7,207,717) $ 37,825,223
- -----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and option contracts 657,364,994 206,268,933
- -----------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies, futures and option
contracts 1,116,552,041 254,914,824
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,766,709,318 499,008,980
- -----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A (9,134,542) (28,039,987)
- -----------------------------------------------------------------------------------------------
Class B -- (3,013,337)
- -----------------------------------------------------------------------------------------------
Class C -- (47,378)
- -----------------------------------------------------------------------------------------------
Institutional Class (216,682) (445,449)
- -----------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAINS:
Class A (149,620,112) (346,531,949)
- -----------------------------------------------------------------------------------------------
Class B (57,712,333) (108,856,197)
- -----------------------------------------------------------------------------------------------
Class C (1,614,093) (819,962)
- -----------------------------------------------------------------------------------------------
Institutional Class (1,761,967) (3,989,466)
- -----------------------------------------------------------------------------------------------
SHARE TRANSACTIONS-NET:
Class A 151,495,357 235,195,827
- -----------------------------------------------------------------------------------------------
Class B 370,892,559 350,425,592
- -----------------------------------------------------------------------------------------------
Class C 84,930,162 32,069,085
- -----------------------------------------------------------------------------------------------
Institutional Class 9,431,197 3,464,509
- -----------------------------------------------------------------------------------------------
Net increase in net assets 2,163,398,864 628,420,268
- -----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 5,197,286,434 4,568,866,166
- -----------------------------------------------------------------------------------------------
End of period $ 7,360,685,298 $5,197,286,434
===============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 4,466,453,244 $3,821,903,969
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (217,108) 9,291,857
- -----------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and option
contracts 613,057,085 201,250,572
- -----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, futures and option contracts 2,281,392,077 1,164,840,036
- -----------------------------------------------------------------------------------------------
$ 7,360,685,298 $5,197,286,434
===============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-38
<PAGE> 297
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Charter Fund (the "Fund") is a series portfolio of AIM Equity Funds, Inc.
(the "Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of ten separate portfolios. The
Fund currently offers four different classes of shares: Class A shares, Class B
shares, Class C shares and the Institutional Class. Class A shares are sold with
a front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is growth of capital with a secondary
objective of current income.
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 the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) 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 any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. 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 Company's officers in a
manner specifically authorized by the Board of Directors of the Company.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. For purposes of determining
net asset value per share, futures and options contracts generally will be
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities 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 the 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 they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was increased by
$7,049,976, undistributed net realized gains decreased by $34,849,976 and
paid-in capital increased by $27,800,000 in order to comply with the
requirements of the American Institute of Certified Public Accountants
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassification discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
D. Futures Contracts -- The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits required
upon entering into futures contracts are satisfied by the segregation of
specific securities as collateral for the account of the broker (the Fund's
agent in acquiring the futures position). During the period the futures
contracts are open, changes in the value of the contracts are recognized as
unrealized gains or losses by "marking to market" on a daily basis to reflect
the market value of the contracts at the end of each day's trading. Variation
margin
FS-39
<PAGE> 298
payments are made or received depending upon whether unrealized gains or
losses are incurred. When the contracts are closed, the Fund recognizes a
realized gain or loss equal to the difference between the proceeds from, or
cost of, the closing transaction and the Fund's basis in the contract. Risks
include the possibility of an illiquid market and that a change in value of
the contracts may not correlate with changes in the value of the securities
being hedged.
E. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions. The Fund does
not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
F. Foreign Currency Contracts -- A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
G. Covered Call Options -- The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may be
below, equal to, or above the current market value of the underlying security
at the time the option is written. When the Fund writes a covered call
option, an amount equal to the premium received by the Fund is recorded as an
asset and an equivalent liability. The amount of the liability is
subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the mean
between the last bid and asked prices on that day. If a written call option
expires on the stipulated expiration date, or if the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or a loss if the
closing purchase transaction exceeds the premium received when the option was
written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the sale
of the underlying security and the proceeds of the sale are increased by the
premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
H. Put Options -- The Fund may purchase put options. By purchasing a put option,
the Fund obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed strike price. In return for this right, the
Fund pays an option premium. The option's underlying instrument may be a
security or a futures contract. Put options may be used by the Fund to hedge
securities it owns by locking in a minimum price at which the Fund can sell.
If security prices fall, the put option could be exercised to offset all or a
portion of the Fund's resulting losses. At the same time, because the maximum
the Fund has at risk is the cost of the option, purchasing put options does
not eliminate the potential for the Fund to profit from an increase in the
value of the securities hedged.
I. Bond Premiums -- It is the policy of the Fund not to amortize market
premiums on bonds for financial reporting purposes.
J. Expenses -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment agreement, the
Fund pays an advisory fee to AIM at the annual rate of 1.0% of the first $30
million of the Fund's average daily net assets, plus 0.75% of the Fund's average
daily net assets in excess of $30 million to and including $150 million, plus
0.625% of the Fund's average daily net assets in excess of $150 million. AIM has
contractually agreed to waive a portion of its advisory fees paid by the Fund to
AIM to the extent necessary to reduce the fees paid by the Fund at net asset
levels higher than those currently incorporated in the present advisory fee
schedule. Under the contractual waiver, AIM will receive a fee calculated at the
annual rate of 1.0% of the first $30 million of the Fund's average daily net
assets, plus 0.75% of the Fund's average daily net assets in excess of $30
million to and including $150 million, plus 0.625% of the Fund's average daily
net assets in excess of $150 million to and including $2 billion, plus 0.60% of
the Fund's average daily net assets in excess of $2 billion. The waiver is
contractual and may not be terminated without approval
FS-40
<PAGE> 299
of the Board of Directors. During the year ended October 31, 1999, AIM waived
fees of $1,130,089. Under the terms of a master sub-advisory agreement between
AIM and A I M Capital Management, Inc. ("AIM Capital"), AIM pays AIM Capital 50%
of the amount paid by the Fund to AIM.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1999, AIM was
paid $235,274 for such services.
The Fund, pursuant to a transfer agency 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 Fund. During the year ended October 31, 1999, AFS
was paid $4,807,681 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares and a master distribution agreement with
Fund Management Company ("FMC) to serve as the distributor for the Institutional
Class shares of the Fund. The Company has adopted a plan pursuant to Rule 12b-1
under the 1940 Act with respect to the Fund's Class A shares, Class B shares and
Class C shares (collectively the "Plans"). The Fund , pursuant to the Plans,
pays AIM Distributors compensation at the annual rate of 0.30% of the Fund's
average daily net assets of Class A shares and 1.00% of the average daily net
assets of Class B and C shares. Of these amounts, the Fund may pay a service fee
of 0.25% of the average daily net assets of the Class A, Class B or Class C
shares to selected dealers and financial institutions who furnish continuing
personal shareholder services to their customers who purchase and own the
appropriate class of shares of the Fund. Any amounts not paid as a service fee
under the Plans would constitute an asset-based sales charge. The Plans also
impose a cap on the total sales charges, including asset-based sales charges
that may be paid by the respective classes. During the year ended October 31,
1999, the Class A, Class B and Class C shares paid AIM Distributors $13,556,239,
$18,631,086 and $809,325, respectively, as compensation under the Plans.
AIM Distributors received commissions of $2,030,454 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1999,
AIM Distributors received $96,080 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and directors of the Company are
officers and directors of AIM, AFS, FMC and AIM Distributors.
During the year ended October 31, 1999, the Fund paid legal fees of $15,483
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$76,809 and $72,301, respectively, under expense offset arrangements. The effect
of the above arrangements resulted in a reduction of the Fund's total expenses
of $149,110 during the year ended October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 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. During the year
ended October 31, 1999, 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 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$7,032,932,257 and $6,722,183,283, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $2,293,837,834
- ----------------------------------------------------------
Aggregate unrealized appreciation
(depreciation) of investment securities (24,022,713)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $2,269,815,121
==========================================================
Cost of investments for tax purposes is $5,209,215,491.
</TABLE>
FS-41
<PAGE> 300
NOTE 7-CALL OPTION CONTRACTS
Transactions in call options written during the year ended October 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ------------
<S> <C> <C>
Beginning of year 31,202 $ 8,091,351
- --------------------------------------------------------------------------------------
Written 62,592 40,059,097
- --------------------------------------------------------------------------------------
Closed (54,607) (18,452,621)
- --------------------------------------------------------------------------------------
Exercised (14,921) (4,076,636)
- --------------------------------------------------------------------------------------
Expired (1,766) (139,631)
- --------------------------------------------------------------------------------------
End of year 22,500 $ 25,481,560
======================================================================================
</TABLE>
Open call option contracts written at October 31, 1999 were as follows:
<TABLE>
<CAPTION>
OCTOBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS 1999 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
- --------------------------------------- -------- ------ --------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
International Business Machines Corp. Jan-00 $80 12,500 $20,804,105 $25,156,250 $(4,352,145)
- --------------------------------------------------------------------------------------------------------------------
Tyco International Ltd. Nov-99 50 10,000 4,677,455 500,000 4,177,455
- --------------------------------------------------------------------------------------------------------------------
22,500 $25,481,560 $25,656,250 $ (174,690)
====================================================================================================================
</TABLE>
NOTE 8-PUT OPTION CONTRACTS
Transactions in put options during the year ended October 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
PUT OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS PAID
--------- -----------
<S> <C> <C>
Beginning of year -- $ --
- -------------------------------------------------------------------------------------
Purchased 24,165 6,379,447
- -------------------------------------------------------------------------------------
Closed (20,165) (4,215,217)
- -------------------------------------------------------------------------------------
Exercised -- --
- -------------------------------------------------------------------------------------
Expired (4,000) (2,164,230)
- -------------------------------------------------------------------------------------
End of year -- $ --
=====================================================================================
</TABLE>
NOTE 9-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 51,272,783 $ 809,088,837 65,753,775 $ 868,543,898
- --------------------------------------------------------------------------------------------------------------------
Class B 36,310,602 576,056,633 32,991,364 431,938,545
- --------------------------------------------------------------------------------------------------------------------
Class C 6,968,661 111,866,437 2,736,777 36,139,093
- --------------------------------------------------------------------------------------------------------------------
Institutional Class 828,138 13,421,969 568,334 7,594,968
- --------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 10,532,077 149,384,623 29,328,588 355,378,824
- --------------------------------------------------------------------------------------------------------------------
Class B 3,894,826 54,866,091 8,807,895 105,930,618
- --------------------------------------------------------------------------------------------------------------------
Class C 107,859 1,525,822 67,166 810,828
- --------------------------------------------------------------------------------------------------------------------
Institutional Class 134,608 1,929,704 351,483 4,295,496
- --------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (51,731,503) (806,978,103) (75,327,509) (988,726,895)
- --------------------------------------------------------------------------------------------------------------------
Class B (16,551,587) (260,030,165) (14,417,738) (187,443,571)
- --------------------------------------------------------------------------------------------------------------------
Class C (1,788,368) (28,462,097) (376,288) (4,880,836)
- --------------------------------------------------------------------------------------------------------------------
Institutional Class (372,429) (5,920,476) (636,014) (8,425,955)
- --------------------------------------------------------------------------------------------------------------------
39,605,667 $ 616,749,275 49,847,833 $ 621,155,013
====================================================================================================================
</TABLE>
FS-42
<PAGE> 301
NOTE 10-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the five-year period ended October 31,
1999, for a share of Class B capital stock outstanding during each of the years
in the four-year period ended October 31, 1999 and the period June 26, 1995
(date sales commenced) through October 31, 1995, and for a share of Class C
capital stock outstanding during each of the two years in the period ended
October 31, 1999 and the period August 4, 1997 (date sales commenced) through
October 31, 1997.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.32 $ 13.41 $ 11.19 $ 10.63 $ 8.90
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income 0.02 0.12 0.10 0.19 0.15
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Net gains (losses) on securities (both realized and
unrealized) 4.39 1.23 2.91 1.43 2.11
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Total from investment operations 4.41 1.35 3.01 1.62 2.26
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income (0.03) (0.10) (0.12) (0.16) (0.20)
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Distributions from net realized gains (0.54) (1.34) (0.67) (0.90) (0.33)
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Total distributions (0.57) (1.44) (0.79) (1.06) (0.53)
- ------------------------------------------------------------ ---------- ---------- ---------- ----------
Net asset value, end of period $ 17.16 $ 13.32 $ 13.41 $ 11.19 $ 10.63
============================================================ ========== ========== ========== ========== ==========
Total return(a) 34.05% 11.20% 28.57% 16.70% 27.03%
============================================================ ========== ========== ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $4,948,666 $3,706,938 $3,466,912 $2,647,208 $1,974,417
============================================================ ========== ========== ========== ========== ==========
Ratio of expenses (exclusive of interest) to average net
assets(b) 1.05%(c) 1.08% 1.09% 1.12% 1.17%
============================================================ ========== ========== ========== ========== ==========
Ratio of net investment income to average net assets(d) 0.11%(c) 0.95% 0.79% 1.81% 1.55%
============================================================ ========== ========== ========== ========== ==========
Portfolio turnover rate 107% 154% 170% 164% 161%
============================================================ ========== ========== ========== ========== ==========
</TABLE>
(a) Does not deduct sales charges.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.07%, 1.10%, 1.10% for 1999-1997.
(c) Ratios are based on average net assets of $4,518,746,255.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 0.09%, 0.93%, 0.78% for 1999-1997.
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------------------------------------- -----------------------------
1999 1998 1997 1996 1995 1999 1998 1997
---------- ---------- ---------- -------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 13.24 $ 13.37 $ 11.18 $ 10.62 $ 9.81 $ 13.27 $ 13.39 $ 13.86
- ----------------------------------- ---------- ---------- ---------- -------- ------- -------- ------- -------
Income from investment operations:
Net investment income (loss) (0.10) 0.02 0.01 0.10 0.03 (0.09) 0.02(a) --
- ----------------------------------- ---------- ---------- ---------- -------- ------- -------- ------- -------
Net gains (losses) on securities
(both realized and unrealized) 4.37 1.22 2.89 1.45 0.80 4.37 1.23 (0.45)
- ----------------------------------- ---------- ---------- ---------- -------- ------- -------- ------- -------
Total from investment operations 4.27 1.24 2.90 1.55 0.83 4.28 1.25 (0.45)
- ----------------------------------- ---------- ---------- ---------- -------- ------- -------- ------- -------
Less distributions:
Dividends from net investment
income -- (0.03) (0.04) (0.09) (0.02) -- (0.03) --
- ----------------------------------- ---------- ---------- ---------- -------- ------- -------- ------- -------
Distributions from net realized
gains (0.54) (1.34) (0.67) (0.90) -- (0.54) (1.34) (0.02)
- ----------------------------------- ---------- ---------- ---------- -------- ------- -------- ------- -------
Total distributions (0.54) (1.37) (0.71) (0.99) (0.02) (0.54) (1.37) (0.02)
- ----------------------------------- ---------- ---------- ---------- -------- ------- -------- ------- -------
Net asset value, end of period $ 16.97 $ 13.24 $ 13.37 $ 11.18 $ 10.62 $ 17.01 $ 13.27 $ 13.39
=================================== ========== ========== ========== ======== ======= ======== ======= =======
Total return(b) 33.06% 10.33% 27.54% 15.90% 8.48% 33.06% 10.39% (3.24)%
=================================== ========== ========== ========== ======== ======= ======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $2,206,752 $1,408,687 $1,056,094 $515,672 $67,592 $138,467 $37,846 $ 5,669
=================================== ========== ========== ========== ======== ======= ======== ======= =======
Ratio of expenses (exclusive of
interest) to average net assets(c) 1.80%(d) 1.84%(d) 1.85% 1.94% 1.98%(f) 1.80%(d) 1.84% 1.82%(f)
=================================== ========== ========== ========== ======== ======= ======== ======= =======
Ratio of net investment income
(loss) to average net assets(e) (0.64)%(d) 0.19%(d) 0.03% 0.99% 0.74%(f) (0.64)%(d) 0.19% 0.06%(f)
=================================== ========== ========== ========== ======== ======= ======== ======= =======
Portfolio turnover rate 107% 154% 170% 164% 161% 107% 154% 170%
=================================== ========== ========== ========== ======== ======= ======== ======= =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.82%, 1.86%, 1.86% for 1999-1997 for Class B and 1.82%, 1.86%, 1.83%
(annualized) for 1999-1997 for Class C.
(d) Ratios are based on average net assets of $1,863,108,558 and $80,932,531 for
Class B and Class C, respectively.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (0.66)%, 0.17%, 0.02% for 1999-1997 for Class B and
(0.66)%, 0.17%, 0.04% (annualized) for 1999-1997 for Class C.
(f) Annualized.
FS-43
<PAGE> 302
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Equity Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of the AIM Constellation Fund (a portfolio of
AIM Equity Funds, Inc.), including the schedule of
investments, as of October 31, 1999, 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 five-year period
then ended. 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 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 October 31, 1999, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM
Constellation Fund as of October 31, 1999, and 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 five-year period then ended,
in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
------------
KPMG LLP
December 3, 1999
Houston, Texas
FS-44
<PAGE> 303
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-95.54%
AIRLINES-0.25%
Southwest Airlines Co. 2,250,000 $ 37,828,125
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.67%
Danaher Corp. 1,250,000 60,390,625
- ---------------------------------------------------------------
SPX Corp.(a) 500,000 42,375,000
- ---------------------------------------------------------------
102,765,625
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.58%
Northern Trust Corp. 925,000 89,320,312
- ---------------------------------------------------------------
BANKS (REGIONAL)-1.01%
Bank United Corp.-Class A 1,000,000 39,000,000
- ---------------------------------------------------------------
Compass Bancshares, Inc. 1,000,000 26,687,500
- ---------------------------------------------------------------
Old Kent Financial Corp. 817,425 33,310,069
- ---------------------------------------------------------------
TCF Financial Corp. 700,000 20,650,000
- ---------------------------------------------------------------
Zions Bancorp 600,000 35,362,500
- ---------------------------------------------------------------
155,010,069
- ---------------------------------------------------------------
BIOTECHNOLOGY-1.53%
Biogen, Inc.(a) 2,500,000 185,312,500
- ---------------------------------------------------------------
Chiron Corp.(a) 1,000,000 28,562,500
- ---------------------------------------------------------------
Genzyme Corp.(a) 527,300 20,169,225
- ---------------------------------------------------------------
234,044,225
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO
& CABLE)-4.64%
Adelphia Communications Corp.(a) 1,000,000 54,625,000
- ---------------------------------------------------------------
AMFM Inc.(a) 2,250,000 157,500,000
- ---------------------------------------------------------------
AT&T Corp.-Liberty Media
Group-Class A(a) 3,000,000 119,062,500
- ---------------------------------------------------------------
Cox Communications, Inc.-Class
A(a) 1,500,000 68,156,250
- ---------------------------------------------------------------
Hispanic Broadcasting Corp.(a) 1,050,000 85,050,000
- ---------------------------------------------------------------
Univision Communications,
Inc.-Class A(a) 1,465,400 124,650,587
- ---------------------------------------------------------------
USA Networks, Inc.(a) 1,317,800 59,383,362
- ---------------------------------------------------------------
Westwood One, Inc.(a) 887,400 40,931,325
- ---------------------------------------------------------------
709,359,024
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-9.95%
ADC Telecommunications, Inc.(a) 1,750,000 83,453,125
- ---------------------------------------------------------------
Comverse Technology, Inc.(a) 1,500,000 170,250,000
- ---------------------------------------------------------------
Corning, Inc. 3,186,600 250,546,425
- ---------------------------------------------------------------
General Instrument Corp.(a) 1,900,000 102,243,750
- ---------------------------------------------------------------
JDS Uniphase Corp.(a) 1,500,000 250,312,500
- ---------------------------------------------------------------
Lucent Technologies Inc.(b) 3,849,120 247,305,960
- ---------------------------------------------------------------
Motorola, Inc. 750,000 73,078,125
- ---------------------------------------------------------------
Nokia Oyj-ADR (Finland) 1,500,000 173,343,750
- ---------------------------------------------------------------
QUALCOMM, Inc.(a) 250,000 55,687,500
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-(CONTINUED)
Scientific-Atlanta, Inc. 2,000,000 $ 114,500,000
- ---------------------------------------------------------------
1,520,721,135
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-1.39%
Apple Computer, Inc.(a) 1,000,000 80,125,000
- ---------------------------------------------------------------
Gateway, Inc.(a) 2,000,000 132,125,000
- ---------------------------------------------------------------
212,250,000
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-0.87%
Exodus Communications, Inc.(a) 341,700 29,386,200
- ---------------------------------------------------------------
VeriSign, Inc.(a) 835,000 103,122,500
- ---------------------------------------------------------------
132,508,700
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-3.06%
Adaptec, Inc.(a) 3,000,000 135,000,000
- ---------------------------------------------------------------
EMC Corp.(a)(b)(c) 3,500,000 255,500,000
- ---------------------------------------------------------------
Lexmark International Group,
Inc.- Class A(a) 1,000,000 78,062,500
- ---------------------------------------------------------------
468,562,500
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-15.30%
America Online, Inc.(a) 2,625,000 340,429,687
- ---------------------------------------------------------------
At Home Corp.(a) 1,150,000 42,981,250
- ---------------------------------------------------------------
BMC Software, Inc.(a) 2,500,000 160,468,750
- ---------------------------------------------------------------
Business Objects S.A.-ADR
(France)(a) 675,000 48,600,000
- ---------------------------------------------------------------
Check Point Software
Technologies Ltd. (Israel)(a) 750,000 86,765,625
- ---------------------------------------------------------------
Citrix Systems, Inc.(a) 2,800,000 179,550,000
- ---------------------------------------------------------------
Compuware Corp.(a) 1,250,000 34,765,625
- ---------------------------------------------------------------
Electronic Arts, Inc.(a) 1,250,000 101,015,625
- ---------------------------------------------------------------
Electronics for Imaging, Inc.(a) 2,000,000 80,625,000
- ---------------------------------------------------------------
Inktomi Corp.(a) 750,000 76,078,125
- ---------------------------------------------------------------
Intuit, Inc.(a) 3,750,000 109,218,750
- ---------------------------------------------------------------
J.D. Edwards & Co.(a) 1,050,000 25,134,375
- ---------------------------------------------------------------
Lycos, Inc.(a) 3,000,000 160,500,000
- ---------------------------------------------------------------
Microsoft Corp.(a) 1,150,000 106,446,875
- ---------------------------------------------------------------
Novell, Inc.(a) 1,000,000 20,062,500
- ---------------------------------------------------------------
RealNetworks, Inc.(a) 1,000,000 109,687,500
- ---------------------------------------------------------------
Siebel Systems, Inc.(a) 600,000 65,887,500
- ---------------------------------------------------------------
Synopsys, Inc.(a) 1,000,000 62,312,500
- ---------------------------------------------------------------
Verio, Inc.(a) 2,125,000 79,289,063
- ---------------------------------------------------------------
VERITAS Software Corp.(a) 2,500,000 269,687,500
- ---------------------------------------------------------------
Yahoo! Inc.(a) 1,000,000 179,062,500
- ---------------------------------------------------------------
2,338,568,750
- ---------------------------------------------------------------
</TABLE>
FS-45
<PAGE> 304
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONSUMER FINANCE-2.41%
Capital One Financial Corp. 2,323,700 $ 123,156,100
- ---------------------------------------------------------------
Providian Financial Corp. 1,800,000 196,200,000
- ---------------------------------------------------------------
SLM Holding Corp. 1,000,000 48,937,500
- ---------------------------------------------------------------
368,293,600
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-5.18%
American Power Conversion
Corp.(a) 5,250,000 117,796,875
- ---------------------------------------------------------------
Conexant Systems, Inc.(a) 2,000,000 186,750,000
- ---------------------------------------------------------------
Sanmina Corp.(a) 1,000,000 90,062,500
- ---------------------------------------------------------------
Solectron Corp.(a) 3,000,000 225,750,000
- ---------------------------------------------------------------
Symbol Technologies, Inc. 2,625,000 104,343,750
- ---------------------------------------------------------------
Vishay Intertechnology, Inc.(a) 2,750,000 67,203,125
- ---------------------------------------------------------------
791,906,250
- ---------------------------------------------------------------
ELECTRONICS (COMPONENT
DISTRIBUTORS)-0.11%
AVX Corp. 428,100 17,124,000
- ---------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.29%
General Motors Corp.-Class H(a) 600,000 43,687,500
- ---------------------------------------------------------------
ELECTRONICS
(INSTRUMENTATION)-0.88%
PE Corp-PE Biosystems Group 1,550,000 100,556,250
- ---------------------------------------------------------------
Waters Corp.(a) 650,000 34,531,250
- ---------------------------------------------------------------
135,087,500
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-9.30%
Altera Corp.(a) 2,875,000 139,796,875
- ---------------------------------------------------------------
Analog Devices, Inc.(a) 3,000,000 159,375,000
- ---------------------------------------------------------------
ASM Lithography Holding N.V.
(Netherlands)(a) 650,000 47,206,250
- ---------------------------------------------------------------
Atmel Corp.(a) 916,800 35,411,400
- ---------------------------------------------------------------
Cypress Semiconductor Corp.(a) 4,000,000 102,250,000
- ---------------------------------------------------------------
Linear Technology Corp. 2,000,000 139,875,000
- ---------------------------------------------------------------
LSI Logic Corp.(a) 2,000,000 106,375,000
- ---------------------------------------------------------------
Maxim Integrated Products,
Inc.(a) 1,500,000 118,406,250
- ---------------------------------------------------------------
Microchip Technology, Inc.(a) 1,338,375 89,169,234
- ---------------------------------------------------------------
PMC-Sierra, Inc.(a) 2,499,700 235,596,725
- ---------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 2,000,000 91,750,000
- ---------------------------------------------------------------
Xilinx, Inc.(a) 2,000,000 157,250,000
- ---------------------------------------------------------------
1,422,461,734
- ---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-1.67%
Applied Materials, Inc.(a) 500,000 44,906,250
- ---------------------------------------------------------------
KLA-Tencor Corp.(a) 1,200,000 95,025,000
- ---------------------------------------------------------------
Novellus Systems, Inc.(a) 500,000 38,750,000
- ---------------------------------------------------------------
Teradyne, Inc.(a) 2,000,000 77,000,000
- ---------------------------------------------------------------
255,681,250
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.36%
American Express Co. 575,000 88,550,000
- ---------------------------------------------------------------
Citigroup, Inc. 1,100,000 59,537,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCIAL (DIVERSIFIED)-(CONTINUED)
MGIC Investment Corp. 1,000,000 $ 59,750,000
- ---------------------------------------------------------------
207,837,500
- ---------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-0.46%
Park Place Entertainment(a) 5,304,000 69,615,000
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-1.80%
Forest Laboratories, Inc.(a) 1,500,000 68,812,500
- ---------------------------------------------------------------
Jones Pharma, Inc.(d) 3,691,275 114,429,525
- ---------------------------------------------------------------
Medicis Pharmaceutical
Corp.-Class A(a) 1,200,000 36,600,000
- ---------------------------------------------------------------
MedImmune, Inc.(a) 500,000 56,000,000
- ---------------------------------------------------------------
275,842,025
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.32%
Express Scripts, Inc.-Class A(a) 1,000,000 49,125,000
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.38%
Bausch & Lomb, Inc. 1,000,000 54,000,000
- ---------------------------------------------------------------
Biomet, Inc. 2,500,000 75,312,500
- ---------------------------------------------------------------
Medtronic, Inc. 1,500,000 51,937,500
- ---------------------------------------------------------------
Sybron International Corp.(a) 1,250,000 29,765,625
- ---------------------------------------------------------------
211,015,625
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.33%
AFLAC, Inc. 1,000,000 51,125,000
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-1.02%
Schwab (Charles) Corp. (The) 4,000,000 155,750,000
- ---------------------------------------------------------------
INVESTMENT MANAGEMENT-0.53%
Federated Investors, Inc.-Class
B 2,064,000 35,604,000
- ---------------------------------------------------------------
Knight/Trimark Group, Inc.-Class
A(a) 1,750,000 45,609,375
- ---------------------------------------------------------------
81,213,375
- ---------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.91%
Harley-Davidson, Inc. 2,350,000 139,384,375
- ---------------------------------------------------------------
NATURAL GAS-0.40%
El Paso Energy Corp. 1,500,000 61,500,000
- ---------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-3.60%
Baker Hughes, Inc. 2,000,000 55,875,000
- ---------------------------------------------------------------
BJ Services Co.(a) 2,000,000 68,625,000
- ---------------------------------------------------------------
Cooper Cameron Corp.(a)(d) 2,750,000 106,390,625
- ---------------------------------------------------------------
Diamond Offshore Drilling, Inc. 1,000,000 31,750,000
- ---------------------------------------------------------------
Global Industries Ltd.(a) 3,000,000 24,000,000
- ---------------------------------------------------------------
R&B Falcon Corporation(a) 3,716,600 46,225,213
- ---------------------------------------------------------------
Rowan Companies, Inc.(a) 2,250,000 35,015,625
- ---------------------------------------------------------------
Smith International, Inc.(a) 1,750,000 60,484,375
- ---------------------------------------------------------------
</TABLE>
FS-46
<PAGE> 305
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT)-(CONTINUED)
Transocean Offshore, Inc. 1,500,000 $ 40,781,250
- ---------------------------------------------------------------
Varco International, Inc.(a) 2,499,400 26,399,913
- ---------------------------------------------------------------
Weatherford International,
Inc.(a) 1,600,000 54,200,000
- ---------------------------------------------------------------
549,747,001
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-0.99%
Apache Corp. 1,790,000 69,810,000
- ---------------------------------------------------------------
EOG Resources, Inc. 3,200,000 66,600,000
- ---------------------------------------------------------------
Santa Fe Snyder Corp.(a) 1,750,000 15,093,750
- ---------------------------------------------------------------
151,503,750
- ---------------------------------------------------------------
PERSONAL CARE-0.23%
Estee Lauder Cos. Inc.-Class A 750,000 34,968,750
- ---------------------------------------------------------------
PUBLISHING-0.43%
McGraw-Hill Cos., Inc. (The) 1,100,000 65,587,500
- ---------------------------------------------------------------
RAILROADS-0.70%
Kansas City Southern Industries,
Inc. 2,250,000 106,734,375
- ---------------------------------------------------------------
RESTAURANTS-0.78%
Brinker International, Inc.(a) 2,000,000 46,625,000
- ---------------------------------------------------------------
Outback Steakhouse, Inc.(a) 1,750,000 40,250,000
- ---------------------------------------------------------------
Papa John's International,
Inc.(a) 851,500 31,824,813
- ---------------------------------------------------------------
118,699,813
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.58%
Lowe's Companies, Inc. 1,600,000 88,000,000
- ---------------------------------------------------------------
RETAIL (COMPUTERS &
ELECTRONICS)-2.95%
Best Buy Co., Inc.(a) 1,750,000 97,234,375
- ---------------------------------------------------------------
CDW Computer Centers, Inc.(a) 1,954,600 120,696,550
- ---------------------------------------------------------------
Circuit City Stores-Circuit City
Group 2,500,000 106,718,750
- ---------------------------------------------------------------
Tandy Corp. 2,000,000 125,875,000
- ---------------------------------------------------------------
450,524,675
- ---------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.98%
Kohl's Corp.(a) 2,000,000 149,625,000
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-1.17%
Dollar Tree Stores, Inc.(a) 1,810,600 78,874,263
- ---------------------------------------------------------------
Family Dollar Stores, Inc. 2,850,000 58,781,250
- ---------------------------------------------------------------
Ross Stores, Inc. 2,000,000 41,250,000
- ---------------------------------------------------------------
178,905,513
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.27%
Kroger Co. (The)(a) 2,000,000 41,625,000
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-2.80%
Barnes & Noble, Inc.(a) 1,153,000 23,996,813
- ---------------------------------------------------------------
Bed Bath & Beyond, Inc.(a) 2,750,100 91,612,706
- ---------------------------------------------------------------
eToys, Inc.(a) 1,169,000 69,847,750
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY)-(CONTINUED)
Linens 'n Things, Inc.(a) 1,285,300 $ 51,090,675
- ---------------------------------------------------------------
Staples, Inc.(a) 6,000,000 133,125,000
- ---------------------------------------------------------------
Williams-Sonoma, Inc.(a) 1,077,500 57,915,625
- ---------------------------------------------------------------
427,588,569
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-1.76%
American Eagle Outfitters,
Inc.(a) 808,300 34,605,344
- ---------------------------------------------------------------
Intimate Brands, Inc. 1,000,000 41,000,000
- ---------------------------------------------------------------
Men's Wearhouse, Inc. (The)(d) 2,310,075 50,677,270
- ---------------------------------------------------------------
Talbots, Inc. (The) 1,302,100 61,280,081
- ---------------------------------------------------------------
TJX Companies, Inc. (The) 3,000,000 81,375,000
- ---------------------------------------------------------------
268,937,695
- ---------------------------------------------------------------
SERVICES (ADVERTISING/
MARKETING)-3.31%
CMGI, Inc.(a) 500,000 54,718,750
- ---------------------------------------------------------------
Interpublic Group of Companies,
Inc. 1,000,000 40,625,000
- ---------------------------------------------------------------
Lamar Advertising Co.(a)(d) 3,025,000 163,350,000
- ---------------------------------------------------------------
Omnicom Group, Inc. 2,500,000 220,000,000
- ---------------------------------------------------------------
TMP Worldwide, Inc.(a) 450,000 28,096,875
- ---------------------------------------------------------------
506,790,625
- ---------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-0.91%
ChoicePoint, Inc.(a) 617,300 38,156,856
- ---------------------------------------------------------------
Cintas Corp. 1,500,000 90,375,000
- ---------------------------------------------------------------
Viad Corp. 400,500 9,837,281
- ---------------------------------------------------------------
138,369,137
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-3.02%
Affiliated Computer Services,
Inc.-Class A(a) 1,000,000 38,000,000
- ---------------------------------------------------------------
Concord EFS, Inc.(a) 6,750,000 182,671,875
- ---------------------------------------------------------------
DST Systems, Inc.(a) 750,000 47,765,625
- ---------------------------------------------------------------
Fiserv, Inc.(a) 3,750,000 120,000,000
- ---------------------------------------------------------------
Paychex, Inc. 1,875,000 73,828,125
- ---------------------------------------------------------------
462,265,625
- ---------------------------------------------------------------
SPECIALTY PRINTING-0.32%
Valassis Communications, Inc.(a) 1,125,000 48,375,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.63%
Crown Castle International
Corp.(a) 2,750,000 52,937,500
- ---------------------------------------------------------------
Metromedia Fiber Network,
Inc.-Class A(a) 1,290,000 42,650,625
- ---------------------------------------------------------------
95,588,125
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.23%
Global TeleSystems Group,
Inc.(a) 1,500,000 35,906,250
- ---------------------------------------------------------------
TELEPHONE-1.38%
CenturyTel, Inc. 2,249,925 90,981,342
- ---------------------------------------------------------------
</TABLE>
FS-47
<PAGE> 306
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELEPHONE-(CONTINUED)
Cincinnati Bell, Inc.(a) 1,000,000 $ 20,812,500
- ---------------------------------------------------------------
NTL, Inc.(a) 687,500 51,820,313
- ---------------------------------------------------------------
RCN Corp.(a) 1,000,000 47,875,000
- ---------------------------------------------------------------
211,489,155
- ---------------------------------------------------------------
TEXTILES (APPAREL)-0.90%
Jones Apparel Group, Inc.(a) 2,563,800 81,080,175
- ---------------------------------------------------------------
Tommy Hilfiger Corp.(a) 2,000,000 56,500,000
- ---------------------------------------------------------------
137,580,175
- ---------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$8,597,266,374) 14,606,399,932
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION MARKET
CONTRACTS PRICE DATE VALUE
<S> <C> <C> <C> <C>
OPTIONS
PURCHASED-0.00%
COMPUTERS
(PERIPHERALS)-0.00%
EMC Corp. (Cost
$1,338,808) 5,691 $60 Dec-99 $604,669
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS-4.63%
STIC Liquid Assets Portfolio(e) 353,486,756 353,486,756
- ----------------------------------------------------------------
STIC Prime Portfolio(e) 353,486,756 353,486,756
- ----------------------------------------------------------------
Total Money Market Funds
(Cost $706,973,512) 706,973,512
- ----------------------------------------------------------------
TOTAL INVESTMENTS-100.17% 15,313,978,113
- ----------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(0.17%) (25,496,319)
- ----------------------------------------------------------------
NET ASSETS-100.00% $15,288,481,794
================================================================
</TABLE>
Investment Abbreviation:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a)Non-income producing security.
(b)A portion of this security is subject to call options.
(c)A portion of this security is subject to put options.
(d)Affiliated issuers are those in which the Fund's holdings of an issuer
represents 5% or more of the outstanding voting securities of the issuer. The
Fund has not owned enough of the outstanding voting securities of any issuer
to have control (as defined in the Investment Company Act of 1940) of that
issuer. The aggregate market value of these securities as of 10/31/99 was
$434,847,420 which represented 2.84% of the Fund's net assets.
(e)The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-48
<PAGE> 307
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$9,305,578,694) $15,313,978,113
- ------------------------------------------------------------
Receivables for:
Investments sold 71,399,488
- ------------------------------------------------------------
Capital stock sold 10,526,738
- ------------------------------------------------------------
Dividends and interest 2,290,468
- ------------------------------------------------------------
Investment for deferred compensation plan 183,244
- ------------------------------------------------------------
Other assets 52,373
============================================================
Total assets 15,398,430,424
============================================================
LIABILITIES:
Payables for:
Investments purchased 56,379,176
- ------------------------------------------------------------
Capital stock reacquired 30,978,770
- ------------------------------------------------------------
Deferred compensation 183,244
- ------------------------------------------------------------
Options written (premiums received
$3,848,894) 5,097,494
- ------------------------------------------------------------
Accrued advisory fees 7,461,612
- ------------------------------------------------------------
Accrued administrative services fees 70,930
- ------------------------------------------------------------
Accrued directors' fees 9,103
- ------------------------------------------------------------
Accrued distribution fees 5,519,204
- ------------------------------------------------------------
Accrued transfer agent fees 3,222,924
- ------------------------------------------------------------
Accrued operating expenses 1,026,173
- ------------------------------------------------------------
Total liabilities 109,948,630
- ------------------------------------------------------------
Net assets applicable to shares outstanding $15,288,481,794
============================================================
NET ASSETS:
Class A $14,292,905,417
============================================================
Class B $ 589,717,520
============================================================
Class C $ 161,489,815
============================================================
Institutional Class $ 244,369,042
============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 1,000,000,000
- ------------------------------------------------------------
Outstanding 412,537,590
============================================================
Class B:
Authorized 1,000,000,000
- ------------------------------------------------------------
Outstanding 17,344,531
============================================================
Class C:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 4,751,201
============================================================
Institutional Class:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 6,787,086
============================================================
Class A:
Net asset value and redemption price per
share $ 34.65
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $34.65 / 94.50%) $ 36.67
============================================================
Class B:
Net asset value and offering price per
share $ 34.00
- ------------------------------------------------------------
Class C:
Net asset value and offering price per
share $ 33.99
- ------------------------------------------------------------
Institutional Class:
Net asset value, offering and redemption
price per share $ 36.01
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $242,135 foreign
withholding tax) $ 43,615,002
- ------------------------------------------------------------
Interest 42,276,941
============================================================
Total investment income 85,891,943
- ------------------------------------------------------------
EXPENSES:
Advisory fees 90,458,750
- ------------------------------------------------------------
Administrative services fees 431,120
- ------------------------------------------------------------
Custodian fees 801,999
- ------------------------------------------------------------
Directors' fees 93,740
- ------------------------------------------------------------
Distribution fees-Class A 40,983,445
- ------------------------------------------------------------
Distribution fees-Class B 4,365,731
- ------------------------------------------------------------
Distribution fees-Class C 1,175,217
- ------------------------------------------------------------
Transfer agent fees-Class A 23,308,682
- ------------------------------------------------------------
Transfer agent fees-Class B 1,540,074
- ------------------------------------------------------------
Transfer agent fees-Class C 368,612
- ------------------------------------------------------------
Transfer agent fees-Institutional Class 22,937
- ------------------------------------------------------------
Other 2,563,084
============================================================
Total expenses 166,113,391
- ------------------------------------------------------------
Less: Fees waived by advisor (3,107,849)
- ------------------------------------------------------------
Expenses paid indirectly (238,341)
============================================================
Net expenses 162,767,201
============================================================
Net investment income (loss) (76,875,258)
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES,
AND OPTION CONTRACTS:
Net realized gain from:
Investment securities 1,641,321,263
- ------------------------------------------------------------
Option contracts written 2,695,940
============================================================
1,644,017,203
============================================================
Change in net unrealized appreciation
(depreciation) of:
Investment securities 2,670,530,284
- ------------------------------------------------------------
Foreign currencies (1,219)
- ------------------------------------------------------------
Option contracts written (1,395,306)
============================================================
2,669,133,759
============================================================
Net gain from investment securities,
foreign currencies, and option
contracts 4,313,150,962
============================================================
Net increase in net assets resulting from
operations $4,236,275,704
============================================================
</TABLE>
See Notes to Financial Statements.
FS-49
<PAGE> 308
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (76,875,258) $ (68,697,946)
- -------------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, and option contracts 1,644,017,203 459,324,772
- -------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies, and option
contracts 2,669,133,759 (647,916,119)
- -------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 4,236,275,704 (257,289,293)
=================================================================================================
Distributions to shareholders from net realized gains:
Class A (337,206,115) (1,023,550,465)
- -------------------------------------------------------------------------------------------------
Class B (8,290,207) (2,750,431)
- -------------------------------------------------------------------------------------------------
Class C (2,229,567) (2,040,204)
- -------------------------------------------------------------------------------------------------
Institutional Class (5,075,580) (13,510,099)
- -------------------------------------------------------------------------------------------------
Share transactions-net:
Class A (1,783,881,252) (667,156,467)
- -------------------------------------------------------------------------------------------------
Class B 205,093,817 292,437,630
- -------------------------------------------------------------------------------------------------
Class C 55,508,352 60,444,760
- -------------------------------------------------------------------------------------------------
Institutional Class (4,793,973) 17,436,212
- -------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 2,355,401,179 (1,595,978,357)
- -------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 12,933,080,615 14,529,058,972
- -------------------------------------------------------------------------------------------------
End of period $15,288,481,794 $12,933,080,615
=================================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 7,663,956,851 $ 9,156,848,152
- -------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (551,737) (994,714)
- -------------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, and option contracts 1,617,926,281 439,210,537
- -------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, and option contracts 6,007,150,399 3,338,016,640
- -------------------------------------------------------------------------------------------------
$15,288,481,794 $12,933,080,615
=================================================================================================
</TABLE>
See Notes to Financial Statements.
FS-50
<PAGE> 309
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Constellation Fund (the "Fund") is a series portfolio of AIM Equity Funds,
Inc. (the "Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of ten separate portfolios. The
Fund currently offers four different classes of shares: Class A shares, Class B
shares, Class C shares and the Institutional Class. Class A shares are sold with
a front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is growth of capital.
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 the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The following is a summary of the significant accounting policies
followed by the Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) 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 any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in the
case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. 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
Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE"). Generally, trading in foreign
securities 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 the 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 they are determined
and the close of the NYSE which would not be reflected in the computation of
the Fund's net asset value. If events materially affecting the value of such
securities occur during such period, then these securities will be valued at
their fair value as determined in good faith by or under the supervision of
the Board of Directors.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income increased by
$77,318,235, undistributed net realized gains decreased by $112,499,990
and paid in capital increased $35,181,755 as a result of net operating tax
loss in order to comply with the requirements of the American Institute of
Certified Public Accountants Statement of Position 93-2. Net assets of the
Fund were unaffected by the reclassification discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions. The
Fund does not separately account for that portion of the results of
operations resulting from changes in foreign exchange rates on investments
and the fluctuations arising from changes in market prices of securities
held. Such
FS-51
<PAGE> 310
fluctuations are included with the net realized and unrealized gain or loss
from investments.
E. Foreign Currency Contracts -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
F. Covered Call Options -- The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is recorded
as an asset and an equivalent liability. The amount of the liability is
subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the mean
between the last bid and asked prices on that day. If a written call option
expires on the stipulated expiration date, or if the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or a loss if the
closing purchase transaction exceeds the premium received when the option
was written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the
sale of the underlying security and the proceeds of the sale are increased
by the premium originally received.
A call option gives the purchaser of such option the right to buy, and
the writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the
call option at any time during the option period. During the option period,
in return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has
retained the risk of loss should the price of the underlying security
decline. During the option period, the Fund may be required at any time to
deliver the underlying security against payment of the exercise price. This
obligation is terminated upon the expiration of the option period or at such
earlier time at which the Fund effects a closing purchase transaction by
purchasing (at a price which may be higher than that received when the call
option was written) a call option identical to the one originally written.
G. Put Options -- The Fund may purchase put options. By purchasing a put
option, the Fund obtains the right (but not the obligation) to sell the
option's underlying instrument at a fixed strike price. In return for this
right, the Fund pays an option premium. The option's underlying instrument
may be a security or a futures contract. Put options may be used by the Fund
to hedge securities it owns by locking in a minimum price at which the Fund
can sell. If security prices fall, the put option could be exercised to
offset all or a portion of the Fund's resulting losses. At the same time,
because the maximum the Fund has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Fund to
profit from an increase in the value of the securities hedged.
H. Expenses -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment agreement, the
Fund pays an advisory fee to AIM at the annual rate of 1.0% of the first $30
million of the Fund's average daily net assets, plus 0.75% of the Fund's average
daily net assets in excess of $30 million to and including $150 million, plus
0.625% of the Fund's average daily net assets in excess of $150 million. AIM has
contractually agreed to waive a portion of its advisory fees paid by the Fund to
AIM to the extent necessary to reduce the fees paid by the Fund at net asset
levels higher than those currently incorporated in the present advisory fee
schedule. Under the contractual waiver, AIM will receive a fee calculated at the
annual rate of 1.0% of the first $30 million of the Fund's average daily net
assets, plus 0.75% of the Fund's average daily net assets in excess of $30
million to and including $150 million, plus 0.625% of the Fund's average daily
net assets in excess of $150 million to and including $2 billion, plus 0.60% of
the Fund's average daily net assets in excess of $2 billion. The waiver is
contractual and may not be terminated without approval of the Board of
Directors. During the year ended October 31, 1999, AIM waived fees of
$3,107,849. Under the terms of a master sub-advisory agreement between AIM and
A I M Capital Management, Inc. ("AIM Capital"), AIM pays AIM Capital 50% of the
amount paid by the Fund to AIM.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1999, AIM was
paid $431,120 for such services.
The Fund, pursuant to a transfer agency 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 Fund. During the year ended October 31, 1999, AFS
was paid $11,438,795 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares and a master distribution agreement with
Fund Management Company ("FMC) to serve as the distributor for the Institutional
Class shares of the
FS-52
<PAGE> 311
Fund. The Company has adopted a plan pursuant to Rule 12b-1 under the 1940 Act
with respect to the Fund's Class A shares, Class B shares and Class C shares
(collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM
Distributors compensation at the annual rate of 0.30% of the Fund's average
daily net assets of Class A shares and 1.00% of the average daily net assets of
Class B and C shares. Of these amounts, the Fund may pay a service fee of 0.25%
of the average daily net assets of the Class A, Class B or Class C shares to
selected dealers and financial institutions who furnish continuing personal
shareholder services to their customers who purchase and own the appropriate
class of shares of the Fund. Any amounts not paid as a service fee under the
Plans would constitute an asset-based sales charge. The Plans also impose a cap
on the total sales charges, including asset-based sales charges that may be paid
by the respective classes. During the year ended October 31, 1999, the Class A,
Class B and Class C shares paid AIM Distributors $40,983,445, $4,365,731 and
$1,175,217, respectively, as compensation under the Plans.
AIM Distributors received commissions of $3,182,696 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1999,
AIM Distributors received $605,519 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and directors of the Company are
officers and directors of AIM, AFS, FMC and AIM Distributors.
During the year ended October 31, 1999, the Fund paid legal fees of $31,683
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$170,495 and $67,846, respectively, under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $238,341 during the year ended October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 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. During the year
ended October 31, 1999, 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 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$8,369,125,551 and $10,276,104,460, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $6,146,948,281
- ----------------------------------------------------------
Aggregate unrealized appreciation
(depreciation) of investment securities (161,712,109)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $5,985,236,172
==========================================================
Cost of investments for tax purposes is $9,328,741,941.
</TABLE>
FS-53
<PAGE> 312
NOTE 7-CALL OPTION CONTRACTS
Transactions in call options written during the year ended October 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of period 1,875 $ 357,644
- -------------------------------------------------------------------------------------
Written 41,226 7,516,095
- -------------------------------------------------------------------------------------
Closed (17,190) (3,487,198)
- -------------------------------------------------------------------------------------
Expired (3,820) (537,647)
- -------------------------------------------------------------------------------------
End of period 22,091 $ 3,848,894
=====================================================================================
</TABLE>
Open call option contracts written at October 31, 1999 were as follows:
<TABLE>
<CAPTION>
OCTOBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS 1999 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
- --------------------------------------- -------- ------ --------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
EMC Corp. Jan. 00 $75 2,846 $1,162,552 $1,849,900 $ (687,348)
- -------------------------------------------------------------------------------------------------------------------
Lucent Technologies Inc. Nov. 99 65 19,245 2,686,342 3,247,594 (561,252)
- -------------------------------------------------------------------------------------------------------------------
22,091 $3,848,894 $5,097,494 $(1,248,600)
===================================================================================================================
</TABLE>
NOTE 8-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 98,564,141 $ 2,981,238,092 271,511,337 $ 7,555,171,888
- ------------------------------------------------------------------------------------------------------------------------
Class B 10,942,571 332,728,027 12,877,388 356,713,527
- ------------------------------------------------------------------------------------------------------------------------
Class C 5,133,893 156,450,704 2,960,570 81,123,332
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class 1,596,295 51,100,608 2,149,830 60,442,629
- ------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 11,320,463 318,895,308 38,633,795 977,878,833
- ------------------------------------------------------------------------------------------------------------------------
Class B 286,888 7,992,642 104,498 2,643,686
- ------------------------------------------------------------------------------------------------------------------------
Class C 75,962 2,115,494 76,723 1,938,518
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class 170,003 4,957,282 494,582 12,886,955
- ------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (167,354,090) (5,084,014,652) (330,045,727) (9,200,207,188)
- ------------------------------------------------------------------------------------------------------------------------
Class B (4,443,036) (135,626,852) (2,423,778) (66,919,583)
- ------------------------------------------------------------------------------------------------------------------------
Class C (3,390,263) (103,057,846) (842,846) (22,617,090)
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class (1,915,980) (60,851,863) (1,977,243) (55,893,372)
- ------------------------------------------------------------------------------------------------------------------------
(49,013,153) $(1,528,073,056) (6,480,871) $ (296,837,865)
========================================================================================================================
</TABLE>
FS-54
<PAGE> 313
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the five-year period ended October 31,
1999, for a share of Class B capital stock outstanding during the year ended
October 31, 1999 and the period November 3, 1997 (date sales commenced) through
October 31, 1998 and for a share of Class C capital stock outstanding during
each of the years in the two year period ended October 31, 1999 and the period
August 4, 1997 (dates sales commenced) through October 31, 1997.
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 26.37 $ 29.23 $ 25.48 $ 23.69 $ 18.31
- ---------------------------------------------------------- ----------- ----------- ----------- ----------- ----------
Income from investment operations:
Net investment income (loss) (0.17) (0.14) (0.11) (0.06) (0.05)
- ---------------------------------------------------------- ----------- ----------- ----------- ----------- ----------
Net gains (losses) on securities (both realized and
unrealized) 9.18 (0.62) 4.75 2.60 5.95
- ---------------------------------------------------------- ----------- ----------- ----------- ----------- ----------
Total from investment operations 9.01 (0.76) 4.64 2.54 5.90
- ---------------------------------------------------------- ----------- ----------- ----------- ----------- ----------
Distributions from net realized gains (0.73) (2.10) (0.89) (0.75) (0.52)
- ---------------------------------------------------------- ----------- ----------- ----------- ----------- ----------
Net asset value, end of period $ 34.65 $ 26.37 $ 29.23 $ 25.48 $ 23.69
========================================================== =========== =========== =========== =========== ==========
Total return(a) 34.81% (2.30)% 18.86% 11.26% 33.43%
========================================================== =========== =========== =========== =========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $14,292,905 $12,391,844 $14,319,441 $11,255,506 $7,000,350
========================================================== =========== =========== =========== =========== ==========
Ratio of expenses to average net assets(b) 1.10%(c) 1.10% 1.11%() 1.14% 1.16%
========================================================== =========== =========== =========== =========== ==========
Ratio of net investment income (loss) to average net
assets(d) (0.50)%(c) (0.47)% (0.40)%() (0.27)% (0.32)%
========================================================== =========== =========== =========== =========== ==========
Portfolio turnover rate 62% 76% 67% 58% 45%
========================================================== =========== =========== =========== =========== ==========
</TABLE>
<TABLE>
<S> <C>
(a) Does not deduct sales charges.
(b) After fee waivers and/or expense reimbursements. Ratios of
expenses to average net assets prior to fee waivers and/or
expense reimbursements were 1.12%, 1.12%, 1.13%, 1.16% and
1.18% for 1999-1995.
(c) Ratios are based on average net assets of $13,661,148,228.
(d) After fee waivers and/or expense reimbursements. Ratios of
net investment income (loss) to average net assets prior to
fee waivers and/or expense reimbursement were (0.52)%,
(0.50)%, (0.42)%, (0.29)% and (0.34)% for 1999-1995.
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------- -------------------------------
1999 1998 1999 1998 1997
--------- -------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 26.11 $ 30.04 $ 26.10 $ 29.18 $ 30.32
- ------------------------------------------------------------ -------- -------- -------- ------- -------
Income from investment operations:
Net investment income (loss) (0.42) (0.37)(a) (0.42) (0.37)(a) (0.04)
- ------------------------------------------------------------ -------- -------- -------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) 9.04 (1.46) 9.04 (0.61) (1.10)
- ------------------------------------------------------------ -------- -------- -------- ------- -------
Total from investment operations 8.62 (1.83) 8.62 (0.98) (1.14)
- ------------------------------------------------------------ -------- -------- -------- ------- -------
Distributions from net realized gains (0.73) (2.10) (0.73) (2.10) --
- ------------------------------------------------------------ -------- -------- -------- ------- -------
Net asset value, end of period $ 34.00 $ 26.11 $ 33.99 $ 26.10 $ 29.18
============================================================ ======== ======== ======== ======= =======
Total return(b) 33.64% (5.86)% 33.65% (3.12)% (3.76)%
============================================================ ======== ======== ======== ======= =======
Ratios/supplement data:
Net assets, end of period (000s omitted) $589,718 $275,676 $161,490 $76,522 $21,508
============================================================ ======== ======== ======== ======= =======
Ratio of expenses to average net assets(c) 1.98%(d) 1.98%(e) 1.98%(d) 1.97% 1.84%(e)
============================================================ ======== ======== ======== ======= =======
Ratio of net investment income (loss) to average net
assets(f) (1.38)%(d) (1.36)%(e) (1.38)%(d) (1.35)% (1.12)%(e)
============================================================ ======== ======== ======== ======= =======
Portfolio turnover rate 62% 76% 62% 76% 67%
============================================================ ======== ======== ======== ======= =======
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to average net assets prior to fee waivers
and/or expense reimbursements were 2.00%, and 2.00% (annualized) for 1999-1998 for Class B and 2.00%, 1.99% and
1.86% (annualized) for 1999-1997 for Class C.
(d) Ratios are based on average net assets of $436,573,129 and $117,521,680 for Class B and Class C, respectively.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment income (loss) to average net assets
prior to fee waivers and/or expense reimbursements were (1.40)% and (1.38)% (annualized) for 1999-1998 for Class B
and (1.40)%, (1.37)% and (1.15)% (annualized) for 1999-1997 for Class C.
</TABLE>
FS-55
<PAGE> 314
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Equity Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of AIM Dent Demographics Trends Fund (a
portfolio of AIM Equity Funds, Inc.), including the
schedule of investments, as of October 31, 1999, the
related statement of operations, the statement of changes
in net assets, and financial highlights for the period
June 7, 1999 (date operations commenced) through October
31, 1999. 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 financial highlights
based on our audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of October 31, 1999, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements and
financial highlights referred to above present fairly, in
all material respects, the financial position of AIM Dent
Demographics Trends Fund as of October 31, 1999, the
results of its operations, the changes in its net assets
and the financial highlights for the period June 7, 1999
(date operations commenced) through October 31, 1999 in
conformity with generally accepted accounting principles.
/s/KPMG LLP
-----------
KPMG LLP
December 3, 1999
Houston, Texas
FS-56
<PAGE> 315
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-93.70%
BANKS (MONEY CENTER)-1.56%
Chase Manhattan Corp. (The) 70,000 $ 6,116,250
- --------------------------------------------------------------
BANKS (REGIONAL)-0.30%
Dah Sing Financial Group (Hong
Kong) 300,000 1,197,204
- --------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-7.22%
AT&T Corp. - Liberty Media
Group-Class A(a) 40,000 1,587,500
- --------------------------------------------------------------
Cablevision Systems Corp.-Class
A(a) 55,000 3,715,937
- --------------------------------------------------------------
Comcast Corp.-Class A 250,000 10,531,250
- --------------------------------------------------------------
Cox Communications, Inc.-Class A(a) 75,000 3,407,812
- --------------------------------------------------------------
Insight Communications Company,
Inc.(a) 160,000 3,780,000
- --------------------------------------------------------------
MediaOne Group, Inc.(a) 75,000 5,329,687
- --------------------------------------------------------------
28,352,186
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-7.19%
Comverse Technology, Inc.(a) 50,000 5,675,000
- --------------------------------------------------------------
General Instrument Corp.(a) 100,000 5,381,250
- --------------------------------------------------------------
Harmonic, Inc.(a) 30,000 1,781,250
- --------------------------------------------------------------
JDS Uniphase Corp.(a) 25,000 4,171,875
- --------------------------------------------------------------
Lucent Technologies Inc. 20,000 1,285,000
- --------------------------------------------------------------
Nokia Oyj-ADR (Finland) 35,000 4,044,687
- --------------------------------------------------------------
Nortel Networks Corp. (Canada) 40,000 2,477,500
- --------------------------------------------------------------
QUALCOMM, Inc.(a) 12,500 2,784,375
- --------------------------------------------------------------
Sycamore Networks, Inc.(a) 3,000 645,000
- --------------------------------------------------------------
28,245,937
- --------------------------------------------------------------
COMPUTERS (HARDWARE)-4.92%
Apple Computer, Inc.(a) 75,000 6,009,375
- --------------------------------------------------------------
Dell Computer Corp.(a) 75,000 3,009,375
- --------------------------------------------------------------
Gateway, Inc.(a) 100,000 6,606,250
- --------------------------------------------------------------
Sun Microsystems, Inc.(a) 35,000 3,703,437
- --------------------------------------------------------------
19,328,437
- --------------------------------------------------------------
COMPUTERS (NETWORKING)-1.88%
Cisco Systems, Inc.(a) 100,000 7,400,000
- --------------------------------------------------------------
COMPUTERS (PERIPHERALS)-1.60%
EMC Corp.(a) 45,000 3,285,000
- --------------------------------------------------------------
Lexmark International Group,
Inc.-Class A(a) 38,700 3,021,019
- --------------------------------------------------------------
6,306,019
- --------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-16.28%
Agile Software Corp.(a) 25,000 2,450,000
- --------------------------------------------------------------
Alteon Websystems, Inc.(a) 10,200 731,850
- --------------------------------------------------------------
America Online, Inc.(a) 50,000 6,484,375
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
Clarify, Inc.(a) 40,000 $ 3,090,000
- --------------------------------------------------------------
E.piphany, Inc.(a) 17,400 1,496,400
- --------------------------------------------------------------
Intuit, Inc.(a) 200,000 5,825,000
- --------------------------------------------------------------
Microsoft Corp.(a) 130,000 12,033,125
- --------------------------------------------------------------
Novell, Inc.(a) 600,000 12,037,500
- --------------------------------------------------------------
Oracle Corp.(a) 25,000 1,189,062
- --------------------------------------------------------------
VERITAS Software Corp.(a) 100,000 10,787,500
- --------------------------------------------------------------
Visio Corp.(a) 75,000 2,969,531
- --------------------------------------------------------------
Vixel Corp.(a) 40,000 1,280,000
- --------------------------------------------------------------
Yahoo! Inc.(a) 20,000 3,581,250
- --------------------------------------------------------------
63,955,593
- --------------------------------------------------------------
CONSUMER FINANCE-1.39%
Providian Financial Corp. 50,000 5,450,000
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.95%
Conexant Systems, Inc.(a) 40,000 3,735,000
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-3.12%
Cypress Semiconductor Corp.(a) 150,000 3,834,375
- --------------------------------------------------------------
Intel Corp. 50,000 3,871,875
- --------------------------------------------------------------
SDL, Inc.(a) 15,000 1,849,687
- --------------------------------------------------------------
Texas Instruments, Inc. 30,000 2,692,500
- --------------------------------------------------------------
12,248,437
- --------------------------------------------------------------
ENTERTAINMENT-1.70%
Time Warner Inc. 75,000 5,226,563
- --------------------------------------------------------------
World Wrestling Federation
Entertainment, Inc.(a) 60,000 1,447,500
- --------------------------------------------------------------
6,674,063
- --------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-1.53%
Applied Materials, Inc.(a) 35,000 3,143,438
- --------------------------------------------------------------
Teradyne, Inc.(a) 75,000 2,887,500
- --------------------------------------------------------------
6,030,938
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-4.90%
American Express Co. 90,000 13,860,000
- --------------------------------------------------------------
Citigroup Inc. 100,000 5,412,500
- --------------------------------------------------------------
19,272,500
- --------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-6.87%
Bristol-Myers Squibb Co. 100,000 7,681,250
- --------------------------------------------------------------
Johnson & Johnson 70,000 7,332,500
- --------------------------------------------------------------
Warner-Lambert Co. 150,000 11,971,875
- --------------------------------------------------------------
26,985,625
- --------------------------------------------------------------
</TABLE>
FS-57
<PAGE> 316
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (DRUGS-GENERIC &
OTHER)-0.64%
Genetech, Inc.(a) 10,000 $ 1,457,500
- --------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class
A(a) 35,000 1,067,500
- --------------------------------------------------------------
2,525,000
- --------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-3.90%
Pfizer, Inc. 200,000 7,900,000
- --------------------------------------------------------------
Schering-Plough Corp. 150,000 7,425,000
- --------------------------------------------------------------
15,325,000
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.26%
Guidant Corp. 100,000 4,937,500
- --------------------------------------------------------------
INSURANCE (MULTI-LINE)-2.10%
American International Group, Inc. 80,000 8,235,000
- --------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-6.82%
Merrill Lynch & Co., Inc. 75,000 5,887,500
- --------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 110,000 12,134,375
- --------------------------------------------------------------
Schwab (Charles) Corp. (The) 225,000 8,760,938
- --------------------------------------------------------------
26,782,813
- --------------------------------------------------------------
LODGING-HOTELS-1.13%
Carnival Corp. 100,000 4,450,000
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-3.71%
Tyco International Ltd. 365,000 14,577,188
- --------------------------------------------------------------
RAILROADS-0.72%
Kansas City Southern Industries,
Inc. 60,000 2,846,250
- --------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-2.31%
Home Depot, Inc. (The) 40,000 3,020,000
- --------------------------------------------------------------
Lowe's Companies, Inc. 110,000 6,050,000
- --------------------------------------------------------------
9,070,000
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (BUILDING SUPPLIES)-(CONTINUED)
- --------------------------------------------------------------
RETAIL (COMPUTERS &
ELECTRONICS)-4.69%
Best Buy Co., Inc.(a) 140,000 $ 7,778,750
- --------------------------------------------------------------
Circuit City Stores-Circuit City
Group 80,000 3,415,000
- --------------------------------------------------------------
Tandy Corp. 115,000 7,237,813
- --------------------------------------------------------------
18,431,563
- --------------------------------------------------------------
RETAIL (SPECIALTY)-0.90%
Amazon.com, Inc.(a) 50,000 3,531,250
- --------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.82%
American Eagle Outfitters, Inc.(a) 75,000 3,210,938
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-3.29%
Nextel Communications, Inc.-Class
A(a) 150,000 12,928,125
- --------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$328,287,739) 368,148,816
- --------------------------------------------------------------
MONEY MARKET FUNDS-6.23%
STIC Liquid Assets Portfolio(b) 12,250,775 12,250,775
- --------------------------------------------------------------
STIC Prime Portfolio(b) 12,250,775 12,250,775
- --------------------------------------------------------------
Total Money Market Funds (Cost
$24,501,550) 24,501,550
- --------------------------------------------------------------
TOTAL INVESTMENTS-99.93% 392,650,366
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.07% 258,135
- --------------------------------------------------------------
NET ASSETS-100.00% $392,908,501
==============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-58
<PAGE> 317
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$352,789,289) $392,650,366
- --------------------------------------------------------
Receivables for:
Capital stock sold 7,895,024
- --------------------------------------------------------
Dividends and interest 116,171
- --------------------------------------------------------
Investment for deferred compensation plan 2,653
- --------------------------------------------------------
Other assets 99,883
- --------------------------------------------------------
Total assets 400,764,097
- --------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 6,597,126
- --------------------------------------------------------
Deferred compensation plan 2,653
- --------------------------------------------------------
Capital stock reacquired 550,419
- --------------------------------------------------------
Accrued advisory fees 352,181
- --------------------------------------------------------
Accrued administrative services fees 4,247
- --------------------------------------------------------
Accrued directors' fees 1,900
- --------------------------------------------------------
Accrued distribution fees 231,529
- --------------------------------------------------------
Accrued transfer agent fees 44,956
- --------------------------------------------------------
Accrued operating expenses 70,585
- --------------------------------------------------------
Total liabilities 7,855,596
- --------------------------------------------------------
Net assets applicable to shares
outstanding $392,908,501
========================================================
NET ASSETS:
Class A $163,872,289
========================================================
Class B $177,430,877
========================================================
Class C $ 51,605,335
========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 13,495,267
========================================================
Class B:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 14,649,049
========================================================
Class C:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 4,260,828
========================================================
Class A:
Net asset value and redemption price per
share $ 12.14
- --------------------------------------------------------
Offering price per share:
(Net asset value of $12.14 divided
by 94.50%) $ 12.85
========================================================
Class B:
Net asset value and offering price per
share $ 12.11
========================================================
Class C:
Net asset value and offering price per
share $ 12.11
========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the period June 7, 1999 (date operations commenced) through October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $225 foreign withholding
tax) $ 270,152
- --------------------------------------------------------
Interest 213,727
- --------------------------------------------------------
Total investment income 483,879
- --------------------------------------------------------
EXPENSES:
Advisory fees 690,278
- --------------------------------------------------------
Administrative services fees 16,849
- --------------------------------------------------------
Custodian fees 19,414
- --------------------------------------------------------
Directors' fees 5,408
- --------------------------------------------------------
Distribution fees -- Class A 112,110
- --------------------------------------------------------
Distribution fees -- Class B 359,002
- --------------------------------------------------------
Distribution fees -- Class C 104,204
- --------------------------------------------------------
Transfer agent fees -- Class A 82,475
- --------------------------------------------------------
Transfer agent fees -- Class B 80,937
- --------------------------------------------------------
Transfer agent fees -- Class C 24,361
- --------------------------------------------------------
Registration and filing fees 77,325
- --------------------------------------------------------
Other 69,236
- --------------------------------------------------------
Total expenses 1,641,599
- --------------------------------------------------------
Less: Fee waivers (43,724)
- --------------------------------------------------------
Expenses paid indirectly (1,853)
- --------------------------------------------------------
Net expenses 1,596,022
- --------------------------------------------------------
Net investment income (loss) (1,112,143)
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain (loss) from:
Investment securities (3,389,752)
- --------------------------------------------------------
Foreign currencies (46)
- --------------------------------------------------------
(3,389,798)
- --------------------------------------------------------
Change in net unrealized appreciation of:
Investment securities 39,861,077
- --------------------------------------------------------
Net gain from investment securities and
foreign currencies 36,471,279
- --------------------------------------------------------
Net increase in net assets resulting from
operations $35,359,136
========================================================
</TABLE>
See Notes to Financial Statements.
FS-59
<PAGE> 318
STATEMENT OF CHANGES IN NET ASSETS
For the period June 7, 1999 (date operations commenced) through October 31, 1999
<TABLE>
<CAPTION>
OCTOBER 31,
1999
------------
<S> <C>
OPERATIONS:
Net investment income (loss) $ (1,112,143)
- --------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (3,389,798)
- --------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 39,861,077
- --------------------------------------------------------------------------
Net increase in net assets resulting from operations 35,359,136
- --------------------------------------------------------------------------
Share transactions-net:
Class A 148,625,216
- --------------------------------------------------------------------------
Class B 161,925,702
- --------------------------------------------------------------------------
Class C 46,998,447
- --------------------------------------------------------------------------
Net increase in net assets 392,908,501
- --------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
- --------------------------------------------------------------------------
End of period $392,908,501
==========================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $356,470,945
- --------------------------------------------------------------------------
Undistributed net investment income (loss) (33,769)
- --------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies (3,389,752)
- --------------------------------------------------------------------------
Unrealized appreciation of investment securities 39,861,077
- --------------------------------------------------------------------------
$392,908,501
==========================================================================
</TABLE>
See Notes to Financial Statements.
FS-60
<PAGE> 319
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Dent Demographic Trends Fund (the "Fund") is a series portfolio of AIM
Equity Funds, Inc. (the "Company"). The Company is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of ten
separate portfolios. The Fund currently offers three different classes of
shares: Class A shares, Class B shares and Class C shares. Class A shares are
sold with a front-end sales charge. Class B shares and Class C shares are sold
with a contingent deferred sales charge. Matters affecting each portfolio or
class will be voted on exclusively by the shareholders of such portfolio or
class. The assets, liabilities and operations of each portfolio are accounted
for separately. Information presented in these financial statements pertains
only to the Fund. The Fund's investment objective is long-term growth of
capital.
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 the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The following is a summary of the significant accounting policies
followed by the Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) 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 any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in the
case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. 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
Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE"). Generally, trading in foreign
securities 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 the 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 they are determined
and the close of the NYSE which would not be reflected in the computation of
the Fund's net asset value. If events materially affecting the value of such
securities occur during such period, then these securities will be valued at
their fair value as determined in good faith by or under the supervision of
the Board of Directors.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income (loss)
increased $1,078,374, undistributed net realized gain (loss) increased $46
and paid in capital decreased $1,078,420 as a result of net operating tax
loss in order to comply with the requirements of the American Institute of
Certified Public Accountants Statement of Position 93-2. Net assets of the
Fund were unaffected by the reclassification discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward of $3,389,675 as of October 31, 1999 which may be carried
forward to offset future taxable gains, if any, which expires, if not
previously utilized, in the year 2007.
D. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions. The
Fund does not separately account for that portion of the results of
operations resulting from changes in foreign exchange rates on investments
and the fluctuations
FS-61
<PAGE> 320
arising from changes in market prices of securities held. Such fluctuations
are included with the net realized and unrealized gain or loss from
investments.
E. Foreign Currency Contracts -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
F. Expenses -- Distribution expenses and transfer agency expenses directly
attributable to a class of shares are charged to that class' operations. All
other expenses which are attributable to more than one class are allocated
among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). H.S. Dent Advisors, Inc. is the Fund's subadvisor. Under
the terms of the master investment advisory agreement, the Fund pays an advisory
fee to AIM at the annual rate of 0.85% of the first $2 billion of the Fund's
average daily net assets, plus 0.80% of the Fund's average daily net assets
exceeding $2 billion. During the period June 7, 1999 (date operations commenced)
through October 31, 1999, AIM waived fees of $43,724.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the period June 7, 1999 (date operations
commenced) through October 31, 1999, AIM was paid $16,849 for such services.
The Fund, pursuant to a transfer agency 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 Fund. During the period June 7, 1999 (date
operations commenced) through October 31, 1999, AFS was paid $82,863 for such
services. The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted a plan
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund ,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.35% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and C shares. Of these amounts, the Fund may
pay a service fee of 0.25% of the average daily net assets of the Class A, Class
B or Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. The Plans also
impose a cap on the total sales charges, including asset-based sales charges
that may be paid by the respective classes. During the period June 7, 1999 (date
operations commenced) through October 31, 1999, the Class A, Class B and Class C
shares paid AIM Distributors $112,110, $359,002 and $104,204, respectively, as
compensation under the Plans. AIM Distributors received commissions of $551,702
from sales of the Class A shares of the Fund during the period June 7, 1999
(date operations commenced) through October 31, 1999. Such commissions are not
an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the period June 7, 1999 (date
operations commenced) through October 31, 1999, AIM Distributors received $3,886
in contingent deferred sales charges imposed on redemptions of Fund shares.
Certain officers and directors of the Company are officers and directors of AIM,
AFS and AIM Distributors. During the period June 7, 1999 (date operations
commenced) through October 31, 1999, the Fund paid legal fees of $988 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-INDIRECT EXPENSES
During the period June 7, 1999 (date operations commenced) through October 31,
1999, the Fund received reductions in transfer agency fees from AFS (an
affiliate of AIM) and reductions in custodian fees of $638 and $1,215,
respectively, under expense offset arrangements. The effect of the above
arrangements resulted in a reduction of the Fund's total expenses of $1,853
during the period June 7, 1999 (date operations commenced) through October 31,
1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 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. During the period
June 7, 1999 (date operations commenced) through October 31, 1999, 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 0.09% 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.
FS-62
<PAGE> 321
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the period June 7, 1999 (date operations
commenced) through October 31, 1999 was $395,499,125 and $63,821,633,
respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $47,072,441
- -------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (7,211,441)
- -------------------------------------------------------------------------
Net unrealized appreciation of investment securities $39,861,000
=========================================================================
</TABLE>
Cost of investments for tax purposes is $352,789,366.
NOTE 7-CAPITAL STOCK
Changes in capital stock outstanding during the period June 7, 1999 (date
operations commenced) through October 31, 1999 were as follows:
<TABLE>
<CAPTION>
OCTOBER 31, 1999
-------------------------
SHARES AMOUNT
---------- ------------
<S> <C> <C>
Sold:
Class A 14,146,708 $155,933,583
- ---------------------------------------------------------------------------------------
Class B 14,828,511 163,946,584
- ---------------------------------------------------------------------------------------
Class C 4,372,731 48,262,483
- ---------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Reacquired:
Class A (651,441) (7,308,367)
- ---------------------------------------------------------------------------------------
Class B (179,461) (2,020,882)
- ---------------------------------------------------------------------------------------
Class C (111,903) (1,264,036)
- ---------------------------------------------------------------------------------------
32,405,145 $357,549,365
=======================================================================================
</TABLE>
FS-63
<PAGE> 322
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A, Class B and
Class C capital stock outstanding during the period June 7, 1999 (date
operations commenced) through October 31, 1999.
<TABLE>
<CAPTION>
CLASS A
-----------
OCTOBER 31,
1999
-----------
<S> <C>
Net asset value, beginning of period $ 10.00
- ------------------------------------------------------------ --------
Income from investment operations:
Net investment income (loss) (0.03)
- ------------------------------------------------------------ --------
Net gains on securities (both realized and unrealized) 2.17
- ------------------------------------------------------------ --------
Total from investment operations 2.14
- ------------------------------------------------------------ --------
Net asset value, end of period $ 12.14
============================================================ ========
Total return(a) 21.40%
============================================================ ========
Ratios/supplement data:
Net assets, end of period (000s omitted) $163,872
============================================================ ========
Ratio of expenses to average net assets(b) 1.60%
============================================================ ========
Ratio of net investment income (loss) to average net
assets(d) (1.00)%
============================================================ ========
Portfolio turnover rate 29%
============================================================ ========
</TABLE>
(a) Does not deduct sales charges and is not annualized for periods less than
one year.
(b) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
1.65% (annualized).
(c) Ratios are annualized and based on average net assets of $86,627,852.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements was (1.05)% (annualized).
<TABLE>
<CAPTION>
CLASS B CLASS C
----------- -----------
OCTOBER 31, OCTOBER 31,
1999 1999
----------- -----------
<S> <C> <C>
Net asset value, beginning of period $ 10.00 $ 10.00
- ------------------------------------------------------------ -------- -------
Income from investment operations:
Net investment income (loss) (0.04) (0.04)
- ------------------------------------------------------------ -------- -------
Net gains on securities (both realized and unrealized) 2.15 2.15
- ------------------------------------------------------------ -------- -------
Total from investment operations 2.11 2.11
- ------------------------------------------------------------ -------- -------
Net asset value, end of period $ 12.11 $ 12.11
============================================================ ======== =======
Total return(a) 21.10% 21.10%
============================================================ ======== =======
Ratios/supplement data:
Net assets, end of period (000s omitted) $177,430 $51,605
============================================================ ======== =======
Ratio of expenses to average net assets(b) 2.24% 2.24%
============================================================ ======== =======
Ratio of net investment income (loss) to average net
assets(d) (1.64)% (1.64)%
============================================================ ======== =======
Portfolio turnover rate 29% 29%
============================================================ ======== =======
</TABLE>
<TABLE>
<S> <C>
(a) Does not deduct contingent deferred sales charges and is not
annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursement. Ratios of
expenses to average net assets prior to fee waivers and/or
expense reimbursements were 2.29% (annualized) for Class B
and 2.29% (annualized) for Class C.
(c) Ratios are annualized and based on average net assets of
$89,140,054 and $25,873,790 for Class B and Class C,
respectively.
(d) After fee waivers and/or expense reimbursements. Ratios of
net investment income (loss) to average net assets prior to
fee waivers and/or expense reimbursements were (1.69)%
(annualized) for Class B and (1.69)% (annualized) for Class
C.
</TABLE>
FS-64
<PAGE> 323
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Equity Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of AIM Large Cap Basic Value Fund (a
portfolio of AIM Equity Funds, Inc.), including the
schedule of investments, as of October 31, 1999, the
related statement of operations, the statement of changes
in net assets, and financial highlights for the period
June 30, 1999 (date operations commenced) through October
31, 1999. 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 financial highlights
based on our audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of October 31, 1999, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Large
Cap Basic Value Fund as of October 31, 1999, the results
of its operations, the changes in its net assets and the
financial highlights for the period June 30, 1999 (date
operations commenced) through October 31, 1999 in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
------------
KPMG LLP
December 3, 1999
Houston, Texas
FS-65
<PAGE> 324
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-90.30%
AUTOMOBILES-1.43%
Ford Motor Co. 300 $ 16,462
- -------------------------------------------------------------
BANKS (MAJOR REGIONAL)-1.89%
Fleet Boston Corp. 500 21,812
- -------------------------------------------------------------
BANKS (MONEY CENTER)-2.79%
Bank of America Corp. 500 32,187
- -------------------------------------------------------------
COMPUTERS (HARDWARE)-2.56%
International Business Machines Corp. 300 29,512
- -------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-7.13%
Akamai Technologies, Inc.(a) 200 29,038
- -------------------------------------------------------------
BMC Software, Inc.(a) 300 19,256
- -------------------------------------------------------------
Computer Associates International, Inc. 600 33,900
- -------------------------------------------------------------
82,194
- -------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-1.74%
McKesson HBOC, Inc. 1,000 20,063
- -------------------------------------------------------------
ELECTRIC COMPANIES-6.86%
Central and South West Corp. 800 17,750
- -------------------------------------------------------------
Illinova Corp. 500 15,906
- -------------------------------------------------------------
Niagara Mohawk Holdings, Inc.(a) 1,400 22,225
- -------------------------------------------------------------
Texas Utilities Co. 600 23,250
- -------------------------------------------------------------
79,131
- -------------------------------------------------------------
ELECTRICAL EQUIPMENT-2.70%
Koninklijke (Royal) Phillips
Electronics N.V.-ADR (Netherlands) 300 31,181
- -------------------------------------------------------------
ENGINEERING & CONSTRUCTION-0.79%
McDermott International, Inc. 500 9,063
- -------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-9.45%
Associates First Capital Corp.-Class A 400 14,600
- -------------------------------------------------------------
Citigroup Inc. 800 43,300
- -------------------------------------------------------------
Fannie Mae 300 21,225
- -------------------------------------------------------------
MGIC Investment Corp. 500 29,875
- -------------------------------------------------------------
109,000
- -------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-1.40%
Pharmacia & Upjohn, Inc. 300 16,181
- -------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-3.44%
Columbia/HCA Healthcare Corp. 800 19,300
- -------------------------------------------------------------
Health Management Associates,
Inc.-Class A(a) 2,300 20,413
- -------------------------------------------------------------
39,713
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (LONG TERM CARE)-0.96%
Manor Care, Inc.(a) 700 $ 11,025
- -------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-3.14%
United Healthcare Corp. 700 36,181
- -------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.60%
Beckman Coulter, Inc. 400 18,400
- -------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.86%
UnumProvident Corp. 300 9,881
- -------------------------------------------------------------
INSURANCE (MULTI-LINE)-1.12%
American International Group, Inc. 125 12,867
- -------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-2.96%
Travelers Property Casualty Corp.-Class A
500 18,000
- -------------------------------------------------------------
XL Capital Ltd.-Class A 300 16,106
- -------------------------------------------------------------
34,106
- -------------------------------------------------------------
INVESTMENT MANAGEMENT-1.82%
Franklin Resources, Inc. 600 21,000
- -------------------------------------------------------------
LEISURE TIME (PRODUCTS)-2.20%
Mattel, Inc. 1,900 25,413
- -------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-2.34%
Minnesota Mining and Manufacturing Co. 200 19,013
- -------------------------------------------------------------
Tyco International Ltd. 200 7,988
- -------------------------------------------------------------
27,001
- -------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-1.59%
Parker Hannifin Corp. 400 18,325
- -------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-6.00%
Diamond Offshore Drilling, Inc. 500 15,875
- -------------------------------------------------------------
ENSCO International, Inc. 800 15,500
- -------------------------------------------------------------
Schlumberger Ltd. 400 24,225
- -------------------------------------------------------------
Transocean Offshore, Inc. 500 13,594
- -------------------------------------------------------------
69,194
- -------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-2.42%
Atlantic Richfield Co. 300 27,956
- -------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-2.51%
Mobil Corp. 300 28,950
- -------------------------------------------------------------
PAPER & FOREST PRODUCTS-2.28%
International Paper Co. 500 26,313
- -------------------------------------------------------------
PERSONAL CARE-0.84%
Avon Products, Inc. 300 9,675
- -------------------------------------------------------------
</TABLE>
FS-66
<PAGE> 325
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (DEPARTMENT STORES)-1.86%
Federated Department Stores, Inc.(a) 300 $ 12,806
- -------------------------------------------------------------
Saks, Inc.(a) 500 8,594
- -------------------------------------------------------------
21,400
- -------------------------------------------------------------
RETAIL (FOOD CHAINS)-1.57%
Albertson's, Inc. 500 18,156
- -------------------------------------------------------------
SERVICES (DATA PROCESSING)-1.98%
First Data Corp. 500 22,844
- -------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-2.03%
AT&T Corp. 500 23,375
- -------------------------------------------------------------
TELEPHONE-4.46%
Bell Atlantic Corp. 400 25,975
- -------------------------------------------------------------
SBC Communications, Inc. 500 25,469
- -------------------------------------------------------------
51,444
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TOBACCO-1.75%
Philip Morris Companies, Inc. 800 $ 20,150
- -------------------------------------------------------------
WASTE MANAGEMENT-1.83%
Waste Management, Inc. 1,150 21,131
- -------------------------------------------------------------
Total Common Stocks & Other Equity
Interests (Cost $1,126,359) 1,041,286
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. GOVERNMENT AGENCY
SECURITIES-10.06%
FEDERAL HOME LOAN MORTGAGE CORP.
("FHLMC")-10.06%
Discount Notes 5.16%, 11/01/99 (Cost
$116,000) $116,000 116,000
==============================================================
TOTAL INVESTMENTS-100.36% 1,157,286
==============================================================
LIABILITIES LESS OTHER ASSETS-(0.36%) (4,179)
==============================================================
NET ASSETS-100.00% $1,153,107
==============================================================
</TABLE>
Investment Abbreviation:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a) Non-income producing security.
See Notes to Financial Statements.
FS-67
<PAGE> 326
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$1,242,359) $ 1,157,286
- --------------------------------------------------------
Cash 656
- --------------------------------------------------------
Receivables for:
- --------------------------------------------------------
Dividends and interest 1,441
- --------------------------------------------------------
Investment for deferred compensation
plan 1,207
- --------------------------------------------------------
Due from advisor 10,800
- --------------------------------------------------------
Other assets 6,374
- --------------------------------------------------------
Total assets 1,177,764
- --------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 14,373
- --------------------------------------------------------
Deferred compensation 1,207
- --------------------------------------------------------
Accrued administrative services fees 4,247
- --------------------------------------------------------
Accrued distribution fees 322
- --------------------------------------------------------
Accrued transfer agent fees 32
- --------------------------------------------------------
Accrued operating expenses 4,476
- --------------------------------------------------------
Total liabilities 24,657
- --------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $ 1,153,107
========================================================
NET ASSETS:
Class A $ 1,153,107
========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 122,735
========================================================
Class A:
Net asset value and redemption price per
share $ 9.40
- --------------------------------------------------------
Offering price per share:
(Net asset value of $9.40 divided
by 94.50%) $ 9.95
========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the period June 30, 1999 (date operations commenced) through October 31,
1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends $ 5,355
- -------------------------------------------------------
Interest 2,565
- -------------------------------------------------------
Total investment income 7,920
- -------------------------------------------------------
EXPENSES:
Advisory fees 2,279
- -------------------------------------------------------
Administrative services fees 16,849
- -------------------------------------------------------
Custodian fees 2,387
- -------------------------------------------------------
Directors' fees 1,608
- -------------------------------------------------------
Distribution fees -- Class A 1,330
- -------------------------------------------------------
Transfer agent fees -- Class A 155
- -------------------------------------------------------
Registration and filing fees 2,577
- -------------------------------------------------------
Printing fees 5,752
- -------------------------------------------------------
Professional fees 5,004
- -------------------------------------------------------
Other 115
- -------------------------------------------------------
Total expenses 38,056
- -------------------------------------------------------
Less: Fee waivers and reimbursement (33,310)
- -------------------------------------------------------
Expenses paid indirectly (134)
- -------------------------------------------------------
Net expenses 4,612
- -------------------------------------------------------
Net investment income 3,308
- -------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities 10,947
- -------------------------------------------------------
Futures contracts (2,451)
- -------------------------------------------------------
8,496
- -------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities (85,073)
- -------------------------------------------------------
Net gain (loss) from investment
securities and futures contracts (76,577)
- -------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $(73,269)
=======================================================
</TABLE>
See Notes to Financial Statements.
FS-68
<PAGE> 327
STATEMENT OF CHANGES IN NET ASSETS
For the period June 30, 1999 (date operations commenced) through October 31,
1999
<TABLE>
<CAPTION>
OCTOBER 31,
1999
-----------
<S> <C>
OPERATIONS:
Net investment income $ 3,308
- -------------------------------------------------------------------------
Net realized gain from investment securities and futures
contracts 8,496
- -------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities and futures contracts (85,073)
- -------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (73,269)
- -------------------------------------------------------------------------
Share transactions-net:
Class A 1,226,376
- -------------------------------------------------------------------------
Net increase in net assets 1,153,107
- -------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
- -------------------------------------------------------------------------
End of period $1,153,107
=========================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,222,360
- -------------------------------------------------------------------------
Undistributed net investment income 7,324
- -------------------------------------------------------------------------
Undistributed net realized gain from investment securities
and futures contracts 8,496
- -------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities and futures contracts (85,073)
- -------------------------------------------------------------------------
$1,153,107
=========================================================================
</TABLE>
See Notes to Financial Statements.
FS-69
<PAGE> 328
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Large Cap Basic Value Fund (the "Fund") is a series portfolio of AIM Equity
Funds, Inc. (the "Company"). The Company is a Maryland corporation registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of ten separate
portfolios. The Fund currently consists of three different classes of shares:
Class A shares, Class B shares and Class C shares. Class A shares are sold with
a front-end sales charge and are currently available only to employees of A I M
Management Group, Inc., AMVESCAP PLC and their affiliates, to any current or
retired officer, director or trustee of The AIM Family of Funds and to residents
of Texas. Class B shares and Class C shares will be sold with a contingent
deferred sales charge. Matters affecting each portfolio or class will be voted
on exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is long-term growth of capital with a secondary
objective of current income.
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 the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the
last sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) 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 any of the above methods are valued based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. 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
Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities 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 the 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 they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair
value as determined in good faith by or under the supervision of the Board
of Directors.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was increased by
$4,016 and paid-in capital decreased by $4,016 as a result of nondeductible
expense reclassifications in order to comply with the requirements of the
American Institute of Certified Public Accountants Statement of Position
93-2. Net assets of the Fund were unaffected by the reclassification
discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Futures Contracts -- The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits
required upon entering into futures contracts are satisfied by the
segregation of specific securities as collateral for the account of the
broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to
FS-70
<PAGE> 329
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and that a change in value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Expenses -- Distribution expenses and transfer agency expenses directly
attributable to a class of shares are charged to that class' operations.
All other expenses which are attributable to more than one class are
allocated among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.60% of
the first $1 billion of the Fund's average daily net assets, plus 0.575% over $1
billion to and including $2 billion of the Fund's average daily net assets and
0.55% of the Fund's average daily net assets over $2 billion. During the period
June 30, 1999 (date operations commenced) through October 31, 1999, AIM waived
fees of $2,279 and reimbursed expenses of $31,031.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the period June 30, 1999 (date
operations commenced) through October 31, 1999, AIM was paid $16,849 for such
services.
The Fund, pursuant to a transfer agency 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 Fund. During the period June 30, 1999 (date
operations commenced) through October 31, 1999, AFS was paid $76 for such
services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted a plan
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.35% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and C shares. Of these amounts, the Fund may
pay a service fee of 0.25% of the average daily net assets of the Class A, Class
B or Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. The Plans also
impose a cap on the total sales charges, including asset-based sales charges
that may be paid by the respective classes. During the period June 30, 1999
(date operations commenced) through October 31, 1999, the Class A shares paid
AIM Distributors $1,330 as compensation under the Plans.
During the period June 30, 1999 (date operations commenced) through October
31, 1999, the Fund paid legal fees of $951 for services rendered by Kramer,
Levin, Naftalis & Frankel LLP as counsel to the Company's directors. A member of
that firm is a director of the Company.
NOTE 3-INDIRECT EXPENSES
During the period June 30, 1999 (date operations commenced) through October 31,
1999, the Fund received reductions in transfer agency fees from AFS (an
affiliate of AIM) and reductions in custodian fees of $3 and $131, respectively,
under expense offset arrangements. The effect of the above arrangements resulted
in a reduction of the Fund's total expenses of $134 during the period June 30,
1999 (date operations commenced) through October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 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. During the period
June 30, 1999 (date operations commenced) through October 31, 1999, 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 0.09% 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.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the period June 30, 1999 (date operations
commenced) through October 31, 1999 was $1,209,659 and $94,251, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 49,862
- --------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (138,464)
- --------------------------------------------------------
Net unrealized depreciation of investment
securities $ (88,602)
========================================================
</TABLE>
Cost of investments for tax purposes is $1,245,888.
FS-71
<PAGE> 330
NOTE 7-CAPITAL STOCK
Changes in capital stock outstanding during the period June 30, 1999 (date
operations commenced) through October 31, 1999 were as follows:
<TABLE>
<CAPTION>
OCTOBER 31, 1999
--------------------
SHARES AMOUNT
------- ----------
<S> <C> <C>
Sold:
Class A 125,927 $1,256,078
- ----------------------------------------------------------------------------------
Reacquired:
Class A (3,192) (29,702)
- ----------------------------------------------------------------------------------
122,735 $1,226,376
==================================================================================
</TABLE>
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during the period June 30, 1999 (date operations commenced) through
October 31, 1999.
<TABLE>
<CAPTION>
CLASS A
-----------
OCTOBER 31,
1999
-----------
<S> <C>
Net asset value, beginning of period $10.00
- ------------------------------------------------------------ ------
Income from investment operations:
Net investment income 0.03
- ------------------------------------------------------------ ------
Net gains (losses) on securities (both realized and
unrealized) (0.63)
- ------------------------------------------------------------ ------
Total from investment operations (0.60)
- ------------------------------------------------------------ ------
Net asset value, end of period $ 9.40
============================================================ ======
Total return(a) (6.00)%
============================================================ ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,153
============================================================ ======
Ratio of expenses to average net assets(b) 1.25%
============================================================ ======
Ratio of net investment income to average net assets(d) 0.87%
============================================================ ======
Portfolio turnover rate 10%
============================================================ ======
</TABLE>
(a) Does not deduct sales charges and is not annualized for periods less than
one year.
(b) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
10.02% (annualized).
(c) Ratios are annualized and based on average net assets of $1,127,371.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements was (7.90)% (annualized).
FS-72
<PAGE> 331
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Equity Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of AIM Large Cap Growth Fund (a portfolio of
AIM Equity Funds, Inc.), including the schedule of
investments, as of October 31, 1999, the related
statement of operations, the statement of changes in net
assets, and financial highlights for the period March 1,
1999 (date operations commenced) through October 31,
1999. 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 financial highlights based on
our audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of October 31, 1999, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Large
Cap Growth Fund as of October 31, 1999, the results of
its operations, the changes in its net assets and the
financial highlights for the period March 1, 1999 (date
operations commenced) through October 31, 1999 in
conformity with generally accepted accounting principles.
/s/KPMG LLP
-----------
KPMG LLP
December 3, 1999
Houston, Texas
FS-73
<PAGE> 332
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-84.06%
BEVERAGES (NON-ALCOHOLIC)-0.52%
Coca-Cola Co. (The) 1,230 $ 72,570
- -------------------------------------------------------------
BIOTECHNOLOGY-0.92%
Amgen, Inc.(a) 1,600 127,600
- -------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-6.76%
AT&T Corp.-Liberty Media Group-Class
A(a) 2,600 103,187
- -------------------------------------------------------------
Cablevision Systems Corp.-Class A(a) 5,000 337,812
- -------------------------------------------------------------
Clear Channel Communications, Inc.(a) 1,980 159,142
- -------------------------------------------------------------
Comcast Corp.-Class A 5,300 223,262
- -------------------------------------------------------------
Infinity Broadcasting Corp.-Class A(a) 3,300 114,056
- -------------------------------------------------------------
937,459
- -------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-3.90%
JDS Uniphase Corp.(a) 400 66,750
- -------------------------------------------------------------
Lucent Technologies Inc. 1,960 125,930
- -------------------------------------------------------------
Motorola, Inc. 2,200 214,362
- -------------------------------------------------------------
QUALCOMM, Inc.(a) 600 133,650
- -------------------------------------------------------------
540,692
- -------------------------------------------------------------
COMPUTERS (HARDWARE)-4.71%
Dell Computer Corp.(a) 3,600 144,450
- -------------------------------------------------------------
Gateway, Inc.(a) 2,100 138,731
- -------------------------------------------------------------
International Business Machines Corp. 1,500 147,562
- -------------------------------------------------------------
Sun Microsystems, Inc.(a) 2,100 222,206
- -------------------------------------------------------------
652,949
- -------------------------------------------------------------
COMPUTERS (NETWORKING)-2.78%
Cisco Systems, Inc.(a) 5,200 384,800
- -------------------------------------------------------------
COMPUTERS (PERIPHERALS)-1.50%
EMC Corp.(a) 2,000 146,000
- -------------------------------------------------------------
Lexmark International Group,
Inc.-Class A(a) 800 62,450
- -------------------------------------------------------------
208,450
- -------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-13.30%
America Online, Inc.(a) 2,000 259,375
- -------------------------------------------------------------
Intuit, Inc.(a) 2,100 61,163
- -------------------------------------------------------------
Microsoft Corp.(a) 8,400 777,525
- -------------------------------------------------------------
Oracle Corp.(a) 4,000 190,250
- -------------------------------------------------------------
Siebel Systems, Inc.(a) 1,500 164,719
- -------------------------------------------------------------
Unisys Corp.(a) 2,800 67,900
- -------------------------------------------------------------
VERITAS Software Corp.(a) 2,000 215,750
- -------------------------------------------------------------
Yahoo! Inc.(a) 600 107,438
- -------------------------------------------------------------
1,844,120
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONSUMER FINANCE-1.02%
Providian Financial Corp. 1,300 $ 141,700
- -------------------------------------------------------------
ELECTRICAL EQUIPMENT-3.91%
General Electric Co. 4,000 542,250
- -------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-4.26%
Intel Corp. 2,300 178,106
- -------------------------------------------------------------
Linear Technology Corp. 1,100 76,931
- -------------------------------------------------------------
LSI Logic Corp.(a) 1,000 53,188
- -------------------------------------------------------------
Texas Instruments, Inc. 2,100 188,475
- -------------------------------------------------------------
Xilinx, Inc.(a) 1,200 94,350
- -------------------------------------------------------------
591,050
- -------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-0.76%
Applied Materials, Inc.(a) 550 49,397
- -------------------------------------------------------------
Teradyne, Inc.(a) 1,470 56,595
- -------------------------------------------------------------
105,992
- -------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-4.03%
American Express Co. 1,000 154,000
- -------------------------------------------------------------
Freddie Mac 7,500 405,469
- -------------------------------------------------------------
559,469
- -------------------------------------------------------------
FOOTWEAR-0.41%
Nike, Inc.-Class B 1,000 56,438
- -------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-8.34%
American Home Products Corp. 2,000 104,500
- -------------------------------------------------------------
Bristol-Myers Squibb Co. 4,500 345,656
- -------------------------------------------------------------
Johnson & Johnson 4,000 419,000
- -------------------------------------------------------------
Warner-Lambert Co. 3,600 287,325
- -------------------------------------------------------------
1,156,481
- -------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-3.83%
Merck & Co., Inc. 900 71,606
- -------------------------------------------------------------
Pfizer, Inc. 7,400 292,300
- -------------------------------------------------------------
Pharmacia & Upjohn, Inc. 1,000 53,938
- -------------------------------------------------------------
Schering-Plough Corp. 2,300 113,850
- -------------------------------------------------------------
531,694
- -------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-4.38%
Guidant Corp. 8,800 434,500
- -------------------------------------------------------------
Medtronic, Inc. 5,000 173,125
- -------------------------------------------------------------
607,625
- -------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-1.29%
Procter & Gamble, Co. (The) 1,700 178,288
- -------------------------------------------------------------
</TABLE>
FS-74
<PAGE> 333
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (MULTI-LINE)-3.19%
American International Group, Inc. 4,300 $ 442,631
- -------------------------------------------------------------
LODGING (HOTELS)-0.80%
Carnival Corp. 2,500 111,250
- -------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-2.65%
AlliedSignal, Inc. 1,100 62,631
- -------------------------------------------------------------
Tyco International Ltd. 4,600 183,713
- -------------------------------------------------------------
United Technologies Corp. 2,000 121,000
- -------------------------------------------------------------
367,344
- -------------------------------------------------------------
NATURAL GAS-0.66%
Enron Corp. 2,300 91,856
- -------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-0.37%
AES Corp.(a) 900 50,794
- -------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-2.41%
Home Depot, Inc. (The) 2,675 201,963
- -------------------------------------------------------------
Lowe's Companies, Inc. 2,400 132,000
- -------------------------------------------------------------
333,963
- -------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-0.56%
Best Buy Co., Inc.(a) 1,400 77,788
- -------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-3.00%
Dayton Hudson Corp. 3,200 206,800
- -------------------------------------------------------------
Wal-Mart Stores, Inc. 3,700 209,744
- -------------------------------------------------------------
416,544
- -------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.43%
Gap, Inc. (The) 1,600 59,400
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (ADVERTISING/MARKETING)-1.08%
Omnicom Group, Inc. 1,700 $ 149,600
- -------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-2.29%
MCI WorldCom, Inc.(a) 3,700 317,506
- -------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$10,450,007) 11,658,303
- -------------------------------------------------------------
FOREIGN STOCKS-5.21%
CANADA-0.63%
Nortel Networks Corp. (Communications
Equipment) 1,400 86,712
- -------------------------------------------------------------
FINLAND-4.58%
Nokia Oyj-ADR (Communications
Equipment) 5,500 635,594
- -------------------------------------------------------------
Total Foreign Stocks (Cost
$481,940) 722,306
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY SECURITIES-0.11%
U.S. TREASURY BILLS-0.11%(B)
4.748%, 12/23/99 (Cost $14,896) $ 15,000(c) 14,896
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS-11.88%
STIC Liquid Assets Portfolio(d) 824,288 824,288
- -------------------------------------------------------------
STIC Prime Portfolio(d) 824,288 824,288
- -------------------------------------------------------------
Total Money Market Funds (Cost
$1,648,576) 1,648,576
- -------------------------------------------------------------
TOTAL INVESTMENTS-101.26% 14,044,081
- -------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS-(1.26%) (174,655)
- -------------------------------------------------------------
NET ASSETS-100.00% $13,869,426
=============================================================
</TABLE>
Investment Abbreviation:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(c) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contract. See Note 7.
(d) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-75
<PAGE> 334
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$12,595,419) $14,044,081
- --------------------------------------------------------
Receivables for:
Capital stock sold 92,779
- --------------------------------------------------------
Dividends and interest 4,890
- --------------------------------------------------------
Investments sold 68,958
- --------------------------------------------------------
Variation margin 3,900
- --------------------------------------------------------
Investment for deferred compensation plan 4,098
- --------------------------------------------------------
Other assets 30,258
- --------------------------------------------------------
Total assets 14,248,964
- --------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock acquired 160,389
- --------------------------------------------------------
Investments purchased 160,022
- --------------------------------------------------------
Deferred compensation plan 4,098
- --------------------------------------------------------
Accrued advisory fees 10,176
- --------------------------------------------------------
Accrued administrative services fees 4,247
- --------------------------------------------------------
Accrued directors' fees 580
- --------------------------------------------------------
Accrued distribution fees 7,598
- --------------------------------------------------------
Accrued transfer agent fees 2,232
- --------------------------------------------------------
Accrued operating expenses 30,196
- --------------------------------------------------------
Total liabilities 379,538
- --------------------------------------------------------
Net assets applicable to shares outstanding $13,869,426
========================================================
NET ASSETS:
Class A $ 7,785,199
========================================================
Class B $ 5,183,176
========================================================
Class C $ 901,051
========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 689,363
========================================================
Class B:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 460,761
========================================================
Class C:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 80,064
========================================================
Class A:
Net asset value and redemption price per
share $ 11.29
- --------------------------------------------------------
Offering price per share:
(Net asset value of $11.29 / 94.50%) $ 11.95
========================================================
Class B:
Net asset value and offering price per
share $ 11.25
========================================================
Class C:
Net asset value and offering price per
share $ 11.25
========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the period March 1, 1999 (date operations commenced) through October 31,
1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $116 foreign withholding
tax) $ 23,063
- --------------------------------------------------------
Interest 29,637
- --------------------------------------------------------
Total investment income 52,700
- --------------------------------------------------------
EXPENSES:
Advisory fees 42,255
- --------------------------------------------------------
Administrative services fees 29,197
- --------------------------------------------------------
Custodian fees 7,781
- --------------------------------------------------------
Directors' fees 6,085
- --------------------------------------------------------
Distribution fees -- Class A 13,159
- --------------------------------------------------------
Distribution fees -- Class B 16,134
- --------------------------------------------------------
Distribution fees -- Class C 2,610
- --------------------------------------------------------
Transfer agent fees -- Class A 5,220
- --------------------------------------------------------
Transfer agent fees -- Class B 2,113
- --------------------------------------------------------
Transfer agent fees -- Class C 342
- --------------------------------------------------------
Registration and filing fees 45,848
- --------------------------------------------------------
Professional fees 24,335
- --------------------------------------------------------
Other 23,014
- --------------------------------------------------------
Total expenses 218,093
- --------------------------------------------------------
Less: Fee waivers and reimbursement (118,380)
- --------------------------------------------------------
Expenses paid indirectly (203)
- --------------------------------------------------------
Net expenses 99,510
- --------------------------------------------------------
Net investment income (loss) (46,810)
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FUTURES
CONTRACTS:
Net realized gain (loss) from:
Investment securities (425,297)
- --------------------------------------------------------
Futures contracts (4,655)
- --------------------------------------------------------
(429,952)
- --------------------------------------------------------
Change in net unrealized appreciation of:
Investment securities 1,448,662
- --------------------------------------------------------
Futures contracts 5,475
- --------------------------------------------------------
1,454,137
- --------------------------------------------------------
Net gain from investment securities
and futures contracts 1,024,185
- --------------------------------------------------------
Net increase in net assets resulting from
operations $ 977,375
========================================================
</TABLE>
See Notes to Financial Statements.
FS-76
<PAGE> 335
STATEMENT OF CHANGES IN NET ASSETS
For the period March 1, 1999 (date operations commenced) through October 31,
1999
<TABLE>
<CAPTION>
OCTOBER 31,
1999
-----------
<S> <C>
OPERATIONS:
Net investment income (loss) $ (46,810)
- -------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
futures contracts (429,952)
- -------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and futures contracts 1,454,137
- -------------------------------------------------------------------------
Net increase in net assets resulting from operations 977,375
- -------------------------------------------------------------------------
Share transactions-net:
Class A 7,163,788
- -------------------------------------------------------------------------
Class B 4,882,266
- -------------------------------------------------------------------------
Class C 845,997
- -------------------------------------------------------------------------
Net increase in net assets 13,869,426
- -------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
- -------------------------------------------------------------------------
End of period $13,869,426
=========================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $12,880,971
- -------------------------------------------------------------------------
Undistributed net investment income (loss) (35,730)
- -------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and futures contracts (429,952)
- -------------------------------------------------------------------------
Unrealized appreciation of investment securities and
futures contracts 1,454,137
- -------------------------------------------------------------------------
$13,869,426
=========================================================================
</TABLE>
See Notes to Financial Statements.
FS-77
<PAGE> 336
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Large Cap Growth Fund (the "Fund") is a series portfolio of AIM Equity
Funds, Inc. (the "Company"). The Company is a Maryland corporation registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of ten separate
portfolios. The Fund currently offers three different classes of shares: Class A
shares, Class B shares and Class C shares. Class A shares are sold with a
front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is long-term growth of capital.
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 the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) 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 any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. 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 Company's officers in a
manner specifically authorized by the Board of Directors of the Company.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. For purposes of determining
net asset value per share, futures and options contracts generally will be
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities 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 the 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 they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was increased by
$11,080 and paid-in capital decreased by $11,080 as a result of nondeductible
expense reclassifications in order to comply with the requirements of the
American Institute of Certified Public Accountants Statement of Position
93-2. Net assets of the Fund were unaffected by the reclassification
discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements. The Fund has a capital loss
carryforward of $380,100 as of October 31, 1999 which may be carried forward
to offset future taxable gains, if any, which expires, if not previously
utilized, in the year 2007.
D. Futures Contracts -- The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits required
upon entering into futures contracts are satisfied by the segregation of
specific securities as collateral for the account of the broker (the Fund's
agent in acquiring the futures position). During the period the futures
contracts are open, changes in the value of the contracts are recognized as
unrealized gains or losses by "marking to market" on a daily basis to reflect
the market value of the
FS-78
<PAGE> 337
contracts at the end of each day's trading. Variation margin payments are
made or received depending upon whether unrealized gains or losses are
incurred. When the contracts are closed, the Fund recognizes a realized gain
or loss equal to the difference between the proceeds from, or cost of, the
closing transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and that a change in value of the contracts
may not correlate with changes in the value of the securities being hedged.
E. Expenses -- Distribution expenses and transfer agency
expenses directly attributable to a class of shares are charged to that
class' operations. All other expenses which are attributable to more than one
class are allocated among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of
the first $1 billion of the Fund's average daily net assets, plus 0.70% over $1
billion to and including $2 billion of the Fund's average daily net assets and
0.625% of the Fund's average daily net assets over $2 billion. During the period
March 1, 1999 (date operations commenced) through October 31, 1999, AIM waived
fees of $32,079 and reimbursed expenses of $86,301.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the period March 1, 1999 (date
operations commenced) through October 31, 1999, AIM was paid $29,197 for such
services.
The Fund, pursuant to a transfer agency 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 Fund. During the period March 1, 1999 (date
operations commenced) through October 31, 1999, AFS was paid $2,310 for such
services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted a plan
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund ,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.35% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and C shares. Of these amounts, the Fund may
pay a service fee of 0.25% of the average daily net assets of the Class A, Class
B or Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. The Plans also
impose a cap on the total sales charges, including asset-based sales charges
that may be paid by the respective classes. During the period March 1, 1999
(date operations commenced) through October 31, 1999, the Class A, Class B and
Class C shares paid AIM Distributors $13,159, $16,134 and 2,610, respectively,
as compensation under the Plans.
AIM Distributors received commissions of $12,562 from sales of the Class A
shares of the Fund during the period March 1, 1999 (date operations commenced)
through October 31, 1999. Such commissions are not an expense of the Fund. They
are deducted from, and are not included in, the proceeds from sales of Class A
shares. During the period March 1, 1999 (date operations commenced) through
October 31, 1999, AIM Distributors received $373 in contingent deferred sales
charges imposed on redemptions of Fund shares. Certain officers and directors of
the Company are officers and directors of AIM, AFS and AIM Distributors.
During the period March 1, 1999 (date operations commenced) through October
31, 1999, the Fund paid legal fees of $2,211 for services rendered by Kramer,
Levin, Naftalis & Frankel LLP as counsel to the Company's directors. A member of
that firm is a director of the Company.
NOTE 3-INDIRECT EXPENSES
During the period March 1, 1999 (date operations commenced) through October 31,
1999, the Fund received reductions in transfer agency fees from AFS (an
affiliate of AIM) and reductions in custodian fees of $55 and $148,
respectively, under expense offset arrangements. The effect of the above
arrangements resulted in a reduction of the Fund's total expenses of $203 during
the period March 1, 1999 (date operations commenced) through October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 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. During the period
March 1, 1999 (date operations commenced) through October 31, 1999, 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 0.09% 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.
FS-79
<PAGE> 338
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the period March 1, 1999 (date operations
commenced) through October 31, 1999 was $12,918,797 and $1,561,062,
respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $1,703,186
- ------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (298,900)
- ------------------------------------------------------------------------
Net unrealized appreciation of investment securities $1,404,286
========================================================================
</TABLE>
Cost of investments for tax purposes is $12,639,795
NOTE 7-FUTURES CONTRACTS
On October 31, 1999, $15,000 principal amount of U.S. Treasury obligations were
pledged as collateral to cover margin requirements for open futures contracts.
Open futures contracts were as follows:
<TABLE>
<CAPTION>
NO. OF MONTH/ UNREALIZED
CONTRACT CONTRACTS COMMITMENT APPRECIATION
- ------------------------------------------------------------ --------- ---------- ------------
<S> <C> <C> <C>
E-mini S & P 500 Index 3 Dec. 99 $5,475
============================================================ ========= ========== ============
</TABLE>
NOTE 8-CAPITAL STOCK
Changes in capital stock outstanding during the period March 1, 1999 (date
operations commenced) through October 31, 1999 were as follows:
<TABLE>
<CAPTION>
1999
-----------------------
SHARES AMOUNT
--------- -----------
<S> <C> <C>
Sold:
Class A 788,751 $ 8,217,840
- -------------------------------------------------------------------------------------
Class B 577,653 6,130,128
- -------------------------------------------------------------------------------------
Class C 85,761 907,295
- -------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Reacquired:
Class A (99,388) (1,054,052)
- -------------------------------------------------------------------------------------
Class B (116,892) (1,247,862)
- -------------------------------------------------------------------------------------
Class C (5,697) (61,298)
- -------------------------------------------------------------------------------------
1,230,188 $12,892,051
=====================================================================================
</TABLE>
FS-80
<PAGE> 339
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during the period March 1, 1999 (date operations commenced) through
October 31, 1999, and for a share of Class B and Class C outstanding during the
period April 5, 1999 (date sales commenced) through October 31, 1999.
<TABLE>
<CAPTION>
CLASS A
-------
1999
-------
<S> <C>
Net asset value, beginning of period $10.00
- ------------------------------------------------------------ ------
Income from investment operations:
Net investment income (loss) (0.04)
- ------------------------------------------------------------ ------
Net gains on securities (both realized and unrealized) 1.33
- ------------------------------------------------------------ ------
Total from investment operations 1.29
- ------------------------------------------------------------ ------
Net asset value, end of period $11.29
============================================================ ======
Total return(a) 13.70%
============================================================ ======
Ratios/supplement data:
Net assets, end of period (000s omitted) $7,785
============================================================ ======
Ratio of expenses to average net assets(b) 1.53%(c)
============================================================ ======
Ratio of net investment income to average net assets(d) (0.59)%(c)
============================================================ ======
Portfolio turnover rate 21%
============================================================ ======
</TABLE>
(a) Does not deduct sales charges and is not annualized for periods less than
one year.
(b) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
3.63% (annualized).
(c) Ratios are annualized and based on average net assets of $5,601,043.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements was (2.69)% (annualized).
<TABLE>
<CAPTION>
CLASS B CLASS C
------- -------
1999 1999
------- -------
<S> <C> <C>
Net asset value, beginning of period $11.02 $11.02
- ------------------------------------------------------------ ------ ------
Income from investment operations:
Net investment income (loss)(a) (0.08) (0.08)
- ------------------------------------------------------------ ------ ------
Net gains (losses) on securities (both realized and
unrealized) 0.31 0.31
- ------------------------------------------------------------ ------ ------
Total from investment operations 0.23 0.23
- ------------------------------------------------------------ ------ ------
Net asset value, end of period $11.25 $11.25
============================================================ ====== ======
Total return(b) 2.09% 2.09%
============================================================ ====== ======
Ratios/supplement data:
Net assets, end of period (000s omitted) $5,183 $ 901
============================================================ ====== ======
Ratio of expenses to average net assets(c) 2.23%(d) 2.23%(d)
============================================================ ====== ======
Ratio of net investment income (loss) to average net
assets(e) (1.29)%(d) (1.29)%(d)
============================================================ ====== ======
Portfolio turnover rate 21% 21%
============================================================ ====== ======
</TABLE>
(a) Calculated based upon the average shares outstanding during the period.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) After fee waivers and/or expense reimbursement. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
4.33% (annualized) for Class B and 4.33% (annualized) for Class C.
(d) Ratios are annualized and based on average net assets of $2,804,277 and
$453,655 for Class B and Class C, respectively.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (3.39)% (annualized) for Class B and (3.39)%
(annualized) for Class C.
FS-81
<PAGE> 340
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Equity Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of AIM Weingarten Fund (a portfolio of AIM
Equity Funds, Inc.), including the schedule of
investments, as of October 31, 1999, 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 financial
highlights for each of the years in the five-year period
then ended. 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 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 October 31, 1999, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and
financial highlights referred to above present fairly, in
all material respects, the financial position of AIM
Weingarten Fund as of October 31, 1999, 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 five-year period then ended in
conformity with generally accepted accounting principles.
/s/KPMG LLP
-----------
KPMG LLP
December 3, 1999
Houston, Texas
FS-82
<PAGE> 341
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS & OTHER
EQUITY INTERESTS-94.51%
BIOTECHNOLOGY-0.32%
Amgen, Inc.(a) 386,300 $ 30,807,425
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-7.88%
AT&T Corp. - Liberty Media
Group-Class A(a) 3,300,000 130,968,750
- ---------------------------------------------------------------
Cablevision Systems Corp.-Class
A(a) 579,700 39,165,981
- ---------------------------------------------------------------
Clear Channel Communications,
Inc.(a) 2,000,000 160,750,000
- ---------------------------------------------------------------
Comcast Corp.-Class A 6,554,600 276,112,525
- ---------------------------------------------------------------
Cox Communications, Inc.-Class
A(a) 2,330,900 105,910,269
- ---------------------------------------------------------------
Infinity Broadcasting Corp.-Class
A(a) 1,274,500 44,049,906
- ---------------------------------------------------------------
756,957,431
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-9.33%
General Instrument Corp.(a) 2,822,200 151,869,637
- ---------------------------------------------------------------
JDS Uniphase Corp.(a) 250,000 41,718,750
- ---------------------------------------------------------------
Lucent Technologies Inc. 2,500,000 160,625,000
- ---------------------------------------------------------------
Motorola, Inc. 1,100,000 107,181,250
- ---------------------------------------------------------------
Nokia Oyj-ADR (Finland) 1,000,000 115,562,500
- ---------------------------------------------------------------
Nortel Networks Corp. (Canada) 3,250,000 201,296,875
- ---------------------------------------------------------------
QUALCOMM, Inc.(a) 247,700 55,175,175
- ---------------------------------------------------------------
Tellabs, Inc.(a) 988,000 62,491,000
- ---------------------------------------------------------------
895,920,187
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-6.54%
Apple Computer, Inc.(a) 1,000,000 80,125,000
- ---------------------------------------------------------------
Gateway, Inc.(a) 3,600,000 237,825,000
- ---------------------------------------------------------------
International Business Machines
Corp. 1,000,000 98,375,000
- ---------------------------------------------------------------
Sun Microsystems, Inc.(a)(b) 2,000,000 211,625,000
- ---------------------------------------------------------------
627,950,000
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-2.22%
Cisco Systems, Inc.(a)(b) 2,879,800 213,105,200
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-1.66%
EMC Corp.(a)(b) 900,000 65,700,000
- ---------------------------------------------------------------
Lexmark International Group,
Inc.-Class A(a) 1,204,400 94,018,475
- ---------------------------------------------------------------
159,718,475
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-13.02%
America Online, Inc.(a)(b) 2,000,000 259,375,000
- ---------------------------------------------------------------
BMC Software, Inc.(a) 634,800 40,746,225
- ---------------------------------------------------------------
Citrix Systems, Inc.(a) 1,581,700 101,426,512
- ---------------------------------------------------------------
Compuware Corp.(a)(b) 421,400 11,720,187
- ---------------------------------------------------------------
Intuit, Inc.(a) 1,198,200 34,897,575
- ---------------------------------------------------------------
Microsoft Corp.(a) 4,750,000 439,671,875
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
Oracle Corp.(a) 248,600 $ 11,824,037
- ---------------------------------------------------------------
Rational Software Corp.(a) 528,600 22,597,650
- ---------------------------------------------------------------
Unisys Corp.(a) 2,977,600 72,206,800
- ---------------------------------------------------------------
VERITAS Software Corp.(a)(b) 1,250,000 134,843,750
- ---------------------------------------------------------------
Yahoo! Inc.(a)(b) 675,000 120,867,188
- ---------------------------------------------------------------
1,250,176,799
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-4.42%
General Electric Co. 1,000,000 135,562,500
- ---------------------------------------------------------------
Koninklijke (Royal) Philips
Electronics N.V.-ADR
(Netherlands) 506,000 52,592,375
- ---------------------------------------------------------------
Koninklijke (Royal) Philips
Electronics N.V. (Netherlands) 948,520 97,294,320
- ---------------------------------------------------------------
Sanmina Corp.(a)(b) 1,023,000 92,133,938
- ---------------------------------------------------------------
Symbol Technologies, Inc. 1,188,000 47,223,000
- ---------------------------------------------------------------
424,806,133
- ---------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-0.44%
Waters Corp.(a) 800,000 42,500,000
- ---------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-5.88%
Analog Devices, Inc.(a) 1,300,000 69,062,500
- ---------------------------------------------------------------
Cypress Semiconductor Corp.(a) 2,500,000 63,906,250
- ---------------------------------------------------------------
Intel Corp.(b) 720,000 55,755,000
- ---------------------------------------------------------------
LSI Logic Corp.(a) 1,250,000 66,484,375
- ---------------------------------------------------------------
Texas Instruments, Inc. 1,700,000 152,575,000
- ---------------------------------------------------------------
Xilinx, Inc.(a) 2,000,000 157,250,000
- ---------------------------------------------------------------
565,033,125
- ---------------------------------------------------------------
ENTERTAINMENT-1.38%
Time Warner, Inc. 1,900,000 132,406,250
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-4.96%
American Express Co. 700,000 107,800,000
- ---------------------------------------------------------------
Fannie Mae 2,263,900 160,170,925
- ---------------------------------------------------------------
Freddie Mac 3,859,600 208,659,625
- ---------------------------------------------------------------
476,630,550
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-7.95%
Bristol-Myers Squibb Co. 2,500,000 192,031,250
- ---------------------------------------------------------------
Johnson & Johnson 2,785,947 291,827,948
- ---------------------------------------------------------------
Warner-Lambert Co. 3,500,000 279,343,750
- ---------------------------------------------------------------
763,202,948
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-2.73%
Pfizer, Inc. 1,076,200 42,509,900
- ---------------------------------------------------------------
</TABLE>
FS-83
<PAGE> 342
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-(CONTINUED)
Pharmacia & Upjohn, Inc. 1,500,000 $ 80,906,250
- ---------------------------------------------------------------
Schering-Plough Corp. 2,795,700 138,387,150
- ---------------------------------------------------------------
261,803,300
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-2.44%
Bausch & Lomb, Inc. 412,200 22,258,800
- ---------------------------------------------------------------
Guidant Corp. 4,297,100 212,169,313
- ---------------------------------------------------------------
234,428,113
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-2.18%
American International Group,
Inc. 2,030,500 209,014,594
- ---------------------------------------------------------------
LODGING-HOTELS-2.05%
Carnival Corp. 2,318,800 103,186,600
- ---------------------------------------------------------------
Royal Caribbean Cruises Ltd. 1,762,300 93,512,044
- ---------------------------------------------------------------
196,698,644
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-2.50%
Tyco International Ltd. 6,000,000 239,625,000
- ---------------------------------------------------------------
NATURAL GAS-0.48%
Enron Corp. 1,150,000 45,928,125
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-4.10%
Home Depot, Inc. (The) 3,275,000 247,262,500
- ---------------------------------------------------------------
Lowe's Companies, Inc. 2,660,000 146,300,000
- ---------------------------------------------------------------
393,562,500
- ---------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-2.51%
Best Buy Co., Inc.(a) 1,340,000 74,453,750
- ---------------------------------------------------------------
Circuit City Stores-Circuit City
Group 1,700,000 72,568,750
- ---------------------------------------------------------------
Tandy Corp. 1,500,000 94,406,250
- ---------------------------------------------------------------
241,428,750
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.15%
Dollar Tree Stores, Inc.(a) 324,600 14,140,388
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.42%
Kroger Co. (The)(a) 1,950,000 40,584,375
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (GENERAL MERCHANDISE)-3.01%
Costco Wholesale Corp.(a) 700,000 $ 56,218,750
- ---------------------------------------------------------------
Dayton Hudson Corp. 1,405,300 90,817,513
- ---------------------------------------------------------------
Wal-Mart Stores, Inc. 2,500,000 141,718,750
- ---------------------------------------------------------------
288,755,013
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-0.38%
Tiffany & Co. 609,000 36,235,500
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.65%
Gap, Inc. (The) 670,000 24,873,750
- ---------------------------------------------------------------
Intimate Brands, Inc.(c) 909,100 37,273,100
- ---------------------------------------------------------------
62,146,850
- ---------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-2.43%
Outdoor Systems, Inc.(a) 5,500,000 233,062,500
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.94%
Concord EFS, Inc.(a) 323,700 8,760,131
- ---------------------------------------------------------------
First Data Corp. 1,440,000 65,790,000
- ---------------------------------------------------------------
Fiserv, Inc.(a) 477,175 15,269,600
- ---------------------------------------------------------------
89,819,731
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-1.54%
Nextel Communications, Inc.-Class
A(a) 1,300,000 112,043,750
- ---------------------------------------------------------------
Western Wireless Corp.-Class A(a) 672,900 35,579,588
- ---------------------------------------------------------------
147,623,338
- ---------------------------------------------------------------
Total Domestic Common Stocks
& Other Equity Interests
(Cost $5,900,438,167) 9,074,071,244
- ---------------------------------------------------------------
MONEY MARKET FUNDS-6.05%
STIC Liquid Assets Portfolio(d) 290,412,117 290,412,117
- ---------------------------------------------------------------
STIC Prime Portfolio(d) 290,412,117 290,412,117
- ---------------------------------------------------------------
Total Money Market Funds
(Cost $580,824,234) 580,824,234
- ---------------------------------------------------------------
TOTAL INVESTMENTS-100.56% 9,654,895,478
- ---------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(0.56%) (54,205,007)
- ---------------------------------------------------------------
NET ASSETS-100.00% $9,600,690,471
===============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 7.
(c) Affiliated issuers are those in which the Fund's holdings of an issuer
represent 5% or more of the outstanding voting securities of the issuer. The
Fund has not owned enough of the outstanding voting securities of the issuer
to have control (as defined in the Investment Company Act of 1940) of that
issuer. The market value as of 10/31/99 represented 0.39% of the Fund's net
assets.
(d) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-84
<PAGE> 343
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$6,481,262,401) $9,654,895,478
- --------------------------------------------------------
Receivables for:
Investments sold 292,802,227
- --------------------------------------------------------
Capital stock sold 9,059,459
- --------------------------------------------------------
Dividends and interest 3,724,856
- --------------------------------------------------------
Investment for deferred compensation
plan 132,089
- --------------------------------------------------------
Other assets 170,438
- --------------------------------------------------------
Total assets 9,960,784,547
- --------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 200,543,565
- --------------------------------------------------------
Capital stock reacquired 11,182,096
- --------------------------------------------------------
Deferred compensation 132,089
- --------------------------------------------------------
Options written (premiums received
$116,996,621) 137,381,137
- --------------------------------------------------------
Accrued advisory fees 4,560,939
- --------------------------------------------------------
Accrued administrative services fees 33,365
- --------------------------------------------------------
Accrued directors' fees 3,745
- --------------------------------------------------------
Accrued distribution fees 4,061,117
- --------------------------------------------------------
Accrued transfer agent fees 1,100,647
- --------------------------------------------------------
Accrued operating expenses 1,095,376
- --------------------------------------------------------
Total liabilities 360,094,076
- --------------------------------------------------------
Net assets applicable to shares
outstanding $9,600,690,471
========================================================
NET ASSETS:
Class A $8,089,739,193
========================================================
Class B $1,291,455,555
========================================================
Class C $ 105,419,980
========================================================
Institutional Class $ 114,075,743
========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 285,748,483
========================================================
Class B:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 47,327,507
========================================================
Class C:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 3,860,919
========================================================
Institutional Class:
Authorized 200,000,000
- --------------------------------------------------------
Outstanding 3,938,787
========================================================
Class A:
Net asset value and redemption price
per share $ 28.31
- --------------------------------------------------------
Offering price per share:
(Net asset value of
$28.31 / 94.50%) $ 29.96
========================================================
Class B:
Net asset value and offering price per
share $ 27.29
========================================================
Class C:
Net asset value and offering price per
share $ 27.30
========================================================
Institutional Class:
Net asset value, offering and
redemption price per share $ 28.96
========================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $491,673 foreign
withholding tax) $ 35,922,859
- ----------------------------------------------------------
Interest 20,631,177
- ----------------------------------------------------------
Total investment income 56,554,036
- ----------------------------------------------------------
EXPENSES:
Advisory fees 54,999,214
- ----------------------------------------------------------
Administrative services fees 281,500
- ----------------------------------------------------------
Custodian fees 560,875
- ----------------------------------------------------------
Directors' fees 63,384
- ----------------------------------------------------------
Distribution fees-Class A 22,561,363
- ----------------------------------------------------------
Distribution fees-Class B 10,382,904
- ----------------------------------------------------------
Distribution fees-Class C 593,913
- ----------------------------------------------------------
Transfer agent fees-Class A 8,377,262
- ----------------------------------------------------------
Transfer agent fees-Class B 2,106,122
- ----------------------------------------------------------
Transfer agent fees-Class C 144,793
- ----------------------------------------------------------
Transfer agent fees-Institutional Class 11,831
- ----------------------------------------------------------
Other 2,155,285
- ----------------------------------------------------------
Total expenses 102,238,446
- ----------------------------------------------------------
Less: Fees waived by advisor (4,288,405)
- ----------------------------------------------------------
Expenses paid indirectly (164,622)
- ----------------------------------------------------------
Net expenses 97,785,419
- ----------------------------------------------------------
Net investment income (loss) (41,231,383)
- ----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FUTURES AND OPTION
CONTRACTS:
Net realized gain (loss) from:
Investment securities 1,362,280,575
- ----------------------------------------------------------
Foreign currencies (5,296,267)
- ----------------------------------------------------------
Futures contracts 10,089,965
- ----------------------------------------------------------
Option contracts purchased (4,655,890)
- ----------------------------------------------------------
Option contracts written (109,805,107)
- ----------------------------------------------------------
1,252,613,276
- ----------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 1,465,393,764
- ----------------------------------------------------------
Foreign currencies 25,402
- ----------------------------------------------------------
Futures contracts (6,756,866)
- ----------------------------------------------------------
Option contracts purchased (3,182,585)
- ----------------------------------------------------------
Option contracts written (27,511,086)
- ----------------------------------------------------------
1,427,968,629
- ----------------------------------------------------------
Net gain from investment securities,
foreign currencies, futures and option
contracts 2,680,581,905
- ----------------------------------------------------------
Net increase in net assets resulting from
operations $2,639,350,522
==========================================================
</TABLE>
FS-85
<PAGE> 344
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (41,231,383) $ 89,216
- ----------------------------------------------------------- ---------------- --------------
Net realized gain from investment securities, foreign
currencies, futures and option contracts 1,252,613,276 514,276,104
- ----------------------------------------------------------- ---------------- --------------
Change in net unrealized appreciation of investment
securities, foreign currencies, futures and option
contracts 1,427,968,629 255,708,695
- ----------------------------------------------------------- ---------------- --------------
Net increase in net assets resulting from operations 2,639,350,522 770,074,015
- ----------------------------------------------------------- ---------------- --------------
Distributions to shareholders from net investment income:
Class A (3,691,627) --
- ----------------------------------------------------------- ---------------- --------------
Institutional Class (343,112) --
- ----------------------------------------------------------- ---------------- --------------
Distribution in excess of net investment income:
Class A (377,640)
- ----------------------------------------------------------- ---------------- --------------
Institutional Class (5,008)
- ----------------------------------------------------------- ---------------- --------------
Distributions to shareholders from net realized gains:
Class A (404,965,108) (864,947,763)
- ----------------------------------------------------------- ---------------- --------------
Class B (49,731,739) (76,736,323)
- ----------------------------------------------------------- ---------------- --------------
Class C (1,700,816) (626,936)
- ----------------------------------------------------------- ---------------- --------------
Institutional Class (4,837,664) (9,231,714)
- ----------------------------------------------------------- ---------------- --------------
Share transactions-net:
Class A 95,538,920 442,079,076
- ----------------------------------------------------------- ---------------- --------------
Class B 347,953,526 240,674,117
- ----------------------------------------------------------- ---------------- --------------
Class C 70,937,422 21,194,188
- ----------------------------------------------------------- ---------------- --------------
Institutional Class 16,644,022 12,302,794
- ----------------------------------------------------------- ---------------- --------------
Net increase in net assets 2,704,771,698 534,781,454
- ----------------------------------------------------------- ---------------- --------------
NET ASSETS:
Beginning of period 6,895,918,773 6,361,137,319
- ----------------------------------------------------------- ---------------- --------------
End of period $9,600,690,471 $6,895,918,773
=========================================================== ================ ==============
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $5,279,351,381 $4,682,377,491
- ----------------------------------------------------------- ---------------- --------------
Undistributed net investment income (loss) (317,554) 4,034,739
- ----------------------------------------------------------- ---------------- --------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and option
contracts 1,168,419,727 484,238,255
- ----------------------------------------------------------- ---------------- --------------
Unrealized appreciation of investment securities, foreign
currencies, futures and option contracts 3,153,236,917 1,725,268,288
- ----------------------------------------------------------- ---------------- --------------
$9,600,690,471 $6,895,918,773
=========================================================== ================ ==============
</TABLE>
See Notes to Financial Statements.
FS-86
<PAGE> 345
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Weingarten Fund (the "Fund") is a series portfolio of AIM Equity Funds, Inc.
(the "Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of ten separate portfolios. The
Fund currently offers four different classes of shares: Class A shares, Class B
shares, Class C shares and the Institutional Class. Class A shares are sold with
a front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is growth of capital primarily by
investing in common stocks of seasoned and better-capitalized companies.
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 the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The following is a summary of the significant accounting policies
followed by the Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) 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 any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in the
case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. 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
Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities 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 the 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 they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was increased
by $41,296,477, undistributed net realized gains decreased by $107,196,477
and paid-in capital increased by $65,900,000 as a result of differing
book/tax treatment of foreign currency transactions, equalization credits
and net operating loss reclassifications in order to comply with the
requirements of the American Institute of Certified Public Accountants
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassification discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions. The
Fund does not separately account for that portion of the results of
operations resulting from changes in
FS-87
<PAGE> 346
foreign exchange rates on investments and the fluctuations arising from
changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from investments.
E. Foreign Currency Contracts -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
F. Futures Contracts -- The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits required
upon entering into futures contracts are satisfied by the segregation of
specific securities as collateral for the account of the broker (the Fund's
agent in acquiring the futures position). During the period the futures
contracts are open, changes in the value of the contracts are recognized as
unrealized gains or losses by "marking to market" on a daily basis to
reflect the market value of the contracts at the end of each day's trading.
Variation margin payments are made or received depending upon whether
unrealized gains or losses are incurred. When the contracts are closed, the
Fund recognizes a realized gain or loss equal to the difference between the
proceeds from, or cost of, the closing transaction and the Fund's basis in
the contract. Risks include the possibility of an illiquid market and that a
change in value of the contracts may not correlate with changes in the value
of the securities being hedged.
G. Covered Call Options -- The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is recorded
as an asset and an equivalent liability. The amount of the liability is
subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the mean
between the last bid and asked prices on that day. If a written call option
expires on the stipulated expiration date, or if the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or a loss if the
closing purchase transaction exceeds the premium received when the option
was written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the
sale of the underlying security and the proceeds of the sale are increased
by the premium originally received.
A call option gives the purchaser of such option the right to buy, and
the writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the
call option at any time during the option period. During the option period,
in return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has
retained the risk of loss should the price of the underlying security
decline. During the option period, the Fund may be required at any time to
deliver the underlying security against payment of the exercise price. This
obligation is terminated upon the expiration of the option period or at such
earlier time at which the Fund effects a closing purchase transaction by
purchasing (at a price which may be higher than that received when the call
option was written) a call option identical to the one originally written.
H. Put Options -- The Fund may purchase put options. By purchasing a put
option, the Fund obtains the right (but not the obligation) to sell the
option's underlying instrument at a fixed strike price. In return for this
right, the Fund pays an option premium. The option's underlying instrument
may be a security or a futures contract. Put options may be used by the Fund
to hedge securities it owns by locking in a minimum price at which the Fund
can sell. If security prices fall, the put option could be exercised to
offset all or a portion of the Fund's resulting losses. At the same time,
because the maximum the Fund has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Fund to
profit from an increase in the value of the securities hedged.
I. Expenses -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.0% of
the first $30 million of the Fund's average daily net assets, plus 0.75% of the
Fund's average daily net assets in excess of $30 million to and including $350
million, plus 0.625% of the Fund's average daily net assets in excess of $350
million. AIM has contractually agreed to waive a portion of its advisory fees
payable by the Fund to AIM to the extent necessary to reduce the fees paid by
the Fund at net asset levels higher than those currently incorporated in the
present advisory fee schedule. AIM will receive a fee calculated at the annual
rate of 1.0% of the first $30 million of the Fund's average daily net assets,
plus 0.75% of the Fund's average daily net assets in excess of $30 million to
and including $350 million, plus 0.625% of the Fund's average daily net assets
in excess of $350 million to and including $2 billion, plus 0.60% of the Fund's
average daily net assets in excess of $2 billion to and including $3 billion,
plus 0.575% of the Fund's average daily net assets in
FS-88
<PAGE> 347
excess of $3 billion to and including $4 billion, plus 0.55% of the Fund's
average daily net assets in excess of $4 billion. The waiver is contractual and
may not be terminated without approval of the Board of Directors. During the
year ended October 31, 1999, AIM waived fees of $4,288,405. Under the terms of a
master sub-advisory agreement between AIM and A I M Capital Management, Inc.
("AIM Capital"), AIM pays AIM Capital 50% of the amount paid by the Fund to AIM.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1999, AIM was
paid $281,500 for such services.
The Fund, pursuant to a transfer agency 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 Fund. During the year ended October 31, 1999, AFS
was paid $5,776,859 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares and a master distribution agreement with
Fund Management Company ("FMC) to serve as the distributor for the Institutional
Class shares of the Fund. The Company has adopted a plan pursuant to Rule 12b-1
under the 1940 Act with respect to the Fund's Class A shares, Class B shares and
Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays
AIM Distributors compensation at the annual rate of 0.30% of the Fund's average
daily net assets of Class A shares and 1.00% of the average daily net assets of
Class B and C shares. Of these amounts, the Fund may pay a service fee of 0.25%
of the average daily net assets of the Class A, Class B or Class C shares to
selected dealers and financial institutions who furnish continuing personal
shareholder services to their customers who purchase and own the appropriate
class of shares of the Fund. Any amounts not paid as a service fee under the
Plans would constitute an asset-based sales charge. The Plans also impose a cap
on the total sales charges, including asset-based sales charges that may be paid
by the respective classes. During the year ended October 31, 1999, the Class A,
Class B and Class C shares paid AIM Distributors $22,561,363, $10,382,904 and
$593,913, respectively, as compensation under the Plans.
AIM Distributors received commissions of $2,209,013 from sales of the Class
A shares of the Fund during the year ended October 31, 1999. Such commissions
are not an expense of the Fund. They are deducted from, and are not included in,
the proceeds from sales of Class A shares. During the year ended October 31,
1999, AIM Distributors received $156,642 in contingent deferred sales charges
imposed on redemptions of Fund shares. Certain officers and directors of the
Company are officers and directors of AIM, AFS, FMC and AIM Distributors.
During the year ended October 31, 1999, the Fund paid legal fees of $20,003
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$102,746 and $61,876, respectively, under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $164,622 during the year ended October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 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. During the year
ended October 31, 1999, 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 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$10,278,536,302 and $10,386,655,927, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $3,184,683,541
- ----------------------------------------------------------
Aggregate unrealized appreciation
(depreciation) of investment securities (14,585,229)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $3,170,098,312
==========================================================
Cost of investments for tax purposes is $6,484,797,166.
</TABLE>
FS-89
<PAGE> 348
NOTE 7-CALL OPTION CONTRACTS
Transactions in call options written during the year ended October 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -------------
<S> <C> <C>
Beginning of period 76,233 $ 44,508,416
- -------------------- --------- -------------
Written 341,015 393,780,650
- -------------------- --------- -------------
Closed (271,232) (293,502,772)
- -------------------- --------- -------------
Exercised (46,212) (3,522,927)
- -------------------- --------- -------------
Expired (7,902) (24,266,746)
- -------------------- --------- -------------
End of period 91,902 $ 116,996,621
==================== ========= =============
</TABLE>
Open call option contracts written at October 31, 1999 were as follows:
<TABLE>
<CAPTION>
OCTOBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS 1999 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
- ----------------------------- -------- ------ --------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
America Online, Inc. Apr-00 $120 20,000 $ 44,712,107 $51,500,000 $ (6,787,893)
- ----------------------------- --------- ------ --------- ------------ ------------ --------------
Cisco Systems, Inc. Jan-00 70 28,798 22,892,140 24,118,325 (1,226,185)
- ----------------------------- --------- ------ --------- ------------ ------------ --------------
Compuware Corp. Jan-00 30 4,214 1,409,536 1,211,525 198,011
- ----------------------------- --------- ------ --------- ------------ ------------ --------------
EMC Corp. Apr-00 70 9,000 8,164,527 11,306,250 (3,141,723)
- ----------------------------- --------- ------ --------- ------------ ------------ --------------
Intel Corp. Apr-00 75 7,200 6,278,190 7,875,000 (1,596,810)
- ----------------------------- --------- ------ --------- ------------ ------------ --------------
Sanmina Corp. Jan-00 85 6,230 5,665,996 7,281,312 (1,615,316)
- ----------------------------- --------- ------ --------- ------------ ------------ --------------
Sun Microsystems, Inc. Apr-00 90 5,609 7,835,511 13,636,881 (5,801,370)
- ----------------------------- --------- ------ --------- ------------ ------------ --------------
VERITAS Software Corp. Dec-99 95 7,530 6,471,819 13,083,375 (6,611,556)
- ----------------------------- --------- ------ --------- ------------ ------------ --------------
Yahoo! Inc. Jan-00 175 3,321 13,566,795 7,368,469 6,198,326
- ----------------------------- --------- ------ --------- ------------ ------------ --------------
91,902 $116,996,621 137,381,137 (20,384,516)
============================= ========= ====== ========= ============ ============ ==============
</TABLE>
NOTE 8-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 38,697,927 $ 994,480,979 62,788,326 $ 1,368,867,407
- ---------------------------------------- -------------- ---------------- ------------ ---------------
Class B 17,982,789 456,125,945 12,056,594 257,385,548
- ---------------------------------------- -------------- ---------------- ------------ ---------------
Class C 3,622,407 92,753,207 1,204,025 25,772,311
- ---------------------------------------- -------------- ---------------- ------------ ---------------
Institutional Class 826,477 21,885,030 593,328 13,533,791
- ---------------------------------------- -------------- ---------------- ------------ ---------------
Issued as reinvestment of dividends:
Class A 16,540,521 383,078,048 41,795,514 813,441,370
- ---------------------------------------- -------------- ---------------- ------------ ---------------
Class B 2,102,927 47,274,883 3,831,332 73,061,374
- ---------------------------------------- -------------- ---------------- ------------ ---------------
Class C 71,213 1,602,275 31,251 600,022
- ---------------------------------------- -------------- ---------------- ------------ ---------------
Institutional Class 217,868 5,146,039 456,144 9,035,386
- ---------------------------------------- -------------- ---------------- ------------ ---------------
Reacquired:
Class A (50,133,647) (1,282,020,107) (79,734,776) (1,740,229,701)
- ---------------------------------------- -------------- ---------------- ------------ ---------------
Class B (6,174,366) (155,447,302) (4,228,997) (89,772,805)
- ---------------------------------------- -------------- ---------------- ------------ ---------------
Class C (926,007) (23,418,060) (246,074) (5,178,145)
- ---------------------------------------- -------------- ---------------- ------------ ---------------
Institutional Class (391,478) (10,387,047) (458,838) (10,266,383)
- ---------------------------------------- -------------- ---------------- ------------ ---------------
22,436,631 $ 531,073,890 38,087,829 $ 716,250,175
======================================== ============== ================ ============ ===============
</TABLE>
FS-90
<PAGE> 349
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the five-year period ended October 31,
1999, for a share of Class B capital stock outstanding during each of the years
in the four-year period ended October 31, 1999 and the period June 26, 1995
(date sales commenced) through October 31, 1995, and for a share of Class C
capital stock outstanding during each of years in the two year period ended
October 31, 1999 and the period August 4, 1997 (date sales commenced) through
October 31, 1997.
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.72 $ 22.72 $ 20.19 $ 20.33 $ 17.82
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) (0.10) 0.02 0.01 0.06 --
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Net gains on securities (both realized and unrealized) 8.16 2.38 4.82 2.51 4.36
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Total from investment operations 8.06 2.40 4.83 2.57 4.36
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income (0.01) -- (0.06) -- (0.07)
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Distributions from net realized gains (1.46) (3.40) (2.24) (2.71) (1.78)
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Total distributions (1.47) (3.40) (2.30) (2.71) (1.85)
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 28.31 $ 21.72 $ 22.72 $ 20.19 $ 20.33
============================================================ ========== ========== ========== ========== ==========
Total return(a) 38.62% 12.34% 26.83% 14.81% 28.20%
============================================================ ========== ========== ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $8,089,739 $6,094,178 $5,810,582 $4,977,493 $4,564,730
============================================================ ========== ========== ========== ========== ==========
Ratio of expenses to average net assets(b) 1.03%(c) 1.04% 1.07% 1.12% 1.17%
============================================================ ========== ========== ========== ========== ==========
Ratio of net investment income (loss) to average net
assets(d) (0.38)%(c) 0.07% 0.07% 0.33% (0.02)%
============================================================ ========== ========== ========== ========== ==========
Portfolio turnover rate 124% 125% 128% 159% 139%
============================================================ ========== ========== ========== ========== ==========
</TABLE>
(a) Does not deduct sales charges.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.08%, 1.09%, 1.11%, 1.15% and 1.19% for 1999-1995.
(c) Ratios are based on average net assets of $7,520,454,321.
(d) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (0.43)%, 0.02%, 0.03%, 0.30%, and (0.04)% for 1999-1995.
FS-91
<PAGE> 350
NOTE 9-FINANCIAL HIGHLIGHTS-continued
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------------------------------------------- ------------------------------
1999 1998 1997 1996 1995 1999 1998 1997
---------- -------- -------- -------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.12 $ 22.34 $ 19.98 $ 20.28 $ 18.56 $ 21.14 $ 22.34 $ 22.83
- ------------------------------------ ---------- -------- -------- -------- ------- -------- ------- -------
Income from investment operations:
Net investment income (loss) (0.30)(a) (0.15)(a) (0.15)(a) (0.05)(a) (0.03) (0.30)(a) (0.15)(a) (0.04)(a)
- ------------------------------------ ---------- -------- -------- -------- ------- -------- ------- -------
Net gains (losses) on securities
(both realized and unrealized) 7.93 2.33 4.75 2.46 1.75 7.92 2.35 (0.45)
- ------------------------------------ ---------- -------- -------- -------- ------- -------- ------- -------
Total from investment operations 7.63 2.18 4.60 2.41 1.72 7.62 2.20 (0.49)
- ------------------------------------ ---------- -------- -------- -------- ------- -------- ------- -------
Distributions from net realized
gains (1.46) (3.40) (2.24) (2.71) -- (1.46) (3.40) --
- ------------------------------------ ---------- -------- -------- -------- ------- -------- ------- -------
Net asset value, end of period $ 27.29 $ 21.12 $ 22.34 $ 19.98 $ 20.28 $ 27.30 $ 21.14 $ 22.34
==================================== ========== ======== ======== ======== ======= ======== ======= =======
Total return(b) 37.59% 11.45% 25.78% 13.95% 9.27% 37.50% 11.54% (2.15)%
==================================== ========== ======== ======== ======== ======= ======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000's
omitted) $1,291,456 $705,750 $486,105 $267,459 $42,238 $105,420 $23,107 $ 2,326
==================================== ========== ======== ======== ======== ======= ======== ======= =======
Ratio of expenses to average net
assets(c) 1.82%(d) 1.83% 1.87% 1.95% 1.91%(e) 1.82%(d) 1.83% 1.84%(e)
==================================== ========== ======== ======== ======== ======= ======== ======= =======
Ratio of net investment income
(loss) to average net assets(f) (1.17)%(d) (0.72)% (0.73)% (0.50)% (0.76)%(e) (1.17)%(d) (0.72)% (0.70)%(e)
==================================== ========== ======== ======== ======== ======= ======== ======= =======
Portfolio turnover rate 124% 125% 128% 159% 139% 124% 125% 128%
==================================== ========== ======== ======== ======== ======= ======== ======= =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.87%, 1.87%, 1.91%, 1.98% and 1.94% (annualized) for 1999-1995 for Class B
and 1.87%, 1.87%, 1.88% (annualized) for 1999-1997 for Class C.
(d) Ratios are based on average net assets of $1,038,290,381 and $59,391,348
for Class B and Class C, respectively.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (1.22)%, (0.76)%, (0.77)%, (0.53)% and (0.79)%
(annualized) for 1999-1995 for Class B and (1.22)%, (0.76)%, (0.74)%
(annualized) for 1999-1997 for Class C.
FS-92
<PAGE> 351
AIM CHARTER FUND
AIM CONSTELLATION FUND
AIM WEINGARTEN FUND
--------------------------------------------------------------------------
Institutional Classes
AIM--Registered Trademark--
PROSPECTUS
MAY 26, 2000
AIM Charter Fund seeks to provide
growth of capital with a secondary
objective of current income.
AIM Constellation Fund seeks to
provide growth of capital.
AIM Weingarten Fund seeks to provide
growth of capital.
This prospectus contains important
information about the funds. Please
read it before investing and keep it
for future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 352
----------------------------------------------
AIM CHARTER - CONSTELLATION - WEINGARTEN FUNDS
----------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
AIM Charter Fund 1
AIM Constellation Fund 1
AIM Weingarten Fund 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUNDS 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 3
FEE TABLE AND EXPENSE EXAMPLE 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 4
Expense Example 4
FUND MANAGEMENT 5
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 5
Advisor Compensation 5
Portfolio Managers 5
OTHER INFORMATION 6
- - - - - - - - - - - - - - - - - - - - - - - - -
Dividends and Distributions 6
Suitability for Investors 6
FINANCIAL HIGHLIGHTS 7
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Purchasing Shares A-1
Redeeming Shares A-1
Pricing of Shares A-2
Taxes A-2
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con
Disciplina and Invest with Discipline are registered service marks and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 353
----------------------------------------------
AIM CHARTER - CONSTELLATION - WEINGARTEN FUNDS
----------------------------------------------
INVESTMENT OBJECTIVES AND STRATEGIES
- --------------------------------------------------------------------------------
AIM CHARTER FUND (CHARTER)
The fund's primary investment objective is growth of capital with a secondary
objective of current income. The investment objectives of the fund may be
changed by the Board of Trustees without shareholder approval.
The fund seeks to meet its objectives by investing at least 65% of its total
assets in securities of established companies that have long-term above-average
growth in earnings and dividends, and growth companies that the portfolio
managers believe have the potential for above-average growth in earnings and
dividends. The portfolio managers consider whether to sell a particular security
when they believe the security no longer has that potential.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objectives. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment. Active trading may also increase
short-term capital gains and losses, which may affect the taxes you have to pay.
AIM CONSTELLATION FUND (CONSTELLATION)
The fund's investment objective is growth of capital. The investment objective
of the fund may be changed by the Board of Trustees without shareholder
approval.
The fund seeks to meet its objective by investing principally in common
stocks of companies the portfolio managers believe are likely to benefit from
new or innovative products, services or processes as well as those that have
experienced above-average, long-term growth in earnings and have excellent
prospects for future growth. The portfolio managers consider whether to sell a
particular security when it no longer meets these criteria.
AIM WEINGARTEN FUND (WEINGARTEN)
The fund's investment objective is to provide growth of capital. The investment
objective of the fund may be changed by the Board of Trustees without
shareholder approval.
The fund will invest primarily in common stocks of seasoned and better-
capitalized companies. The portfolio managers focus on companies that have
experienced above-average growth in earnings and have excellent prospects for
future growth. The portfolio managers consider whether to sell a particular
security when any of those factors materially changes.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objectives. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment. Active trading may also increase
short-term capital gains and losses, which may affect the taxes you have to pay.
ALL FUNDS
Each fund may also invest up to 20% of its total assets in foreign securities.
Any percentage limitations with respect to assets of a fund are applied at the
time of purchase.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, each of the funds may
temporarily hold all or a portion of its assets in cash, money market
instruments, shares of affiliated money market funds, bonds or other debt
securities. As a result, a fund may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
funds and that the income you may receive from your investment in Charter may
vary. The value of your investment in a fund will go up and down with the prices
of the securities in which the fund invests. The prices of equity securities
change in response to many factors including the historical and prospective
earnings of the issuer, the value of its assets, general economic conditions,
interest rates, investor perceptions and market liquidity. This is especially
true with respect to equity securities of smaller companies, whose prices may go
up and down more than equity securities of larger, more-established companies.
Also, since equity securities of smaller companies may not be traded as often as
equity securities of larger, more-established companies, it may be difficult or
impossible for a fund to sell securities at a desirable price.
The values of the convertible securities in which the funds may invest also
will be affected by market interest rates, the risk that the issuer may default
on interest or principal payments and the value of the underlying common stock
into which these securities may be converted. Specifically, since these types of
convertible securities pay fixed interest and dividends, their values may fall
if market interest rates rise and rise if market interest rates fall.
Additionally, an issuer may have the right to buy back certain of the
convertible securities at a time and at a price that is unfavorable to the fund.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
An investment in the funds is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 354
----------------------------------------------
AIM CHARTER - CONSTELLATION - WEINGARTEN FUNDS
----------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar charts and tables shown below provide an indication of the risks of
investing in each of the funds. A fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar charts show changes in the performance of each fund's
Institutional Class shares from year to year.
CHARTER--INSTITUTIONAL CLASS
[GRAPH]
<TABLE>
<CAPTION>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
<S> <C>
1992 ........................................... 1.48%
1993 ........................................... 9.81%
1994 ........................................... -3.84%
1995 ........................................... 36.13%
1996 ........................................... 20.29%
1997 ........................................... 25.18%
1998 ........................................... 27.82%
1999 ........................................... 34.37%
</TABLE>
The Institutional Class shares' year-to-date total return as of March 31,
2000 was [ ]%.
CONSTELLATION--INSTITUTIONAL CLASS
[GRAPH]
<TABLE>
<CAPTION>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
<S> <C>
1993 ........................................... 17.65%
1994 ........................................... 1.80%
1995 ........................................... 36.16%
1996 ........................................... 16.83%
1997 ........................................... 13.45%
1998 ........................................... 19.41%
1999 ........................................... 45.07%
</TABLE>
The Institutional Class shares' year-to-date total return as of March 31,
2000 was [ ]%.
2
<PAGE> 355
----------------------------------------------
AIM CHARTER - CONSTELLATION - WEINGARTEN FUNDS
----------------------------------------------
PERFORMANCE INFORMATION (continued)
- --------------------------------------------------------------------------------
WEINGARTEN--INSTITUTIONAL CLASS
[GRAPH]
<TABLE>
<CAPTION>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
- ----------- -------
<S> <C>
1992 ........................................... -1.07%
1993 ........................................... 1.91%
1994 ........................................... 0.13%
1995 ........................................... 35.43%
1996 ........................................... 18.24%
1997 ........................................... 26.48%
1998 ........................................... 33.58%
1999 ........................................... 35.23%
</TABLE>
The Institutional Class shares' year-to-date total return as of March 31, 2000
was [ ]%.
During the periods shown in the bar charts, the highest quarterly returns and
the lowest quarterly returns were as follows:
<TABLE>
<CAPTION>
HIGHEST QUARTERLY RETURN LOWEST QUARTERLY RETURN
FUND (QUARTER ENDED) (QUARTER ENDED)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Charter--Institutional Class 26.29% (12/31/98) -11.85% (9/30/98)
Constellation--Institutional Class 36.71% (12/31/99) -15.52% (9/30/98)
Weingarten--Institutional Class 28.14% (12/31/98) -12.11% (9/30/98)
- -------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE TABLE
The following performance table compares each fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -----------------------------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charter--Institutional Class 34.37% 28.54% 18.77% 07/30/91
S&P 500(1) 21.03 28.54 19.86(3) 07/31/91(3)
Constellation--Institutional Class 45.07 25.60 21.68 04/08/92
S&P 500(1) 21.03 28.54 20.78(3) 03/31/92(3)
Weingarten--Institutional Class 35.23 29.62 19.50 10/08/91
S&P 500(1),(2) 21.03 28.54 20.20(3) 09/30/91(3)
Russell 1000--Registered
Trademark-- Index(4) 20.91 28.04 20.06(3) 09/30/91(3)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.
(2) The fund has elected to use the S&P 500 as its primary index rather than
the Russell 1000--Registered Trademark-- Index since the S&P 500 more
closely reflects the performance of the securities in which the fund
invests.
(3) The average annual total return given is since the date closest to the
inception date of the Institutional Class of the fund.
(4) The Russell 1000--Registered Trademark-- Index is a widely recognized,
unmanaged index of common stocks that measures the performance of the 1,000
largest companies in the Russell 3000--Registered Trademark-- Index, which
measures the performance of the 3,000 largest U.S. companies based on
total market capitalization.
3
<PAGE> 356
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AIM CHARTER - CONSTELLATION - WEINGARTEN FUNDS
----------------------------------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Class shares of the funds:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- ---------------------------------------------------------------
(fees paid directly from
your investment) CHARTER CONSTELLATION WEINGARTEN
- ---------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales
Charge (Load) Imposed
on Purchases (as a
percentage of
offering price) None None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less) None None None
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- --------------------------------------------------------------
(expenses that are deducted
from fund assets) CHARTER CONSTELLATION WEINGARTEN
- ---------------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.63% 0.63% 0.63%
Distribution and/or
Service (12b-1) Fees None None None
Other Expenses 0.04 0.03 0.05
Total Annual Fund
Operating Expenses 0.67 0.66 0.68
Fee Waivers(1) 0.02 0.02 0.05
Net Expenses 0.65 0.64 0.63
- ---------------------------------------------------------------
</TABLE>
(1) The investment advisor has contractually agreed to waive a portion of its
fees.
You should also consider the effect of any account fees charged by the
financial institution managing your account.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the funds
with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in a fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's gross operating expenses remain the same. To the extent fees are waived,
the expenses will be lower. Although your actual returns and costs may be higher
or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------
<S> <C> <C> <C> <C>
Charter $68 $214 $373 $835
Constellation 67 211 368 822
Weingarten 69 218 379 847
- ----------------------------------------------------
</TABLE>
4
<PAGE> 357
----------------------------------------------
AIM CHARTER - CONSTELLATION - WEINGARTEN FUNDS
----------------------------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as each fund's investment advisor.
A I M Capital Management, Inc. (the subadvisor), a wholly owned subsidiary of
the advisor, is each fund's subadvisor and is responsible for its day-to-day
management. Both the advisor and the subadvisor are located at 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173. The advisors supervise all aspects
of the funds' operations and provide investment advisory services to the funds,
including obtaining and evaluating economic, statistical and financial
information to formulate and implement investment programs for the funds.
The advisor has acted as an investment advisor since its organization in 1976,
and the subadvisor has acted as an investment advisor since 1986. Today, the
advisor, together with its subsidiaries, advises or manages over 120 investment
portfolios, including the funds, encompassing a broad range of investment
objectives.
ADVISOR COMPENSATION
During the fiscal year ended October 31, 1999, the advisor received compensation
of 0.61%, 0.61% and 0.58%, respectively, of Charter's, Constellation's and
Weingarten's average daily net assets.
PORTFOLIO MANAGERS
The advisors use a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of each fund's portfolio, all of whom are officers of the subadvisor, are
CHARTER
- - Monika H. Degan, Portfolio Manager, who has been responsible for the fund
since 2000 and has been associated with the advisor and/or its affiliates
since 1995.
- - Lanny H. Sachnowitz, Senior Portfolio Manager, who has been responsible for
the fund since 1991 and has been associated with the advisor and/or its
affiliates since 1987.
CONSTELLATION
- - David P. Barnard, Senior Portfolio Manager, who has been responsible for the
fund since 1990 and has been associated with the advisor and/or its affiliates
since 1982.
- - Steven A. Brase, Portfolio Manager, who has been responsible for the fund
since 2000 and has been associated with the advisor and/or its affiliates
since 1998. From 1995 to 1998, he was Associate Portfolio Manager and Partner
for Bricoleur Capital Management, Inc.
- - Brant H. DeMuth, Senior Portfolio Manager, who has been responsible for the
fund since 2000 and has been associated with the advisor and/or its affiliates
since 1996. From 1992 to 1996, he was Portfolio Manager for Colorado Public
Employee's Retirement Association.
- - Robert M. Kippes, Senior Portfolio Manager, who has been responsible for the
fund since 1993 and has been associated with the advisor and/or its affiliates
since 1989.
- - Christopher P. Perras, Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1999. From 1997 to 1999, he was an equity analyst at Van Wagoner Capital
Management. From 1995 to 1997, he was Associate Portfolio Manager for Van
Kampen American Capital Asset Management, Inc.
- - Charles D. Scavone, Senior Portfolio Manager, who has been responsible for the
fund since 1996 and has been associated with the advisor and/or its affiliates
since 1996. From 1994 to 1996, he was Associate Portfolio Manager for Van
Kampen American Capital Asset Management, Inc.
- - Kenneth A. Zschappel, Senior Portfolio Manager, who has been responsible for
the fund since 1996 and has been associated with the advisor and/or its
affiliates since 1990.
WEINGARTEN
- - David P. Barnard, Senior Portfolio Manager, who has been responsible for the
fund since 1986 and has been associated with the advisor and/or its affiliates
since 1982.
- - Monika H. Degan, Portfolio Manager, who has been responsible for the fund
since 1998 and has been associated with the advisor and/or its affiliates
since 1995.
- - Jonathan C. Schoolar, Senior Portfolio Manager, who has been responsible for
the fund since 1987 and has been associated with the advisor and/or its
affiliates since 1986.
5
<PAGE> 358
----------------------------------------------
AIM CHARTER - CONSTELLATION - WEINGARTEN FUNDS
----------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
Each of the funds expects that its distributions, if any, will consist primarily
of capital gains.
DIVIDENDS
The funds generally declare and pay dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The funds generally distribute long-term and short-term capital gains, if
any, annually.
SUITABILITY FOR INVESTORS
The Institutional Classes of the funds are intended for use by institutions,
particularly banks, acting for themselves or in a fiduciary or similar capacity.
Shares of the Institutional Classes of the funds are available for collective
and common trust funds of banks, banks investing for their own account and banks
investing for the account of a public entity (e.g., Taft-Hartley funds, states,
cities, or government agencies) that does not pay commissions or distribution
fees. Prospective investors should determine if an investment in a fund is
consistent with the objectives of an account and with applicable state and
federal laws and regulations.
The Institutional Classes of the funds are designed to be convenient and
economical vehicles in which institutions can invest in a portfolio of equity
securities. An investment in the funds may relieve the institution of many of
the investment and administrative burdens encountered when investing in equity
securities directly. These include: selection and diversification of portfolio
investments; surveying the market for the best price at which to buy and sell;
valuation of portfolio securities; receipt, delivery and safekeeping of
securities; and portfolio recordkeeping. It is anticipated that most investors
will perform their own subaccounting.
6
<PAGE> 359
----------------------------------------------
AIM CHARTER - CONSTELLATION - WEINGARTEN FUNDS
----------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights tables are intended to help you understand each fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in each fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by KPMG LLP, whose report, along with each
fund's financial statements, is included in the fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
CHARTER--INSTITUTIONAL CLASS
- -------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.42 $ 13.48 $ 11.24 $ 10.66 $ 8.93
Income from investment operations:
Net investment income 0.09 0.18 0.16 0.24 0.23
Net gains (losses) on securities (both realized
and unrealized) 4.43 1.24 2.91 1.44 2.07
Total from investment operations 4.52 1.42 3.07 1.68 2.30
Less distributions:
Dividends from net investment income (0.07) (0.14) (0.16) (0.20) (0.24)
Distributions from net realized gains (0.54) (1.34) (0.67) (0.90) (0.33)
Total distributions (0.61) (1.48) (0.83) (1.10) (0.57)
Net asset value, end of period $ 17.33 $ 13.42 $ 13.48 $ 11.24 $ 10.66
Total return 34.61% 11.69% 29.05% 17.29% 27.45%
- -------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $66,801 $43,815 $40,191 $29,591 $25,538
Ratio of expenses (exclusive of interest) to average
net assets(a) 0.65%(b) 0.66% 0.67% 0.69% 0.74%
Ratio of net investment income to average net assets(c) 0.51%(b) 1.37% 1.21% 2.24% 1.98%
Portfolio turnover rate 107% 154% 170% 164% 161%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.67%, 0.67%, 0.68% and 0.70% for 1999-1996.
(b) Ratios are based on average net assets of $57,565,832.
(c) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursement were 0.49%, 1.36%, 1.20% and 2.23% for 1999-1996.
7
<PAGE> 360
----------------------------------------------
AIM CHARTER - CONSTELLATION - WEINGARTEN FUNDS
----------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONSTELLATION--INSTITUTIONAL CLASS
- -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 27.25 $ 30.00 $ 26.01 $ 24.05 $ 18.49
Income from investment operations:
Net investment income (0.01) -- 0.02 0.04 0.02
Net gains (losses) on securities (both realized and
unrealized) 9.50 (0.65) 4.86 2.67 6.06
Total from investment operations 9.49 (0.65) 4.88 2.71 6.08
Less distributions:
Distributions from net realized gains (0.73) (2.10) (0.89) (0.75) (0.52)
Net asset value, end of period $ 36.01 $ 27.25 $ 30.00 $ 26.01 $ 24.05
Total return 35.46% (1.85)% 19.42% 11.81% 34.09%
- --------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $244,369 $189,039 $188,109 $293,035 $138,918
Ratio of expenses to average net assets(a) 0.64%(b) 0.63% 0.65% 0.66% 0.66%
Ratio of net investment income (loss) to average net
assets(c) (0.04)%(b) (0.01)% 0.06% 0.21% 0.18%
Portfolio turnover rate 62% 76% 67% 58% 45%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.66%, 0.65%, 0.67%, 0.67% and 0.68% for 1999-1995.
(b) Ratios are based on average net assets of $216,157,183.
(c) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursement were (0.06)%, (0.03)%, 0.04%, 0.20% and 0.16% for 1999-1995.
<TABLE>
<CAPTION>
WEINGARTEN--INSTITUTIONAL CLASS
-------------------------------------------------------------
YEAR ENDED OCTOBER 31,
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 22.18 $ 23.05 $ 20.46 $ 20.48 $ 17.94
Income from investment operations:
Net investment income 0.02 0.10 0.08 0.17 0.10
Net gains on securities (both realized and unrealized) 8.32 2.43 4.90 2.52 4.35
Total from investment operations 8.34 2.53 4.98 2.69 4.45
Less distributions:
Dividends from net investment income (0.10) -- (0.15) -- (0.13)
Distributions from net realized gains (1.46) (3.40) (2.24) (2.71) (1.78)
Total distributions (1.56) (3.40) (2.39) (2.71) (1.91)
Net asset value, end of period $ 28.96 $ 22.18 $ 23.05 $ 20.46 $ 20.48
Total return 39.20% 12.79% 27.37% 15.34% 28.69%
- -------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $114,076 $72,884 $62,124 $60,483 $54,332
Ratio of expenses to average net assets(a) 0.63%(b) 0.62% 0.64% 0.65% 0.70%
Ratio of net investment income to average net assets(c) 0.02%(b) 0.49% 0.50% 0.80% 0.45%
Portfolio turnover rate 124% 125% 128% 159% 139%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.68%, 0.67%, 0.68%, 0.68% and 0.72% for 1999-1995.
(b) Ratios are based on average net assets of $99,738,345.
(c) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursement were (0.03)%, 0.44%, 0.46%, 0.77% and 0.43% for 1999-1995.
8
<PAGE> 361
----------------------------------------------
AIM CHARTER - CONSTELLATION - WEINGARTEN FUNDS
----------------------------------------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
PURCHASING SHARES
The minimum initial investment in any of the funds is $100,000. No minimum
amount is required for subsequent investments in a fund nor are minimum balances
required.
Shares of the Institutional Class of each fund are sold on a continuing basis
at their respective net asset values. Although no sales charge is imposed in
connection with the purchase of shares, banks or other financial institutions
may charge a recordkeeping, account maintenance or other fee to their customers,
and beneficial holders of shares of the funds should consult with such
institutions to obtain a schedule of such fees. Institutions may be requested to
maintain separate master accounts in each fund for shares held by the
institution (a) for its own account, for the account of other institutions and
for accounts for which the institution acts as a fiduciary; and (b) for accounts
for which the institution acts in some other capacity. An institution's master
accounts and subaccounts with a fund may be aggregated for the purpose of the
minimum investment requirement. Prior to the initial purchase of shares, an
account application must be completed and sent to A I M Fund Services, Inc.
(transfer agent) at P.O. Box 0843, Houston, Texas 77001-0843. An account
application may be obtained from the transfer agent.
Purchase orders will be accepted for execution on the day the order is placed,
provided that the order is properly submitted and received by the transfer agent
during the hours of the customary trading session of the New York Stock Exchange
(NYSE) on the day the order is placed and such orders will be confirmed at the
net asset value determined as of the close of the customary trading session of
the NYSE that day or such earlier closing time (trade date). Subsequent
purchases of shares of the funds may also be made via AIM LINK--Registered
Trademark-- Remote, a personal computer application software product.
Payments for shares purchased must be in the form of federal funds or other
funds immediately available to the funds and must be made on the "settlement
date," which shall be the next business day of the funds following the trade
date. Federal Reserve wires should be sent as early as possible on the
settlement date in order to facilitate crediting to the shareholder's account.
Any funds received in respect of an order which is not accepted by a fund and
any funds received for which an order has not been received will be returned to
the sending institution. An order to purchase shares must specify which fund is
being purchased, otherwise any funds received will be returned to the sending
institution.
REDEEMING SHARES
TIMING OF REDEMPTIONS
You can redeem shares during the hours of the customary trading session of the
NYSE. A fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
You may redeem any or all of your shares at the net asset value next
determined after receipt of a redemption request in proper form by the
applicable fund. There is no charge for redemption. Redemption requests with
respect to shares for which certificates have not been issued are normally made
by calling the transfer agent.
You may request a redemption by calling the transfer agent at (800) 659-1005,
or by using AIM LINK--Registered Trademark-- Remote. We use reasonable
procedures to confirm that instructions communicated by telephone are genuine
and are not liable for telephone instructions that are reasonably believed to
be genuine. Such reasonable procedures may include recordings of telephone
transactions maintained for a reasonable period of time.
TIMING AND METHOD OF PAYMENT
If a redemption request is received during the hours of the customary trading
session of the NYSE, the redemption will be effected at the net asset value
determined as of the close of the customary trading session of the NYSE that day
or such earlier closing time (the redemption date).
Payment for redeemed shares is normally made by Federal Reserve wire to the
commercial bank account designated in your Account Application. You may also
request that payment be made by check. The proceeds of a redemption request will
be wired on the next business day following the redemption date.
Payment for shares redeemed by mail and payment for telephone redemptions in
amounts of less than $1,000 may, at the option of a fund, be made by check
mailed within seven days after receipt of the redemption request in proper form.
A fund may make payment for telephone redemptions in excess of $1,000 by check
when it is considered to be in the fund's best interest to do so.
REDEMPTIONS BY THE FUNDS
If a fund determines that you have not provided a correct Social Security or
other tax ID number on your account application, the fund may, at its
discretion, redeem your account and distribute the proceeds to you.
----------------------------------------------------------------------
EACH OF THE FUNDS AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY FUND; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
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AIM CHARTER - CONSTELLATION - WEINGARTEN FUNDS
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SHAREHOLDER INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
PRICING OF SHARES
The price of each of the funds' shares is the fund's net asset value per share.
The funds value portfolio securities for which market quotations are readily
available at market value. The funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value.
The funds value all other securities and assets at their fair value. Securities
and other assets quoted in foreign currencies are valued in U.S. dollars based
on the prevailing exchange rates on that day. In addition, if, between the time
trading ends on a particular security and the close of the customary trading
session of the NYSE or as of the closing time of the NYSE if the NYSE closes
early on a particular day, events occur that materially affect the value of the
security, the funds may value the security at its fair value as determined in
good faith by or under the supervision of the Board of Directors of the funds.
The effect of using fair value pricing is that a fund's net asset value will be
subject to the judgment of the Board of Directors or its designee instead of
being determined by the market. Because some of the funds may invest in
securities that are primarily listed on foreign exchanges, the value of those
fund's shares may change on days when you will not be able to purchase or redeem
shares.
Each fund determines the net asset value of its shares as of the close of the
customary trading session of the NYSE on each day the NYSE is open for business
or as of the closing time of the NYSE if the NYSE closes early on a particular
day. The funds price purchase and redemption orders at the net asset value
calculated after the transfer agent receives an order in good form.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different rates of tax apply to ordinary income and long-term
capital gain distributions. Every year, information showing the amount of
dividends and distributions you received from each fund during the prior year
will be sent to you.
Any long-term or short-term capital gains realized from redemptions of fund
shares will be subject to federal income tax.
The foreign, state and local tax consequences of investing in fund shares may
differ materially from the federal income tax consequences described above. You
should consult your tax advisor before investing.
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AIM CHARTER - CONSTELLATION - WEINGARTEN FUNDS
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OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the funds
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about each fund's investments. Each fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about these funds, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
a fund's current SAI or annual or semiannual reports, please contact us
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 0843
Houston, TX 77001-0843
BY TELEPHONE: (800) 659-1005
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports only)
</TABLE>
- -------------------------------------------------------------------------------
You also can review and obtain copies of a fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
-------------------------------------------------------------
AIM Charter Fund, AIM Constellation Fund, AIM Weingarten Fund
SEC 1940 Act file number: 811-1424
-------------------------------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 364
STATEMENT OF
ADDITIONAL INFORMATION
Institutional Classes of
AIM CHARTER FUND
AIM CONSTELLATION FUND
AIM WEINGARTEN FUND
(Series Portfolios of
AIM EQUITY FUNDS)
11 Greenway Plaza
Suite 100
Houston, TX 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 FUNDS,
A COPY OF WHICH MAY BE OBTAINED FREE OF CHARGE
FROM AUTHORIZED DEALERS OR BY WRITING
FUND MANAGEMENT COMPANY
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TX 77046-1173
OR BY CALLING (800) 659-1005.
-----------------
Statement of Additional Information dated May 26, 2000
relating to the Prospectus dated May 26, 2000
<PAGE> 365
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
INTRODUCTION.................................................................................1
GENERAL INFORMATION ABOUT THE TRUST..........................................................1
The Trust and Its Shares.............................................................1
PERFORMANCE..................................................................................3
Total Return Calculations............................................................4
Yield Quotations.....................................................................4
Historical Portfolio Results.........................................................4
PORTFOLIO TRANSACTIONS AND BROKERAGE.........................................................5
General Brokerage Policy.............................................................5
Allocation of Portfolio Transactions.................................................6
Allocation of IPO Securities Transactions............................................6
Section 28(e) Standards..............................................................7
Transactions with Regular Brokers....................................................8
Brokerage Commissions Paid...........................................................8
Portfolio Turnover...................................................................8
INVESTMENT STRATEGIES AND RISKS..............................................................8
Real Estate Investment Trusts.......................................................10
Foreign Securities..................................................................11
Foreign Exchange Transactions.......................................................12
Illiquid Securities.................................................................12
Rule 144A Securities................................................................12
Repurchase Agreements...............................................................13
Reverse Repurchase Agreements.......................................................13
Special Situations..................................................................13
Short Sales.........................................................................14
Margin Transactions.................................................................14
Warrants............................................................................14
Securities Issued on a When-Issued or Delayed Delivery Basis........................14
Lending of Portfolio Securities.....................................................15
Interfund Loans.....................................................................15
Equity-Linked Derivatives...........................................................15
Borrowing...........................................................................16
Investment in Unseasoned Issuers....................................................16
Investment in Other Investment Companies............................................16
Temporary Defensive Investments.....................................................16
OPTIONS, FUTURES AND CURRENCY STRATEGIES....................................................17
Introduction........................................................................17
General Risks of Options, Futures and Currency Strategies...........................17
Cover...............................................................................17
Writing Call Options................................................................18
Writing Put Options.................................................................18
Purchasing Put Options..............................................................19
Purchasing Call Options.............................................................19
Over-The-Counter Options............................................................19
</TABLE>
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<TABLE>
<S> <C>
Index Options.......................................................................20
Limitations on Options..............................................................20
Interest Rate, Currency and Stock Index Futures Contracts...........................20
Options on Futures Contracts........................................................21
Forward Contracts...................................................................21
Limitations on Use of Futures, Options on Futures and Certain Options on Currencies.22
INVESTMENT RESTRICTIONS.....................................................................22
Fundamental Restrictions............................................................22
Non-Fundamental Restrictions........................................................23
MANAGEMENT..................................................................................24
Trustees and Officers...............................................................24
Remuneration of Trustees.....................................................27
AIM Funds Retirement Plan for Eligible Directors/Trustees....................28
Deferred Compensation Agreements.............................................29
INVESTMENT ADVISORY AND OTHER SERVICES......................................................30
THE DISTRIBUTOR.............................................................................33
HOW TO PURCHASE AND REDEEM SHARES...........................................................34
NET ASSET VALUE DETERMINATION...............................................................34
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS....................................................35
Reinvestment of Dividends and Distributions.........................................35
Tax Matters.........................................................................35
Qualification as a Regulated Investment Company.....................................35
Determination of Taxable Income of a Regulated Investment Company...................36
Excise Tax on Regulated Investment Companies........................................37
Fund Distributions..................................................................37
Sale or Redemption of Shares........................................................39
Foreign Shareholders................................................................39
Effect of Future Legislation; Local Tax Considerations..............................40
SHAREHOLDER INFORMATION.....................................................................40
MISCELLANEOUS INFORMATION...................................................................41
Charges for Certain Account Information.............................................41
Audit Reports.......................................................................41
Legal Matters.......................................................................41
Custodian and Transfer Agent........................................................41
Principal Holders of Securities.....................................................42
Other Information...................................................................51
APPENDIX...................................................................................A-1
FINANCIAL STATEMENTS........................................................................FS
</TABLE>
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INTRODUCTION
AIM Equity 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 certain information
concerning the activities of the fund being considered for investment. This
information is included in a Prospectus dated May 26, 2000 (the "Prospectus"),
which relates to the Institutional Classes of the following portfolios of the
Trust: AIM Charter Fund ("Charter"), AIM Constellation Fund ("Constellation")
and AIM Weingarten Fund ("Weingarten") (individually a "Fund" and collectively,
the "Funds"). Additional copies of the Prospectus and this Statement of
Additional Information may be obtained without charge by writing the principal
distributor of the Funds' shares, Fund Management Company ("FMC"), 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173 or by calling (800) 659-1005.
Investors must receive a Prospectus before they invest.
This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Funds. Some of
the information required to be in this Statement of Additional Information is
also included in the Prospectus; and, in order to avoid repetition, reference
will be made to sections of the Prospectus. Additionally, the Prospectus and
this Statement of Additional Information omit certain information contained in
the 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 described under its rules and regulations.
GENERAL INFORMATION ABOUT THE TRUST
THE TRUST AND ITS SHARES
The Trust currently is organized as a Delaware business trust under an
Agreement and Declaration of Trust, dated December 6, 1999 (the "Trust
Agreement"). The Trust was previously organized as AIM Equity Funds, Inc.
("AEF"), a Maryland corporation. Pursuant to an Agreement and Plan of
Reorganization, the AEF Funds (defined below) were reorganized on May 26, 2000
as portfolios of the Trust, which is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as a diversified open-end series
management investment company.
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. The Trust currently consists of eleven separate portfolios: AIM
Aggressive Growth Fund ("Aggressive Growth"), AIM Blue Chip Fund ("Blue Chip"),
AIM Capital Development Fund ("Capital Development"), Charter, Constellation,
AIM Dent Demographic Trends Fund ("Demographic Trends"), AIM Emerging Growth
Fund ("Emerging Growth"), AIM Large Cap Basic Value Fund ("Large Cap Basic
Value"), AIM Large Cap Growth Fund ("Large Cap Growth"), AIM Mid Cap Growth Fund
("Mid Cap") and Weingarten (each an "AEF Fund" and collectively, the "AEF
Funds"). Charter, Weingarten and Constellation each have four separate classes:
Class A, Class B and Class C and an Institutional Class. Aggressive Growth, Blue
Chip, Capital Development, Demographic Trends, Emerging Growth, Large Cap Basic
Value, Large Cap Growth and Mid Cap each have three classes of shares: Class A,
Class B and Class C shares. Class A shares (sold with a front-end sales charge)
and Class B and Class C shares (each sold with a contingent deferred sales
charge) of the AEF Funds are also referred to as the Retail Classes. Prior to
October 15, 1993, Aggressive Growth was a portfolio of AIM Funds Group ("AFG"),
a Massachusetts business trust. Pursuant to an Agreement and Plan of
Reorganization between AFG and AEF, Aggressive Growth was redomesticated as a
portfolio of AEF. Blue Chip acquired the investment portfolio of Baird Blue Chip
Fund, Inc. (the "BBC Fund"), a registered management investment company, on June
3, 1996, in a corporate reorganization. Capital Development acquired
substantially all of the assets of Baird Capital Development Fund, Inc., a
registered management investment company, on August 12, 1996 in a corporate
reorganization.
Pursuant to the May 26, 2000 Agreement and Plan of Reorganization, the
Funds succeeded to the assets and assumed the liabilities of the series
portfolios with corresponding names (the "Predecessor Funds") of AEF. All
historical financial and other information contained in this Statement of
Additional Information for
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<PAGE> 368
periods prior to May 26, 2000 relating to the AEF Funds (or a class thereof) is
that of the Predecessor Funds (or the corresponding class thereof).
Shares of beneficial interest of the Trust are redeemable at their net
asset value (subject, in certain circumstances, to a contingent deferred sales
charge) at the option of the shareholder or at the option of the Trust in
certain circumstances. For information concerning the methods of redemption,
investors should consult the Prospectuses under the caption "Redeeming Shares."
This Statement of Additional Information relates solely to the
Institutional Classes of the Funds.
The assets received by the Trust from the issue or sale of shares of
each of its series of shares, and all income, earnings, profits and proceeds
thereof, subject only to the rights of creditors, are specifically allocated to
the appropriate Fund. They constitute the underlying assets of each Fund, are
required to be segregated on the Trust's books of account, and are to be charged
with the expenses with respect to such 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.
Each share of each Fund represents an equal proportionate interest in
that Fund with each other share and is entitled to such dividends and
distributions out of the income belonging to such Fund as are declared by the
Board. Each class represents interests in the same portfolio of investments but,
as further described in the Prospectuses, each such class is subject to
differing sales charges 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 applicable Fund allocable to such class available for
distribution after satisfaction of outstanding liabilities of the Fund allocable
to such class.
The Trust is not required to hold annual or regular meetings of
shareholders. Meetings of shareholders of a Fund will be held from time to time
to consider matters requiring a vote of such shareholders in accordance with the
requirements of the 1940 Act, state law or the provisions of the Trust
Agreement. It is not expected that shareholder meetings will be held annually.
Shares of the Retail Class and the Institutional Class of each Fund have
equal rights and privileges. Each share of a particular class is entitled to one
vote, to participate equally in dividends and distributions declared by the
Trust's Board of Trustees with respect to the class of such Fund and, upon
liquidation of the Fund, to participate proportionately in the net assets of the
Fund allocable to such class remaining after satisfaction of outstanding
liabilities of the Fund allocable to such class. Fund shares are fully paid,
non-assessable and fully transferable when issued and have no preemptive rights
and have such conversion and exchange rights as set forth in the Prospectus and
this Statement of Additional Information. Fractional shares have proportionately
the same rights, including voting rights, as are provided for a full share.
Except as specifically noted above, shareholders of each Fund are
entitled to one vote per share (with proportionate voting for fractional
shares), irrespective of the relative net asset value of the different classes
of shares, where applicable, of a Fund. However, on matters affecting one
portfolio of the Trust or one class of shares, a separate vote of shareholders
of that portfolio or class is required. Shareholders of a portfolio or class are
not entitled to vote on any matter which does not affect that portfolio or class
but which requires a separate vote of another portfolio or class. An example of
a matter which would be voted on separately by shareholders of a portfolio is
the approval of an advisory agreement, and an example of a matter which would be
voted on separately by shareholders of a class of shares is approval of a
distribution plan.
Shareholders of the Funds do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all Funds
voting together for election of trustees may elect all of the members of the
Board of Trustees of the Trust. In such event, the remaining holders cannot
elect any trustees of the Trust.
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 at least
two-thirds of the outstanding shares of the Trust, or at any time by written
instrument signed by at least
2
<PAGE> 369
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 retired by a written instrument signed by a majority of the trustees and
specifying the date of his or her retirement.
Under Delaware law, shareholders of a Delaware business trust shall be
entitled to the same limitations or liability extended to shareholders of
private for-profit corporations, however, there is a remote possibility that
shareholders could, under certain circumstances, be held liable for the
obligations of the Trust to the extent the courts of another state which does
not recognize such limited liability were to apply the laws of such state to a
controversy involving such obligations. 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 the trustees to all parties, and each
party thereto must expressly waive all rights of action directly against
shareholders of the Trust. The Trust Agreement provides for indemnification out
of the property of a Fund for all losses and expenses of any shareholder of such
Fund held liable on account of being or having been a shareholder. Thus, the
risk of a shareholder incurring financial loss due to shareholder liability is
limited to circumstances in which a Fund would be unable to meet its obligations
and wherein the complaining party was held not to be bound by the disclaimer.
The Trust Agreement further provides that the trustees and officers will
not be liable for any act, omission or obligation of the Trust or any trustee or
officer. However, nothing in the Trust Agreement protects a trustee or officer
against any liability to the Trust or to the shareholders to which a trustee or
officer would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
his or her office with the Trust. The Trust Agreement provides for
indemnification by the Trust of the trustees, officers, employees and agents of
the Trust, if it is determined that such person acted in good faith, and
reasonably believed: (1) in the case of conduct in his or her official capacity
for the Trust, that his or her conduct was in the Trust's best interests, (2) in
all other cases, that his or her conduct was at least not opposed to the Trust's
best interests and (3) in a criminal proceeding, that he or she had no reason to
believe that his or her conduct was unlawful. The Trust Agreement also
authorizes the purchase of liability insurance on behalf of trustees and
officers.
PERFORMANCE
Each Fund's performance may be quoted in advertising in terms of yield
or total return.
The total return shows the overall change in value of a Fund's
Institutional Class, including changes in share price and assuming all the
Fund's dividends and capital gain distributions are reinvested and that all
expenses are deducted. A cumulative total return reflects the performance of a
Fund's Institutional Class 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 performance of a Fund's
Institutional Class had been constant over the entire period. BECAUSE AVERAGE
ANNUAL RETURNS TEND TO EVEN OUT VARIATIONS IN A 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 gain or
loss.
A fund may participate in the initial public offering ("IPO") market,
and a significant portion of the fund's returns may be attributable to its
investment in IPOs. Investment in IPOs could have a magnified impact on a fund
with a small asset base. There is no guarantee that as a fund's assets grow, it
will continue to experience substantially similar performance by investing in
IPOs.
Yield is computed in accordance with the standardized formula described
below and can be expected to fluctuate from time to time and is not necessarily
indicative of future results. Accordingly, yield information may not provide a
basis for comparison with investments which pay a fixed rate of interest for a
stated period of time. Yield is a function of the type and quality of a Fund's
investments, the Fund's maturity and the Fund's operating expense ratio.
From time to time, A I M Advisors, Inc. ("AIM") or its affiliates may
waive all or a portion of their fees and/or assume certain expenses of any Fund.
Voluntary fee waivers or reductions or commitments to assume
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<PAGE> 370
expenses may be rescinded at any time without further notice to investors.
During periods of voluntary fee waivers or reductions or commitments to assume
expenses, AIM will retain its ability to be reimbursed for such fee prior to the
end of each fiscal year. Contractual fee waivers or reductions or reimbursement
of expenses set forth in the Fee Table in a Prospectus may not be terminated or
amended to the Funds' detriment during the period stated in the agreement
between AIM and the Fund. Fee waivers or reductions or commitments to reduce
expenses will have the effect of increasing that Fund's yield and total return.
The performance of the Institutional Class of each Fund will vary from
time to time and past results are not necessarily indicative of future results.
A Fund's performance is a function of its portfolio management in selecting the
type and quality of portfolio securities and is affected by operating expenses
of the Fund and market conditions. A shareholder's investment in a Fund is not
insured or guaranteed. These factors should be carefully considered by the
investor before making an investment in any Fund.
Additional performance information is contained in the Trust's Annual
Report to Shareholders, which is available upon request without charge.
TOTAL RETURN CALCULATIONS
Total returns quoted in advertising reflect all aspects of the
applicable Fund's return, including the effect of reinvesting dividends and
capital gain distributions, and any change in such 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 a particular Fund
over a stated period, and then calculating the annually 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 a 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 such Fund.
In addition to average annual returns, the Institutional Class of each
Fund may quote unaveraged or cumulative total returns 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, yields, and other
performance information may be quoted numerically or in a table, graph or
similar illustration.
YIELD QUOTATIONS
The standard formula for calculating yield is as follows:
6
YIELD = 2[((a-b)/(c x d) + 1) -1]
Where a = dividends and interest earned during a stated 30-day period.
For purposes of this calculation, dividends are accrued rather than
recorded on the ex-dividend date. Interest earned under this
formula must generally be calculated based on the yield to maturity
of each obligation (or, if more appropriate, based on yield to call
date).
b = expense accrued during period (net of reimbursement).
c = the average daily number of shares outstanding during the period.
d = the maximum offering price per share on the last day of the period.
HISTORICAL PORTFOLIO RESULTS
The average annual return of the Institutional Class of Charter was
34.61% for the fiscal year ended October 31, 1999. The cumulative return of the
Institutional Class of Charter was 266.37% for the period of July 30, 1991 (date
operations commenced) through October 31, 1999. The average annual return of the
Institutional Class of Constellation was 35.46% for the fiscal year ended
October 31, 1999. The cumulative return of the Institutional Class of
Constellation was 258.14% for the period of April 8, 1992 (date operations
4
<PAGE> 371
commenced) through October 31, 1999. The average annual return of the
Institutional Class of Weingarten was 39.25% for the fiscal year ended October
31, 1999. The cumulative return of the Institutional Class of Weingarten was
266.82% for the period of October 8, 1991 (date operations commenced) through
October 31, 1999.
The performance data listed above is not necessarily indicative of the
future performance of any of the Funds.
Each 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 Funds may also advertise
mutual fund performance rankings which have been assigned to each respective
Fund by such monitoring services.
Each Fund's performance may also be compared in advertising and other
materials to the performance of comparative benchmarks such as the Consumer
Price Index ("CPI"), the Russell(R) indices, the Standard & Poor's 500 Stock
Index, and fixed-price investments such as bank certificates of deposit and/or
savings accounts.
The CPI, published by the U.S. Bureau of Labor Statistics, is a
statistical measure of changes, over time, in the prices of goods and services.
Standard & Poor's 500 Stock Index is a group of unmanaged securities widely
regarded by investors as representative of the stock market in general.
Comparisons assume the reinvestment of dividends. Fixed price investments, such
as bank certificates of deposits and savings accounts, are generally backed by
federal agencies for up to $100,000.
Each Fund's advertising may from time to time include discussions of
general economic conditions and interest rates. In addition, each Fund's
long-term performance may be described in advertising in relation to historical,
political and/or economic events. Each Fund's advertising may also include
references to the use of the Fund as part of an individual's overall retirement
investment program.
From time to time, Fund 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.
From time to time, the Funds' 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.
PORTFOLIO TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
AIM makes decisions to buy and sell securities for each Fund, selects
broker-dealers, effects the Funds' investment portfolio transactions, allocates
brokerage fees in such transactions, and where applicable, negotiates
commissions and spreads on transactions. AIM's primary consideration in
effecting a security transaction is to obtain the most favorable execution of
the order, which includes the best price on the security and a low commission
rate. While AIM seeks reasonably competitive commission rates, the Funds may not
pay the lowest commission or spread available. See "Section 28(e) Standards"
below.
Some of the securities in which the Funds invest are traded in
over-the-counter markets. In such transactions, a Fund deals directly with
dealers who make markets in the securities involved, except when better prices
are available elsewhere. Portfolio transactions placed through dealers who are
primary market makers are effected at net prices without commissions, but which
include compensation in the form of a mark up or mark down.
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Traditionally, commission rates have not been negotiated on stock
markets outside the United States. Although in recent years many overseas stock
markets have adopted a system of negotiated rates, a number of markets maintain
an established schedule of minimum commission rates.
AIM may determine target levels of commission business with various
brokers on behalf of its clients (including the Funds) over a certain time
period. The target levels will be based upon the following factors, among
others: (1) the execution services provided by the broker; (2) the research
services provided by the broker; and (3) the broker's interest in mutual funds
in general and in the Funds and other mutual funds advised by AIM or A I M
Capital Management, Inc. ("AIM Capital") (collectively, the "AIM Funds") in
particular, including sales of the Funds and of the other AIM Funds. In
connection with (3) above, the Funds' trades may be executed directly by dealers
that sell shares of the AIM Funds or by other broker-dealers with which such
dealers have clearing arrangements. AIM will not use a specific formula in
connection with any of these considerations to determine the target levels.
The Funds may engage in certain principal and agency transactions with
banks and their affiliates that own 5% or more of the outstanding voting
securities of an AIM Fund, provided the conditions of an exemptive order
received by the Funds from the SEC are met. In addition, a Fund may purchase or
sell a security from or to another AIM Fund or account and may invest in
affiliated money market funds, provided the Funds follow procedures adopted by
the Board of Trustees/Trustees of the various AIM Funds, including the Trust.
These inter-fund transactions do not generate brokerage commissions but may
result in custodial fees or taxes or other related expenses.
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage numerous other investment accounts. Some
of these accounts may have investment objectives similar to the Funds.
Occasionally, identical securities will be appropriate for investment by one of
the Funds and by another Fund or one or more of these investment accounts.
However, the position of each account in the same securities and the length of
time that each account may hold its investment in the same securities may 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 is consistent with the
investment policies of the Fund(s) and one or more of these accounts, and is
considered at or about the same time, AIM will fairly allocate transactions in
such securities among the Fund(s) and these accounts. AIM may combine such
transactions, in accordance with applicable laws and regulations, to obtain the
most favorable execution. Simultaneous transactions could, however, adversely
affect a Fund's ability to obtain or dispose of the full amount of a security
which it seeks to purchase or sell.
Sometimes the procedure for allocating portfolio transactions among the
various investment accounts advised by AIM could have an adverse effect on the
price or amount of securities available to a Fund. In making such allocations,
AIM considers the investment objectives and policies of its advisory clients,
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.
ALLOCATION OF IPO SECURITIES TRANSACTIONS
From time to time, certain of the AIM Funds or other accounts managed by
AIM may become interested in participating in security distributions that are
available in an IPO, and occasions may arise when purchases of such securities
by one AIM Fund or account may also be considered for purchase by one or more
other AIM Funds or accounts. In such cases, it shall be AIM's practice to
combine or otherwise bunch indications of interest for IPO securities for all
AIM Funds and accounts participating in purchase transactions for that security,
and to allocate such transactions in accordance with the following procedures:
AIM will determine the eligibility of each AIM Fund and account that
seeks to participate in a particular IPO by reviewing a number of factors,
including suitability of the investment with the AIM Fund's or account's
investment objective, policies and strategies, the liquidity of the AIM Fund or
account if such investment is purchased, and whether the portfolio manager
intends to hold the security as a long-term investment. The allocation of
limited supply securities issued in IPOs will be made to eligible AIM Funds and
accounts in a
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manner designed to be fair and equitable for the eligible AIM Funds or accounts,
and so that there is equal allocation of IPOs over the longer term. Where
multiple funds or accounts are eligible, rotational participation may occur,
based on the extent to which an AIM Fund or account has participated in previous
IPOs as well as the size of the AIM Fund or account. Each eligible AIM Fund or
account with an asset level of less than $500 million will be placed in one of
three tiers, depending upon its asset level. The AIM Funds and accounts in the
tier containing funds and accounts with the smallest asset levels will
participate first, each receiving a 40 basis point allocation (rounded to the
nearest share round lot that approximates 40 basis points) (the "Allocation"),
based on that AIM Fund's or account's net assets. This process continues until
all of the AIM Funds or accounts in the three tiers receive their Allocation, or
until the shares are all allocated. Should securities remain after this process,
eligible AIM Funds and accounts will receive their Allocation on a straight pro
rata basis. For the tier of AIM Funds and accounts not receiving a full
Allocation, the Allocation may be made only to certain AIM Funds or accounts so
that each may receive close to or exactly 40 basis points.
When AIM Funds and/or accounts with substantially identical investment
objectives and policies will participate in syndicates in amounts that are
substantially proportionate to each other. In these cases, the net assets of the
largest AIM Fund will be used to determine in which tier, as described in the
paragraph above, such group of AIM Funds or accounts will be placed. If no AIM
Fund is participating, then the net assets of the largest account will be used
to determine tier placement. The price per share of securities purchased in such
syndicate transactions will be the same for each AIM Fund and account. Due to
their asset size, Charter, Constellation and Weingarten are unlikely to
participate in IPOs to a material degree.
SECTION 28(e) STANDARDS
Section 28(e) of the Securities Exchange Act of 1934 provides that AIM,
under certain circumstances, lawfully may cause an account to pay a higher
commission than the lowest available. Under Section 28(e), AIM must make a good
faith determination that the commissions paid are "reasonable in relation to the
value of the brokerage and research services provided ... viewed in terms of
either that particular transaction or [AIM's] overall responsibilities with
respect to the accounts as to which it exercises investment discretion." The
services provided by the broker also must lawfully and appropriately assist AIM
in the performance of its investment decision-making responsibilities.
Accordingly, in recognition of research services provided to it, a Fund may pay
a broker higher commissions than those available from another broker.
Research services received from broker-dealers supplement AIM's own
research (and the research of its affiliates), and may include the following
types of information: statistical and background information on the U.S. and
foreign economies, industry groups and individual companies; forecasts and
interpretations with respect to the U.S. and foreign economies, securities,
markets, specific industry groups and individual companies; information on
federal, state, local and foreign political developments; portfolio management
strategies; performance information on securities, indexes and investment
accounts; information concerning prices of securities; and information supplied
by specialized services to AIM and to the Board of Trustees with respect to the
performance, investment activities, and fees and expenses of other mutual funds.
Broker-dealers may communicate such information electronically, orally, in
written form or on computer software. Research services may also include the
providing of custody services, as well as the providing of equipment used to
communicate research information, the providing of specialized consultations
with AIM personnel with respect to computerized systems and data furnished to
AIM as a component of other research services, the arranging of meetings with
management of companies, and the providing of access to consultants who supply
research information.
The outside research assistance is useful to AIM since the
broker-dealers used by AIM tend to follow a broader universe of securities and
other matters than AIM staff can follow. In addition, the research provides AIM
with a diverse perspective on financial markets. Research services provided to
AIM by broker-dealers are available for the benefit of all accounts managed or
advised by AIM or by its affiliates. Some broker-dealers may indicate that the
provision of research services is dependent upon the generation of certain
specified levels of commissions and underwriting concessions by AIM clients,
including the Funds. However, the Funds are not under any obligation to deal
with any broker-dealer in the execution of transactions in portfolio securities.
In some cases, the research services are available only from the
broker-dealer providing them. In other cases, the research services may be
obtainable from alternative sources in return for cash payments.
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AIM believes that the research services are beneficial in supplementing AIM's
research and analysis and that they improve the quality of AIM's investment
advice. The advisory fee paid by the Funds is not reduced because AIM receives
such services. However, to the extent that AIM would have purchased research
services had they not been provided by broker-dealers, the expenses to AIM could
be considered to have been reduced accordingly.
TRANSACTIONS WITH REGULAR BROKERS
As of October 31, 1999, Charter held an amount of common stock issued by
Goldman Sachs Group having a market value of $10,650,000; Merrill Lynch & Co.
having a market value of $39,250,000 and common stock issued by Morgan Stanley,
Dean Witter, Discover & Co. having a market value of $137,890,625.
BROKERAGE COMMISSIONS PAID
For the fiscal years ended October 31, 1999, 1998 and 1997, Charter paid
brokerage commissions of $11,856,781, $15,567,811 and $12,073,633, respectively.
For the fiscal year ended October 31, 1999, AIM allocated certain of Charter's
brokerage transactions to certain broker-dealers that provided AIM with certain
research, statistical and other information. Such transactions amounted to
$1,349,408,533 and the related brokerage commissions were $1,333,679.
For the fiscal years ended October 31, 1999, 1998 and 1997,
Constellation paid brokerage commissions of $20,108,956, $25,285,665 and
$16,928,988, respectively. For the fiscal year ended October 31, 1999, AIM
allocated certain of Constellation's brokerage transactions to certain
broker-dealers that provided AIM with certain research, statistical and other
information. Such transactions amounted to $2,153,357,263 and the related
brokerage commissions were $2,610,073.
For the fiscal years ended October 31, 1999, 1998 and 1997, Weingarten
paid brokerage commissions of $20,226,511, $19,810,852 and $17,413,682,
respectively. For the fiscal year ended October 31, 1998, AIM allocated certain
of Weingarten's brokerage transactions to certain broker-dealers that provided
AIM with certain research, statistical and other information. Such transactions
amounted to $2,225,018,782 and the related brokerage commissions were
$2,027,136.
PORTFOLIO TURNOVER
The portfolio turnover rate of each Fund is shown under "Financial
Highlights" in the Prospectus. Higher portfolio turnover increases transaction
costs to the Fund.
INVESTMENT STRATEGIES AND RISKS
Information concerning each Fund's non-fundamental investment
objective(s) is set forth in the Prospectus under the heading "Investment
Objectives and Strategies." There can be no assurance that any Fund will achieve
its objective. The principal features of each Fund's investment program and the
principal risks associated with that investment program are discussed in the
Prospectus under the heading "Investment Objectives and Strategies" and
"Principal Risks of investing in the Funds."
Set forth in this section is a description of each Fund's investment
policies, strategies and practices. The investment objective(s) of each Fund are
non-fundamental policies and may be changed by the Board of Trustees without
shareholder approval. Each Fund's investment policies, strategies and practices
are also non-fundamental. The Board of Trustees of the Trust reserves the right
to change any of these non-fundamental investment policies, strategies or
practices without shareholder approval. However, shareholders will be notified
before any material change in the investment policies becomes effective. Each
Fund has adopted certain investment restrictions, some of which are fundamental
and cannot be changed without shareholder approval. See "Investment
Restrictions" in this Statement of Additional Information. Individuals
considering the purchase of shares of any Fund should recognize that there are
risks in the ownership of any security. Any percentage limitations with respect
to assets of a Fund will be applied at the time of purchase.
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The primary investment objective of Charter is growth of capital with a
secondary objective of current income. Although the amount of Charter's current
income will vary from time to time, it is anticipated that the current income
realized by Charter will generally be greater than that realized by mutual funds
whose sole objective is growth of capital.
The investment objective of Constellation is growth of capital.
Constellation aggressively seeks to increase shareholders' capital by investing
principally in common stocks of companies the portfolio managers believe are
likely to benefit from new or innovative products, services or processes that
should enhance such companies' prospects for future growth in earnings. As a
result of this policy, the market prices of many of the securities purchased and
held by the Fund may fluctuate widely. Any income received from securities held
by the Fund will be incidental, and an investor should not consider a purchase
of shares of the Fund as equivalent to a complete investment program.
Constellation and Weingarten's portfolio is primarily comprised of
securities of two basic categories of companies: (a) "core" companies, which
Fund management considers to have experienced above-average and consistent
long-term growth in earnings and to have excellent prospects for outstanding
future growth, and (b) "earnings acceleration" companies which Fund management
believes are currently enjoying a dramatic increase in profits.
The investment objective of Weingarten is to seek growth of capital. The
Fund will invest in common stocks of seasoned and better capitalized companies.
Current income will not be an important criterion of investment selection, and
any such income should be considered incidental. It is anticipated that common
stocks will be the principal form of investment by the Fund.
Each of the Funds may invest, for cash management, temporary or
defensive purposes, all or substantially all of their assets in investment grade
(high quality) corporate bonds, shares of affiliated money market funds,
commercial paper, or U.S. Government obligations. In addition, all or a portion
of each Fund's assets may be held, from time to time, in cash, repurchase
agreements, shares of affiliated money market funds, bonds or other short-term
debt securities when such positions are deemed advisable in light of economic or
market conditions. For a description of the various rating categories of
corporate bonds and commercial paper in which the Funds may invest, see the
Appendix to this Statement of Additional Information.
COMMON STOCKS -- The Funds will invest in common stocks. Common stocks
represent the residual ownership interest in the issuer and are entitled to the
income and increase in the value of the assets and business of the entity after
all of its obligations and preferred stocks are satisfied. Common stocks
generally have voting rights. Common stocks fluctuate in price in response to
many factors including historical and prospective earnings of the issuer, the
value of its assets, general economic conditions, interest rates, investor
perceptions and market liquidity.
PREFERRED STOCKS -- The Funds may invest in preferred stocks. Preferred
stock has a preference over common stock in liquidation (and generally dividends
as well) but is subordinated to the liabilities of the issuer in all respects.
As a general rule the market value of preferred stock with a fixed dividend rate
and no conversion element varies inversely with interest rates and perceived
credit risk, while the market price of convertible preferred stock generally
also reflects some element of conversion value. Because preferred stock is
junior to debt securities and other obligations of the issuer, deterioration in
the credit quality of the issuer will cause greater changes in the value of a
preferred stock than in a more senior debt security with similar stated yield
characteristics. Unlike interest payments on debt securities, preferred stock
dividends are payable only if declared by the issuer's board of directors.
Preferred stock also may be subject to optional or mandatory redemption
provisions.
CONVERTIBLE SECURITIES -- The Funds may invest in convertible
securities. A convertible security is a bond, debenture, note, preferred stock
or other security that may be converted into or exchanged for a prescribed
amount of common stock or other equity security of the same or a different
issuer within a particular period of time at a specified price or formula. A
convertible security entitles the holder to receive interest paid or accrued on
debt or the dividend paid on preferred stock until the convertible security
matures or is redeemed, converted or exchanged. Before conversion, convertible
securities have characteristics similar to non-convertible income securities in
that they ordinarily provide a stable stream of income with generally higher
yields
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than those of common stocks of the same or similar issuers. Convertible
securities rank senior to common stock in a corporation's capital structure but
are usually subordinated to comparable nonconvertible securities. Convertible
securities may be subject to redemption at the option of the issuer at a price
established in the convertible security's governing instrument. Although each
Fund will only purchase convertible securities that AIM considers to have
adequate protection parameters, including an adequate capacity to pay interest
and repay principal in a timely manner, it invests without regard to corporate
bond ratings.
CORPORATE DEBT SECURITIES -- The Funds may invest in corporate debt
securities. Corporations issue debt securities of various types, including bonds
and debentures (which are long-term), notes (which may be short- or long-term),
bankers acceptances (indirectly secured borrowings to facilitate commercial
transactions) and commercial paper (short-term unsecured notes). These
securities typically provide for periodic payments of interest, at a rate which
may be fixed or adjustable, with payment of principal upon maturity and are
generally not secured by assets of the issuer or otherwise guaranteed. The
values of fixed rate income securities tend to vary inversely with changes in
interest rates, with longer-term securities generally being more volatile than
shorter-term securities. Corporate securities frequently are subject to call
provisions that entitle the issuer to repurchase such securities at a
predetermined price prior to their stated maturity. In the event that a security
is called during a period of declining interest rates, the Fund may be required
to reinvest the proceeds in securities having a lower yield. In addition, in the
event that a security was purchased at a premium over the call price, a Fund
will experience a capital loss if the security is called. Adjustable rate
corporate debt securities may have interest rate caps and floors.
Securities rated in the four highest long-term rating categories by
Standard and Poor's Ratings Services ("S&P") and Moody's Investors Service
("Moody's") are considered to be "investment grade." S&P's fourth highest
long-term rating category is "BBB", with BBB- being the lowest investment grade
rating. Moody's fourth highest long-term rating category is "Baa", with Baa3
being the lowest investment grade rating. Publications of S&P indicate that it
assigns securities to the "BBB" rating category when such securities are
"regarded as having an adequate capacity to pay interest and repay principal.
Such securities normally exhibit adequate protection parameters, but adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay," whereas securities rated AAA by S&P are regarded as
having "capacity to pay interest and repay principal [that] is extremely
strong." Publications of Moody's indicate that it assigns securities to the "Baa
rating category when such securities are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well," whereas securities rated Aaa by
Moody's "are judged to be of the best quality" and "carry the smallest degree of
investment risk."
U.S. GOVERNMENT SECURITIES -- The Funds may invest in securities issued
or guaranteed by the United States government or its agencies or
instrumentalities. These include Treasury securities (bills, notes, bonds and
other debt securities) which differ only in their interest rates, maturities and
times of issuance. U.S. Government agency and instrumentality securities include
securities which are supported by the full faith and credit of the U.S.,
securities that are supported by the right of the agency to borrow from the U.S.
Treasury, securities that are supported by the discretionary authority of the
U.S. Government to purchase certain obligations of the agency or instrumentality
and securities that are supported only by the credit of such agencies. While the
U.S. Government may provide financial support to such U.S. government-sponsored
agencies or instrumentalities, no assurance can be given that it always will do
so. The U.S. government, its agencies and instrumentalities do not guarantee the
market value of their securities. The values of such securities fluctuate
inversely to interest rates.
REAL ESTATE INVESTMENT TRUSTS ("REITS")
To the extent consistent with their respective investment objectives and
policies, the Funds may invest in equity and/or debt securities issued by REITs.
Such investments will not exceed 25% of the total assets of any of the Funds.
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REITs are trusts which sell equity or debt securities to investors and
use the proceeds to invest in real estate or interests therein. A REIT may focus
on particular projects, such as apartment complexes, or geographic regions, such
as the southeastern United States, or both.
To the extent that a Fund has the ability to invest in REITs, such Fund
could conceivably own real estate directly as a result of a default on the
securities it owns. A Fund, therefore, may be subject to certain risks
associated with the direct ownership of real estate including difficulties in
valuing and trading real estate, declines in the value of real estate, risks
related to general and local economic condition, adverse change in the climate
for real estate, environmental liability risks, increases in property taxes and
operating expense, changes in zoning laws, casualty or condemnation losses,
limitations on rents, changes in neighborhood values, the appeal of properties
to tenants, and increases in interest rates.
In addition to the risks described above, equity REITs may be affected
by any changes in the value of the underlying property owned by the trusts,
while mortgage REITs may be affected by the quality of any credit extended.
Equity and mortgage REITs are dependent upon management skill, are not
diversified, and are therefore subject to the risk of financing single or a
limited number of projects. Such trusts are also subject to heavy cash flow
dependency, defaults by borrowers, self-liquidation, and the possibility of
failing to maintain exemption from the 1940 Act. Changes in interest rates may
also affect the value of debt securities held by a Fund. By investing in REITs
indirectly through a Fund, a shareholder will bear not only his/her
proportionate share of the expenses of the Fund, but also, indirectly, similar
expenses of the REITs.
FOREIGN SECURITIES
To the extent consistent with their respective investment objectives,
each of the Funds may invest in foreign securities. Each of Charter,
Constellation and Weingarten may invest up to 20% of its total assets in foreign
securities. For purposes of computing such limitation American Depositary
Receipts ("ADRs"), European Depositary Receipts ("EDRs") and other securities
representing underlying securities of foreign issuers are treated as foreign
securities. These securities may not necessarily be denominated in the same
currency as the securities into which they may be converted. ADRs are receipts
typically issued by a United States bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. EDRs are
receipts issued in Europe which evidence a similar ownership arrangement.
Generally, ADRs, in registered form, are designed for use in the United States
securities markets, and EDRs, in bearer form, are designed for use in European
securities markets. ADRs and EDRs may be listed on stock exchanges, or traded in
OTC markets in the United States or Europe, as the case may be. ADRs, like other
securities traded in the United States, will be subject to negotiated commission
rates.
To the extent a Fund invests in securities denominated in foreign
currencies, each Fund bears the risk of changes in the exchange rates between
U.S. currency and the foreign currency, as well as the availability and status
of foreign securities markets. These securities will be marketable equity
securities (including common and preferred stock, depositary receipts for stock
and fixed income or equity securities exchangeable for or convertible into
stock) of foreign companies which generally are listed on a recognized foreign
securities exchange or traded in a foreign over-the-counter market. Each of the
Funds may also invest in foreign securities listed on recognized U.S. securities
exchanges or traded in the U.S. over-the-counter market. Such foreign securities
may be issued by foreign companies located in developing countries in various
regions of the world. A "developing country" is a country in the initial stages
of its industrial cycle. As compared to investment in the securities markets of
developed countries, investment in the securities markets of developing
countries involves exposure to markets that may have substantially less trading
volume and greater price volatility, economic structures that are less diverse
and mature, and political systems that may be less stable.
Investments by a Fund in foreign securities, whether denominated in U.S.
currencies or foreign currencies, may entail all of the risks set forth below.
Investments by a Fund in ADRs, EDRs or similar securities also may entail some
or all of the risks as set forth below.
Currency Risk. The value of each Fund's foreign investments will be
affected by changes in currency exchange rates. The U.S. dollar value of a
foreign security decreases when the value of the U.S. dollar rises against the
foreign currency in which the security is denominated, and increases when the
value of the U.S. dollar falls against such currency.
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On January 1, 1999, certain members of the European Economic and
Monetary Union ("EMU"), namely Austria, Belgium, Finland, France, Germany,
Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain established a
common European currency known as the "euro" and each members' local currency
became a denomination of the euro. It is anticipated that each participating
country will replace its local currency with the euro on July 1, 2002.
Any other European country that is a member of the European Union and
satisfies the criteria for participation in the EMU may elect to participate in
the EMU and may supplement its existing currency with the euro. The anticipated
replacement of existing currencies with the euro on July 1, 2002 could cause
market disruptions before or after July 1, 2002 and could adversely affect the
value of securities held by the Fund.
Political and Economic Risk. The economies of many of the countries in
which the Funds may invest are not as developed as the United States economy and
may be subject to significantly different forces. Political or social
instability, expropriation or confiscatory taxation, and limitations on the
removal of funds or other assets could also adversely affect the value of each
Fund's investments.
Regulatory Risk. Foreign companies are not registered with the SEC and
are generally not subject to the regulatory controls imposed on United States
issuers and, as a consequence, there is generally less publicly available
information about foreign securities than is available about domestic
securities. Foreign companies are not subject to uniform accounting, auditing
and financial reporting standards, practices and requirements comparable to
those applicable to domestic companies. Income from foreign securities owned by
the Funds may be reduced by a withholding tax at the source, which tax would
reduce dividend income payable to the Funds' shareholders.
Market Risk. The securities markets in many of the countries in which
the Funds invest will have substantially less trading volume than the major
United States markets. As a result, the securities of some foreign companies may
be less liquid and experience more price volatility than comparable domestic
securities. Increased custodian costs as well as administrative costs (such as
the need to use foreign custodians) may be associated with the maintenance of
assets in foreign jurisdictions. There is generally less government regulation
and supervision of foreign stock exchanges, brokers and issuers which may make
it difficult to enforce contractual obligations. In addition, transaction costs
in foreign securities markets are likely to be higher, since brokerage
commission rates in foreign countries are likely to be higher than in the United
States.
FOREIGN EXCHANGE TRANSACTIONS
Each Fund has authority to deal in foreign exchange between currencies
of the different countries in which it will invest either for the settlement of
transactions or as a hedge against possible variations in the foreign exchange
rates between those currencies. This may be accomplished through direct
purchases or sales of foreign currency, purchases of futures contracts with
respect to foreign currency (and options thereon), and contractual agreements to
purchase or sell a specified currency at a specified future date (up to one
year) at a price set at the time of the contract. Such contractual commitments
may be forward contracts entered into directly with another party or
exchange-traded futures contracts. The Fund may purchase and sell options on
futures contracts or forward contracts which are denominated in a particular
foreign currency to hedge the risk of fluctuations in the value of another
currency. The Funds' dealings in foreign exchange may involve specific
transactions or portfolio positions. Transaction hedging is the purchase or sale
of foreign currency with respect to specific receivables or payables of the Fund
accruing in connection with the purchase or sale of its portfolio securities,
the sale and redemption of shares of the Fund, or the payment of dividends and
distributions by the Fund. Position hedging is the purchase or sale of foreign
currency with respect to portfolio security positions (or underlying portfolio
security positions, such as in an ADR) denominated or quoted in a foreign
currency. The Fund will not speculate in foreign exchange, nor commit a larger
percentage of its total assets to foreign exchange hedges than the percentage of
its total assets that it could invest in foreign securities. Further information
concerning futures contracts and related options is set forth under the heading
"Options, Futures and Currency Strategies."
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ILLIQUID SECURITIES
None of the Funds will invest more than 15% of their net assets in
illiquid securities, including repurchase agreements with maturities in excess
of seven days.
RULE 144A SECURITIES
The Funds may purchase privately placed securities that are eligible for
purchase and sale pursuant to Rule 144A under the Securities Act of 1933 (the
"1933 Act"). This Rule permits certain qualified institutional buyers, such as a
Fund, to trade in securities that have not been registered under the 1933 Act.
AIM, under the supervision of the Trust's Board of Trustees, will consider
whether securities purchased under Rule 144A are illiquid and thus subject to a
Fund's restriction of investing no more than 15% of its assets in illiquid
securities. Determination of whether a Rule 144A security is liquid or not is a
question of fact. In making this determination AIM will consider the trading
markets for the specific security taking into account the unregistered nature of
a Rule 144A security. In addition, AIM could consider the (i) frequency of
trades and quotes, (ii) number of dealers and potential purchasers, (iii) dealer
undertakings to make a market, and (iv) nature of the security and of market
place trades (for example, the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer). The liquidity of
Rule 144A securities will also be monitored by AIM and, if as a result of
changed conditions, it is determined that a Rule 144A security is no longer
liquid, the Fund's holdings of illiquid securities will be reviewed to determine
what, if any, action is required to assure that the Fund does not invest more
than 15% of its assets in illiquid securities. Investing in Rule 144A securities
could have the effect of increasing the amount of the Fund's investments in
illiquid securities if qualified institutional buyers are unwilling to purchase
such securities.
REPURCHASE AGREEMENTS
The Funds may each enter into repurchase agreements. A repurchase
agreement is an instrument under which a Fund acquires ownership of a debt
security and the seller (usually a broker or bank) agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed upon time and price,
thereby determining the yield during the Fund's holding period. In the event of
bankruptcy or other default of a seller of a repurchase agreement, the Fund may
experience both delays in liquidating the underlying securities and losses,
including: (a) a possible decline in the value of the underlying security during
the period in which the Fund seeks to enforce its rights thereto; (b) a possible
subnormal level of income and lack of access to income during this period; and
(c) expenses of enforcing its rights. A repurchase agreement is collateralized
by the security acquired by the Fund and its value is marked to market daily in
order to minimize the Fund's risk. Repurchase agreements usually are for short
periods, such as one or two days, but may be entered into for longer periods of
time. Repurchase agreements are not included in each Fund's restrictions on
lending. Repurchase agreements are considered to be loans by each Fund under the
1940 Act.
Charter may enter into repurchase agreements (at any time, up to 50% of
its net assets), using only U.S. Government securities, for the sole purpose of
increasing its yield on idle cash.
REVERSE REPURCHASE AGREEMENTS
Consistent with Charter's policy on borrowings, Charter may invest in
reverse repurchase agreements with banks, which involve the sale of securities
held by the Fund, with an agreement that the Fund will repurchase the securities
at an agreed upon price and date. The Fund may employ reverse repurchase
agreements (i) for temporary emergency purposes, such as to meet unanticipated
net redemptions so as to avoid liquidating other portfolio securities during
unfavorable market conditions; (ii) to cover short-term cash requirements
resulting from the timing of trade settlements; or (iii) to take advantage of
market situations where the interest income to be earned from the investment of
the proceeds of the transaction is greater than the interest expense of the
transaction. At the time it enters into a reverse repurchase agreement, the Fund
will segregate liquid securities having a dollar value equal to the repurchase
price. Reverse repurchase agreements are considered borrowings by the Fund under
the 1940 Act.
SPECIAL SITUATIONS
Although Constellation does not currently intend to do so, it may invest
in "special situations." A special situation arises when, in the opinion of the
Fund's management, the securities of a particular company will,
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within a reasonably estimable period of time, be accorded market recognition at
an appreciated value solely by reason of a development applicable to that
company, and regardless of general business conditions or movements of the
market as a whole. Developments creating special situations might include, among
others: liquidations, reorganizations, recapitalizations, mergers, material
litigation, technical breakthroughs, and new management or management policies.
Although large and well-known companies may be involved, special situations more
often involve comparatively small or unseasoned companies. Investments in
unseasoned companies and special situations often involve much greater risk than
is inherent in ordinary investment securities.
SHORT SALES
Each of the Funds may from time to time make short sales of securities
which it owns or which it has the right to acquire through the conversion or
exchange of other securities it owns. In a short sale, a Fund does not
immediately deliver the securities sold and does not receive the proceeds from
the sale. A Fund is said to have a short position in the securities sold until
it delivers the securities sold, at which time it receives the proceeds of the
sale. A Fund will neither make short sales of securities nor maintain a short
position unless, at all times when a short position is open, the Fund owns an
equal amount of such securities or securities convertible into or exchangeable,
without payment of any further consideration, for securities of the same issue
as, and equal in amount to, the securities sold short. This is a technique known
as selling short "against the box." To secure its obligation to deliver the
securities sold short, a Fund will deposit in escrow in a separate account with
its custodian, an equal amount of the securities sold short or securities
convertible into or exchangeable for such securities. In no event may more than
10% of a Fund's total assets be deposited or pledged as collateral for short
sales at any one time.
Since a Fund ordinarily will want to continue to receive interest and
dividend payments on securities in its portfolio which are convertible into the
securities sold short, the Fund will normally close out a short position by
purchasing and delivering an equal amount of the securities sold short, rather
than by delivering securities which it already holds.
A Fund will make a short sale, as a hedge, when it believes that the
price of a security may decline, causing a decline in the value of a security
owned by the Fund or a security convertible into or exchangeable for such
security, or when the Fund does not want to sell the security it owns, because
among other reasons, it wishes to defer recognition of gain or loss for federal
income tax purposes. In such case, any future losses in a Fund's long position
should be reduced by a gain in the short position. Conversely, any gain in the
long position should be reduced by a loss in the short position. The extent to
which such gains or losses are reduced will depend upon the amount of the
security sold short relative to the amount a Fund owns, either directly or
indirectly, and, in the case where the Fund owns convertible securities, changes
in the conversion premium. In determining the number of shares to be sold short
against a Fund's position in a convertible security, the anticipated fluctuation
in the conversion premium is considered. A Fund may also make short sales to
generate additional income from the investment of the cash proceeds of short
sales.
MARGIN TRANSACTIONS
Neither Charter nor Weingarten will purchase any security on margin,
except that each Fund may obtain such short-term credits as may be necessary for
the clearance of purchases and sales of portfolio securities. The payment by a
Fund of initial or variation margin in connection with futures or related
options transactions will not be considered the purchase of a security on
margin.
WARRANTS
The Funds may, from time to time, invest in warrants. Warrants are, in
effect, longer-term call options. They give the holder the right to purchase a
given number of shares of a particular company at specified prices within
certain periods of time. The purchaser of a warrant expects that the market
price of the security will exceed the purchase price of the warrant plus the
exercise price of the warrant, thus giving him a profit. Of course, since the
market price may never exceed the exercise price before the expiration date of
the warrant, the purchaser of the warrant risks the loss of the entire purchase
price of the warrant. Warrants generally trade in the open market and may be
sold rather than exercised. Warrants are sometimes sold in unit form with other
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securities of an issuer. Units of warrants and common stock may be employed in
financing young, unseasoned companies. The purchase price of a warrant varies
with the exercise price of a warrant, the current market value of the underlying
security, the life of the warrant and various other investment factors.
SECURITIES ISSUED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS
Each Fund may purchase securities on a "when-issued" basis, that is,
delivery of and payment for the securities is not fixed at the date of purchase,
but is set after the securities are issued (normally within forty-five days
after the date of the transaction). Each Fund also may purchase or sell
securities on a delayed delivery basis. The payment obligation and the interest
rate that will be received on the delayed delivery securities are fixed at the
time the buyer enters into the commitment. A Fund will only make commitments to
purchase when-issued or delayed delivery securities with the intention of
actually acquiring such securities, but the Fund may sell these securities
before the settlement date if it is deemed advisable.
Investment in securities on a when-issued or delayed delivery basis may
increase a Fund's exposure to market fluctuation and may increase the
possibility that the Fund will incur short-term gains subject to federal
taxation or short-term losses if the Fund must engage in portfolio transactions
in order to honor a when-issued or delayed delivery commitment. In a delayed
delivery transaction, the Fund relies on the other party to complete the
transaction. If the transaction is not completed, the Fund may miss a price or
yield considered to be advantageous. A Fund will employ techniques designed to
reduce such risks. If a Fund purchases a when-issued security, the Fund will
segregate liquid assets in an amount equal to the when-issued commitment. If the
market value of such assets declines, additional cash or securities will be
segregated on a daily basis so that the market value of the segregated assets
will equal the amount of the Fund's when-issued commitments. To the extent cash
and securities are segregated, they will not be available for new investments or
to meet redemptions. Securities purchased on a delayed delivery basis may
require a similar segregation of liquid assets.
LENDING OF PORTFOLIO SECURITIES
Consistent with applicable regulatory requirements, the Funds may lend
their portfolio securities (principally to broker-dealers) to the extent of
one-third of their respective total assets. Such loans would be callable at any
time and would be continuously secured by collateral equal to no less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash or debt securities issued or guaranteed by the U.S. Government or any of
its agencies. The Funds would continue to receive the income on loaned
securities and would, at the same time, earn interest on the loan collateral or
on the investment of the loan collateral if it were cash. Any cash collateral
pursuant to these loans would be invested in short-term money market instruments
or affiliated money market funds. Where voting or consent rights with respect to
loaned securities pass to the borrower, the Funds will follow the policy of
calling the loan, in whole or in part as may be appropriate, to permit the
exercise of such voting or consent rights if the matters involved are expected
to have a material effect on the Funds' investment in the loaned securities.
Lending securities entails a risk of loss to the Funds if and to the extent that
the market value of the securities loaned were to increase and the lender did
not increase the collateral accordingly.
INTERFUND LOANS
Each Fund may lend up to 33 1/3% of its total assets to another AIM
Fund, on such terms and conditions as the SEC may require in an exemptive order.
An application for exemptive relief has been filed with the SEC on behalf of the
Funds and others. Each Fund may also borrow from another AIM Fund to satisfy
redemption requests or to cover unanticipated cash shortfalls due to a delay in
the delivery of cash to the Fund's custodian or improper delivery instructions
by a broker effectuating a transaction.
EQUITY-LINKED DERIVATIVES
Each of the Funds may invest in equity-linked derivative products
designed to replicate the composition and performance of particular indices.
Examples of such products include S&P Depositary Receipts ("SPDRs"), World
Equity Benchmark Series ("WEBs"), NASDAQ 100 tracking shares ("QQQs"), Dow Jones
Industrial Average Instruments ("DIAMONDS") and Optomised Portfolios as Listed
Securities ("OPALS"). Investments
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in equity-linked derivatives involve the same risks associated with a direct
investment in the types of securities included in the indices such products are
designed to track. There can be no assurance that the trading price of the
equity-linked derivatives will equal the underlying value of the basket of
securities purchased to replicate a particular index or that such basket will
replicate the index. Investments in equity-linked derivatives may constitute
investment in other investment companies. See "Investment in Other Investment
Companies."
BORROWING
In additional to the ability to borrow money for temporary or emergency
purposes, Constellation may, but has no current intention to, borrow money from
banks to purchase or carry securities. Constellation may borrow amounts to
purchase or carry securities only if, immediately after such borrowing, the
value of its assets, including the amount borrowed, less its liabilities, is
equal to at least 300% of the amount borrowed, plus all outstanding borrowings.
Any investment gains made by Constellation with the borrowed monies in excess of
interest paid by the Fund will cause the net asset value of the Fund's shares to
rise faster than would otherwise be the case. On the other hand, if the
investment performance of the additional securities purchased with the proceeds
of such borrowings fails to cover the interest paid on the money borrowed by the
Fund, the net asset value of the Fund will decrease faster than would otherwise
be the case. This speculative factor is knows as "leveraging."
INVESTMENT IN UNSEASONED ISSUERS
Charter may purchase securities of unseasoned issuers. Securities in
such issuers may provide opportunities for long term capital growth. Greater
risks are associated with investments in securities of unseasoned issuers than
in the securities of more established companies because unseasoned issuers have
only a brief operating history and may have more limited markets and financial
resources. As a result, securities of unseasoned issuers tend to be more
volatile than securities of more established companies.
INVESTMENT IN OTHER INVESTMENT COMPANIES
Each of the Funds may invest in other investment companies to the extent
permitted by the 1940 Act, and rules and regulations thereunder, and if
applicable, exemptive orders granted by the SEC. The following restrictions
apply to investments in other investment companies other than Affiliated Money
Market Funds (defined below): (i) a Fund may not purchase more than 3% of the
total outstanding voting stock of another investment company; (ii) a Fund may
not invest more than 5% of its total assets in securities issued by another
investment company; and (iii) a Fund may not invest more than 10% of its total
assets in securities issued by other investment companies other than Affiliated
Money Market Funds. With respect to a Fund's purchase of shares of another
investment company, including Affiliated Money Market Funds, the Fund will
indirectly bear its proportionate share of the advisory fees and other operating
expenses of such investment company. The Funds have obtained an exemptive order
from the SEC allowing them to invest uninvested cash balances and cash
collateral received in connection with securities lending in money market funds
that have AIM or an affiliate of AIM as an investment advisor (the "Affiliated
Money Market Funds"), provided that, with respect to uninvested cash balances,
investments in Affiliated Money Market Funds do not exceed 25% of the total
assets of such Fund.
TEMPORARY DEFENSIVE INVESTMENTS
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, each of the Funds may
temporarily hold all or a portion of its assets in cash, money market
instruments, bonds, or other debt securities. Each of the Funds may also invest
up to 25% of its total assets in Affiliated Money Market Funds for these
purposes. For a description of the various rating categories of corporate bonds
and commercial paper in which the Funds may invest, see the Appendix to this
Statement of Additional Information.
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OPTIONS, FUTURES AND CURRENCY STRATEGIES
INTRODUCTION
The Funds may each use forward contracts, futures contracts, options on
securities, options on indices, options on currencies, and options on futures
contracts to attempt to hedge against the overall level of investment and
currency risk normally associated with each Fund's investments. These
instruments are often referred to as "derivatives," which may be defined as
financial instruments whose performance is derived, at least in part, from the
performance of another asset (such as a security, currency or an index of
securities).
GENERAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use by the Funds of options, futures contracts and forward currency
contracts involves special considerations and risks, as described below. Risks
pertaining to particular strategies are described in the sections that follow.
(1) Successful use of hedging transactions depends upon AIM's ability to
correctly predict the direction of changes in the value of the applicable
markets and securities, contracts and/or currencies. While AIM is experienced in
the use of these instruments, there can be no assurance that any particular
hedging strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between the price movements of an instrument (such as an option contract) and
the price movements of the investments being hedged. For example, if a
"protective put" is used to hedge a potential decline in a security and the
security does decline in price, the put option's increased value may not
completely offset the loss in the underlying security. Such a lack of
correlation might occur due to factors unrelated to the value of the investments
being hedged, such as changing interest rates, market liquidity, and speculative
or other pressures on the markets in which the hedging instrument is traded.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements in
the investments being hedged. However, hedging strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments.
(4) There is no assurance that a liquid secondary market will exist for
any particular option, futures contract, forward contract or option thereon at
any particular time.
(5) As described below, a Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in instruments involving obligations to third parties. If a Fund were
unable to close out its positions in such instruments, it might be required to
continue to maintain such assets or accounts or make such payments until the
position expired or matured. The requirements might impair the Fund's ability to
sell a portfolio security or make an investment at a time when it would
otherwise be favorable to do so, or require that the Fund sell a portfolio
security at a disadvantageous time.
(6) There is no assurance that a Fund will use hedging transactions. For
example, if a Fund determines that the cost of hedging will exceed the potential
benefit to the Fund, the Fund will not enter into such transaction.
COVER
Transactions using forward contracts, futures contracts and options
(other than options purchased by a Fund) expose a Fund to an obligation to
another party. A Fund will not enter into any such transactions unless it owns
either (1) an offsetting ("covered") position in securities, currencies, or
other options, forward contracts or futures contracts or (2) cash, liquid assets
and/or short-term debt securities with a value sufficient at all times to cover
its potential obligations not covered as provided in (1) above. Each Fund will
comply with SEC guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash or liquid securities. To the extent that a
futures contract, forward contract or option is deemed to be illiquid, the
assets
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used to "cover" the Fund's obligation will also be treated as illiquid for
purposes of determining the Fund's maximum allowable investment in illiquid
securities.
Even though options purchased by the Funds do not expose the Funds to an
obligation to another party, but rather provide the Funds with a right to
exercise, the Funds intend to "cover" the cost of any such exercise. To the
extent that a purchased option is deemed illiquid, the Fund will treat the
market value of the option (i.e., the amount at risk to the Fund) as illiquid,
but will not treat the assets used as cover on such transactions as illiquid.
Assets used as cover cannot be sold while the position in the
corresponding forward contract, futures contract or option is open, unless they
are replaced with other appropriate assets. If a large portion of a Fund's
assets is used for cover or otherwise set aside, it could affect portfolio
management or the Fund's ability to meet redemption requests or other current
obligations.
WRITING CALL OPTIONS
Each of the Funds may write (sell) covered call options on securities,
futures contracts, forward contracts, indices and currencies. As the writer of a
call option, a Fund would have the obligation to deliver the underlying
security, cash or currency (depending on the type of derivative) to the holder
(buyer) at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). So long as
the obligation of a Fund continues, it may be assigned an exercise notice,
requiring it to deliver the underlying security, cash or currency against
payment of the exercise price. This obligation terminates upon the expiration of
the call option, or such earlier time at which a Fund effects a closing purchase
transaction by purchasing an option identical to that previously sold.
When writing a call option a Fund, in return for the premium, gives up
the opportunity for profit from a price increase in the underlying security,
contract or currency above the exercise price, and retains the risk of loss
should the price of the security, contract or currency decline. Unlike one who
owns securities, contracts or currencies not subject to an option, a Fund has no
control over when it may be required to sell the underlying securities,
contracts or currencies, since most options may be exercised at any time prior
to the option's expiration. If a call option that a Fund has written expires, it
will realize a gain in the amount of the premium; however, such gain may be
offset by a decline in the market value of the underlying security, contract or
currency during the option period. If the call option is exercised, a Fund will
realize a gain or loss from the sale of the underlying security, contract or
currency, which will be increased or offset by the premium received.
Writing call options can serve as a limited hedge because declines in
the value of the hedged investment would be offset to the extent of the premium
received for writing the option.
Closing transactions may be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security, contract or currency
from being called or to permit the sale of the underlying security, contract or
currency. Furthermore, effecting a closing transaction will permit a Fund to
write another call option on the underlying security, contract or currency with
either a different exercise price or expiration date, or both.
WRITING PUT OPTIONS
Each of the Funds may write (sell) covered put options on securities,
futures contracts, forward contracts, indices and currencies. As the writer of a
put option, a Fund would have the obligation to buy the underlying security,
contract or currency (depending on the type of derivative) at the exercise price
at any time until (American style) or on (European style) the expiration date.
This obligation terminates upon the expiration of the put option, or such
earlier time at which a Fund effects a closing purchase transaction by
purchasing an option identical to that previously sold.
A Fund would write a put option at an exercise price that, reduced by
the premium received on the option, reflects the lower price it is willing to
pay for the underlying security, contract or currency. The risk in such a
transaction would be that the market price of the underlying security, contract
or currency would decline below the exercise price less the premium received.
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PURCHASING PUT OPTIONS
Each of the Funds may purchase covered put options on securities,
futures contracts, forward contracts, indices and currencies. As the holder of a
put option, a Fund would have the right to sell the underlying security,
contract or currency at the exercise price at any time until (American style) or
on (European style) the expiration date. A Fund may enter into closing sale
transactions with respect to such options, exercise such option or permit such
option to expire.
A Fund may purchase a put option on an underlying security, contract or
currency ("protective put") owned by the Fund in order to protect against an
anticipated decline in the value of the security, contract or currency. Such
hedge protection is provided only during the life of the put option. The premium
paid for the put option and any transaction costs would reduce any profit
realized when the security, contract or currency is delivered upon exercise of
said option. Conversely, if the underlying security, contract or currency does
not decline in value, the option may expire worthless and the premium paid for
the protective put would be lost.
A Fund may also purchase put options on underlying securities, contracts
or currencies against which it has written other put options. For example, where
a Fund has written a put option on an underlying security, rather than entering
a closing transaction of the written option, it may purchase a put option with a
different exercise price and/or expiration date that would eliminate some or all
of the risk associated with the written put. Used in combinations, these
strategies are commonly referred to as "put spreads." Likewise, a Fund may write
call options on underlying securities, contracts or currencies against which it
has purchased protective put options. This strategy is commonly referred to as a
"collar."
PURCHASING CALL OPTIONS
Each of the Funds may purchase covered call options on securities,
futures contracts, forward contracts, indices and currencies. As the holder of a
call option, a Fund would have the right to purchase the underlying security,
contract or currency at the exercise price at any time until (American style) or
on (European style) the expiration date. A Fund may enter into closing sale
transactions with respect to such options, exercise such options or permit such
options to expire.
Call options may be purchased by a Fund for the purpose of acquiring the
underlying security, contract or currency for its portfolio. Utilized in this
fashion, the purchase of call options would enable a Fund to acquire the
security, contract or currency at the exercise price of the call option plus the
premium paid. So long as it holds such a call option, rather than the underlying
security or currency itself, the Fund is partially protected from any unexpected
decline in the market price of the underlying security, contract or currency
and, in such event, could allow the call option to expire, incurring a loss only
to the extent of the premium paid for the option.
Each of the Funds may also purchase call options on underlying
securities, contracts or currencies against which it has written other call
options. For example, where a Fund has written a call option on an underlying
security, rather than entering a closing transaction of the written option, it
may purchase a call option with a different exercise price and/or expiration
date that would eliminate some or all of the risk associated with the written
call. Used in combinations, these strategies are commonly referred to as "call
spreads."
OVER-THE-COUNTER OPTIONS
Options may be either listed on an exchange or traded in
over-the-counter ("OTC") markets. Listed options are third-party contracts
(i.e., performance of the obligations of the purchaser and seller is guaranteed
by the exchange or clearing corporation) and have standardized strike prices and
expiration dates. OTC options are two-party contracts with negotiated strike
prices and expiration dates. A Fund will not purchase an OTC option unless it
believes that daily valuations for such options are readily obtainable. OTC
options differ from exchange-traded options in that OTC options are transacted
with dealers directly and not through a clearing corporation (which guarantees
performance). Consequently, there is a risk of non-performance by the dealer.
Since no exchange is involved, OTC options are valued on the basis of an average
of the last bid prices obtained from dealers, unless a quotation from only one
dealer is available, in which case only that dealer's price will be used. In the
case of OTC options, there can be no assurance that a liquid secondary market
will exist for any particular option at any specific time. Although a Fund will
enter into OTC options only with dealers that
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are expected to be capable of entering into closing transactions with it, there
is no assurance that the Fund will in fact be able to close out an OTC option
position at a favorable price prior to expiration. In the event of insolvency of
the dealer, a Fund might be unable to close out an OTC option position at any
time prior to its expiration.
The staff of the SEC considers purchased OTC options (i.e., the market
value of the option) to be illiquid securities. A Fund may also sell OTC options
and, in connection therewith, segregate assets or cover its obligations with
respect to OTC options written by it. The assets used as cover for OTC options
written by the Fund will be considered illiquid unless the OTC options are sold
to qualified dealers who agree that the Fund may repurchase any OTC option it
writes at a maximum price to be calculated by a formula set forth in the option
agreement. The cover for an OTC option written subject to this procedure would
be considered illiquid only to the extent that the maximum repurchase price
under the formula exceeds the intrinsic value of the option.
INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities or
futures contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price movements in the
securities market or a particular market sector generally) rather than on price
movements in individual securities or futures contracts. The amount of cash is
equal to the difference between the closing price of the index and the exercise
price of the call or put times a specified multiple (the "multiplier"), which
determines the total dollar value for each point of such difference.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Fund writes a call
on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. A Fund can
offset some of the risk of writing a call index option position by holding a
diversified portfolio of securities similar to those on which the underlying
index is based. However, the Fund cannot, as a practical matter, acquire and
hold a portfolio containing exactly the same securities as underlie the index
and, as a result, bears a risk that the value of the securities held will not be
perfectly correlated with the value of the index.
LIMITATIONS ON OPTIONS
A Fund will not write options if, immediately after such sale, the
aggregate value of securities or obligations underlying the outstanding options
exceeds 20% of the Fund's total assets. A Fund will not purchase options if, at
any time of the investment, the aggregate premiums paid for the options will
exceed 5% of the Fund's total assets.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
Each of the Funds may enter into interest rate, currency or stock index
futures contracts (collectively, "Futures" or "Futures Contracts") as a hedge
against changes in prevailing levels of interest rates, currency exchange rates
or stock price levels, respectively, in order to establish more definitely the
effective return on securities or currencies held or intended to be acquired by
it. A Fund's hedging may include sales of Futures as an offset against the
effect of expected increases in interest rates, and decreases in currency
exchange rates and stock prices, and purchases of Futures as an offset against
the effect of expected declines in interest rates, and increases in currency
exchange rates or stock prices.
A Futures Contract is a two party agreement to buy or sell a specified
amount of a specified security or currency (or delivery of a cash settlement
price, in the case of an index future) for a specified price at a designated
date, time and place. A stock index future provides for the delivery, at a
designated date, time and place, of an amount of cash equal to a specified
dollar amount times the difference between the stock index value at the close of
trading on the contract and the price agreed upon in the Futures Contract; no
physical delivery of stocks comprising the index is made. Brokerage fees are
incurred when a Futures Contract is bought or sold, and margin deposits must be
maintained at all times the Future is outstanding.
The Funds will only enter into Futures Contracts that are traded (either
domestically or internationally) on futures exchanges and are standardized as to
maturity date and underlying financial instrument. Futures
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exchanges and trading thereon in the United States are regulated under the
Commodity Exchange Act and by the Commodity Futures Trading Commission ("CFTC").
Foreign futures exchanges and trading thereon are not regulated by the CFTC and
are not subject to the same regulatory controls. For a further discussion of the
risks associated with investments in foreign securities, see "Foreign
Securities" in this Statement of Additional Information.
Closing out an open Future is effected by entering into an offsetting
Future for the same aggregate amount of the identical financial instrument or
currency and the same delivery date. There can be no assurance, however, that a
Fund will be able to enter into an offsetting transaction with respect to a
particular Future at a particular time. If a Fund is not able to enter into an
offsetting transaction, it will continue to be required to maintain the margin
deposits on the Future.
A Fund's Futures transactions will be entered into for hedging purposes
only; that is, Futures will be sold to protect against a decline in the price of
securities or currencies that the Fund owns, or Futures will be purchased to
protect the Fund against an increase in the price of securities or currencies it
has committed to purchase or expects to purchase.
"Margin" with respect to Futures is the amount of funds that must be
deposited by a Fund in order to initiate Futures trading and maintain its open
positions in Futures. A margin deposit made when the Futures Contract is entered
("initial margin") is intended to ensure the Fund's performance under the
Futures Contract. The margin required for a particular Future is set by the
exchange on which the Future is traded and may be significantly modified from
time to time by the exchange during the term of the Futures Contract.
Subsequent payments, called "variation margin," to and from the futures
commission merchant through which a Fund entered into the Futures Contract will
be made on a daily basis as the price of the underlying security, currency or
index fluctuates making the Futures more or less valuable, a process known as
marking-to-market.
If a Fund were unable to liquidate a Future or an option on a Futures
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. The Fund would continue to be
subject to market risk with respect to the position. In addition, except in the
case of purchased options, the Fund would continue to be required to make daily
variation margin payments and might be required to maintain the position being
hedged by the Future or option or to maintain cash or securities in a segregated
account.
OPTIONS ON FUTURES CONTRACTS
Options on Futures Contracts are similar to options on securities or
currencies except that options on Futures Contracts give the purchaser the
right, in return for the premium paid, to assume a position in a Futures
Contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. Upon exercise of the option, the delivery of the Futures position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's Futures margin account.
FORWARD CONTRACTS
A forward contract is an obligation, usually arranged with a commercial
bank or other currency dealer, to purchase or sell a currency against another
currency at a future date and price as agreed upon by the parties. A Fund either
may accept or make delivery of the currency at the maturity of the forward
contract. A Fund may also, if its contra party agrees prior to maturity, enter
into a closing transaction involving the purchase or sale of an offsetting
contract. Forward contracts are traded over-the-counter, and not on organized
commodities or securities exchanges. As a result, it may be more difficult to
value such contracts, and it may be difficult to enter into closing
transactions.
Each of the Funds may engage in forward currency transactions in
anticipation of, or to protect itself against, fluctuations in exchange rates. A
Fund may enter into forward contracts with respect to a specific purchase or
sale of a security, or with respect to its portfolio positions generally. When a
Fund purchases a
21
<PAGE> 388
security denominated in a foreign currency for settlement in the near future, it
may immediately purchase in the forward market the currency needed to pay for
and settle the purchase. By entering into a forward contract with respect to the
specific purchase or sale of a security denominated in a foreign currency, the
Fund can secure an exchange rate between the trade and settlement dates for that
purchase or sale transaction. This practice is sometimes referred to as
"transaction hedging." Position hedging is the purchase or sale of foreign
currency with respect to portfolio security positions denominated or quoted in a
foreign currency.
The cost to a Fund of engaging in forward contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because forward contracts are usually entered
into on a principal basis, no fees or commissions are involved. The use of
forward contracts does not eliminate fluctuations in the prices of the
underlying securities a Fund owns or intends to acquire, but it does establish a
rate of exchange in advance. In addition, while forward contract sales limit the
risk of loss due to a decline in the value of the hedged currencies, they also
limit any potential gain that might result should the value of the currencies
increase.
LIMITATIONS ON USE OF FUTURES, OPTIONS ON FUTURES AND CERTAIN OPTIONS ON
CURRENCIES
To the extent that a Fund enters into Futures Contracts, options on
Futures Contracts and options on foreign currencies traded on a CFTC-regulated
exchange, in each case other than for bona fide hedging purposes (as defined by
the CFTC), the aggregate initial margin and premiums required to establish those
positions (excluding the amount by which options are "in-the-money") will not
exceed 5% of the total assets of the Fund, after taking into account unrealized
profits and unrealized losses on any contracts it has entered into. This
guideline may be modified by the Board, without a shareholder vote. This
limitation does not limit the percentage of the Fund's assets at risk to 5%.
INVESTMENT RESTRICTIONS
Each Fund is subject to the following investment restrictions, which may
be changed only by a vote of a majority of such Fund's outstanding shares.
Fundamental restrictions may be changed only by a vote of the lesser of (i) 67%
or more of the Fund's shares present at a meeting if the holders of more than
50% of the outstanding shares are present in person or represented by proxy, or
(ii) more than 50% of the Fund's outstanding shares. Any investment restriction
that involves a maximum or minimum percentage of securities or assets shall not
be considered to be violated unless an excess over or a deficiency under the
percentage occurs immediately after, and is caused by, an acquisition or
disposition of securities or utilization of assets by the Fund.
FUNDAMENTAL RESTRICTIONS
(1) The Fund is a "diversified company" as defined in the 1940
Act. The Fund will not purchase the securities of any issuer if, as a
result, the Fund would fail to be a diversified company within the
meaning of the 1940 Act, and the rules and regulations promulgated
thereunder, as such statute, rules and regulations are amended from time
to time or are interpreted from time to time by the SEC staff
(collectively, the "1940 Act Laws and Interpretations") or except to the
extent that the Fund may be permitted to do so by exemptive order or
similar relief (collectively, with the 1940 Act Laws and
Interpretations, the "1940 Act Laws, Interpretations and Exemptions").
In complying with this restriction, however, the Fund may purchase
securities of other investment companies to the extent permitted by the
1940 Act Laws, Interpretations and Exemptions.
(2) The Fund may not borrow money or issue senior securities,
except as permitted by the 1940 Act Laws, Interpretations and
Exemptions.
(3) The Fund may not underwrite the securities of other issuers.
This restriction does not prevent the Fund from engaging in transactions
involving the acquisition, disposition or resale of its portfolio
securities, regardless of whether the Fund may be considered to be an
underwriter under the Securities Act of 1933.
22
<PAGE> 389
(4) The Fund will not make investments that will result in the
concentration (as that term may be defined or interpreted by the 1940
Act Laws, Interpretations and Exemptions) of its investments in the
securities of issuers primarily engaged in the same industry. This
restriction does not limit the Fund's investments in (i) obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or (ii) tax-exempt obligations issued by governments
or political subdivisions of governments. In complying with this
restriction, the Fund will not consider a bank-issued guaranty or
financial guaranty insurance as a separate security.
(5) The Fund may not purchase real estate or sell real estate
unless acquired as a result of ownership of securities or other
instruments. This restriction does not prevent the Fund from investing
in issuers that invest, deal, or otherwise engage in transactions in
real estate or interests therein, or investing in securities that are
secured by real estate or interests therein.
(6) The Fund may not purchase physical commodities or sell
physical commodities unless acquired as a result of ownership of
securities or other instruments. This restriction does not prevent the
Fund from engaging in transactions involving futures contracts and
options thereon or investing in securities that are secured by physical
commodities.
(7) The Fund may not make personal loans or loans of its assets
to persons who control or are under common control with the Fund, except
to the extent permitted by 1940 Act Laws, Interpretations and
Exemptions. This restriction does not prevent the Fund from, among other
things, purchasing debt obligations, entering into repurchase
agreements, loaning its assets to broker-dealers or institutional
investors, or investing in loans, including assignments and
participation interests.
(8) The Fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objectives, policies and
restrictions as the Fund.
The investment restrictions set forth above provide each of the Funds
with the ability to operate under new interpretations of the 1940 Act or
pursuant to exemptive relief from the SEC without receiving prior shareholder
approval of the change. Even though each of the Funds have this flexibility, the
Board of Trustees has adopted non-fundamental restrictions for each of the Funds
relating to certain of these restrictions which the advisor must follow in
managing the Funds. Any changes to these non-fundamental restrictions, which are
set forth below, require the approval of the Board of Trustees.
NON-FUNDAMENTAL RESTRICTIONS
The following restrictions apply to each of the Funds. They may be
changed for any Fund without approval of that Fund's voting securities.
(1) In complying with the fundamental restriction regarding
issuer diversification, the Fund will not, with respect to 75% of its
total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities), if, as a result, (i) more than 5% of the
Fund's total assets would be invested in the securities of that issuer,
or (ii) the Fund would hold more than 10% of the outstanding voting
securities of that issuer. The Fund may (i) purchase securities of other
investment companies as permitted by Section 12(d)(1) of the 1940 Act
and (ii) invest its assets in securities of other money market funds and
lend money to other investment companies or their series portfolios that
have AIM or an affiliate of AIM as an investment advisor (an "AIM
Advised Fund"), subject to the terms and conditions of any exemptive
orders issued by the SEC.
(2) In complying with the fundamental restriction regarding
borrowing money and issuing senior securities, the Fund may borrow money
in an amount not exceeding 33 1/3% of its total assets (including the
amount borrowed) less liabilities (other than borrowings). The Fund may
borrow from banks, broker-dealers or an AIM Advised Fund. Other than
Constellation, the Fund may not borrow for leveraging, but may borrow
for temporary or emergency purposes, in anticipation of or in response
to adverse market conditions, or for cash management purposes. Other
than Constellation, the Fund may
23
<PAGE> 390
not purchase additional securities when any borrowings from banks exceed
5% of the Fund's total assets.
(3) In complying with the fundamental restriction regarding
industry concentration, the Fund may invest up to 25% of its total
assets in the securities of issuers whose principal business activities
are in the same industry.
(4) In complying with the fundamental restriction with regard to
making loans, the Fund may lend up to 33 1/3% of its total assets and
may lend money to another AIM Advised Fund, on such terms and conditions
as the SEC may require in an exemptive order.
(5) Notwithstanding the fundamental restriction with regard to
investing all assets in an open-end fund, the Fund may not invest all of
its assets in the securities of a single open-end management investment
company with the same fundamental investment objectives, policies and
restrictions as the Fund.
[The following non-fundamental polices apply only to the Fund specified.
(1) The amount Constellation may borrow will also be limited by
the applicable margin limitations imposed by the Federal Reserve Board.
If at any time the value of Constellations' assets should fail to meet
the 300% asset coverage requirement, the Fund will, within three days,
reduce its borrowings to the extent necessary. The Fund may be required
to eliminate partially or totally its outstanding borrowings at times
when it may not be desirable for it to do so. Any investment gains made
by Fund with the borrowed monies in excess of interest paid by the Fund
will cause the net asset value of the Fund's shares to rise faster than
would otherwise be the case. On the other hand, if the investment
performance of the additional securities purchased with the proceeds of
such borrowings fails to cover the interest paid on the money borrowed
by Constellation, the net asset value of the Fund will decrease faster
than would otherwise be the case. This speculative factor is known as
"leveraging.
(2) Weingarten may not purchase more than 10% of the outstanding
securities of any one issuer or more than 10% of any class of securities
of an issuer, except that the Fund may purchase securities of Affiliated
Money Market Funds to the extent permitted by exemptive order.]
MANAGEMENT
The overall management of the business and affairs of the Funds and the
Trust is vested with the Trust's Board of Trustees. The Board of Trustees
approves all significant agreements between the Trust, on behalf of the Funds,
and persons or companies furnishing services to the Funds. The day-to-day
operations of each Fund are delegated to the officers of the Trust and to AIM,
subject always to the objectives, restrictions and policies of the applicable
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.
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 100, Houston, TX
77046-1173.
24
<PAGE> 391
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Positions Held
Name, Address and Age with Registrant Principal Occupation During Past 5 Years
--------------------- --------------- ----------------------------------------
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
*CHARLES T. BAUER (81) Trustee and Chairman of the Board of Directors, A I M
Chairman Management Group Inc.; A I M Advisors, Inc.,
A I M Capital Management, Inc., A I M
Distributors, Inc., A I M Fund Services,
Inc., and Fund Management Company; and
Executive Vice Chairman and Director,
AMVESCAP PLC.
- ---------------------------------------------------------------------------------------------------
BRUCE L. CROCKETT (56) Trustee Director, ACE Limited (insurance company).
906 Frome Lane Formerly, Director, President and Chief
McLean, VA 22102 Executive Officer, COMSAT Corporation; and
Chairman, Board of Governors of INTELSAT
(international communications company).
- ---------------------------------------------------------------------------------------------------
OWEN DALY II (75) Trustee Formerly, Director, Cortland Trust Inc.
Six Blythewood Road (investment company). Formerly, Director, CF
Baltimore, MD 21210 & I Steel Corp., Monumental Life Insurance
Company and Monumental General Insurance
Company; and Chairman of the Board of
Equitable Bancorporation.
- ---------------------------------------------------------------------------------------------------
EDWARD K. DUNN, JR. (64) Trustee Chairman of the Board of Directors,
2 Hopkins Plaza, 8th Floor Mercantile Mortgage Corp; Formerly, Vice
Suite 805 Chairman of the Board of Directors, President
Baltimore, MD 21201 and Chief Operating Officer, Mercantile -
Safe Deposit & Trust Co.; and President,
Mercantile Bankshares.
- ---------------------------------------------------------------------------------------------------
JACK FIELDS (48) Trustee Chief Executive Officer, Texana Global, Inc.
8810 Will Clayton Parkway (foreign trading company) and Twenty-First
Jetero Plaza, Suite E Century Group, Inc. (governmental affairs
Humble, Texas 77338 company). Formerly, Member of the U.S. House
of Representatives.
- ---------------------------------------------------------------------------------------------------
**CARL FRISCHLING (63) Trustee Partner, Kramer Levin Naftalis & Frankel LLP
919 Third Avenue (law firm).
New York, NY 10022
- ---------------------------------------------------------------------------------------------------
*ROBERT H. GRAHAM (53) Trustee and Director, President and Chief Executive
President Officer, A I M Management Group Inc.;
Director and President, A I M Advisors, Inc.;
Director and Senior Vice President, A I M
Capital Management, Inc., A I M Distributors,
Inc., A I M Fund Services, Inc., and Fund
Management Company; and Director and Chief
Executive Officer, Managed Products, AMVESCAP
PLC.
- ---------------------------------------------------------------------------------------------------
PREMA MATHAI-DAVIS (49) Trustee Chief Executive Officer, YWCA of the U.S.A.
350 Fifth Avenue, Suite 301
New York, NY 10118
- ---------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------
* A trustee who is an "interested person" of A I M Advisors, INc. and the
Trust as defined in the 1940 Act.
** A trustee who is an "interested person" of the Trust as defined in the 1940
Act.
25
<PAGE> 392
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Positions Held
Name, Address and Age with Registrant Principal Occupation During Past 5 Years
--------------------- --------------- ----------------------------------------
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
LEWIS F. PENNOCK (57) Trustee Partner, Pennock & Cooper (law firm).
6363 Woodway, Suite 825
Houston, TX 77057
- ---------------------------------------------------------------------------------------------------
LOUIS S. SKLAR (60) Trustee Executive Vice President, Development and
The Williams Tower, 50th Floor Operations, Hines Interests Limited
2800 Post Oak Blvd. Partnership (real estate development).
Houston, TX 77056
- ---------------------------------------------------------------------------------------------------
GARY T. CRUM (52) Senior Vice Director and President, A I M Capital
President Management, Inc.; Director and Executive Vice
President, A I M Management Group Inc.;
Director and Senior Vice President, A I M
Advisors, Inc.; and Director, A I M
Distributors, Inc. and AMVESCAP PLC.
- ---------------------------------------------------------------------------------------------------
CAROL F. RELIHAN (45) Senior Vice Director, Senior Vice President, General
President Counsel and Secretary, A I M Advisors, Inc.;
and Secretary Senior Vice President, General Counsel and
Secretary, A I M Management Group Inc.;
Director, Vice President and General Counsel,
Fund Management Company; General Counsel and
Vice President, A I M Fund Services, Inc.;
and Vice President, A I M Capital Management,
Inc., and A I M Distributors, Inc.
- ---------------------------------------------------------------------------------------------------
MELVILLE B. COX (56) Vice President Vice President and Chief Compliance Officer,
A I M Advisors, Inc., A I M Capital
Management, Inc., A I M Distributors, Inc., A
I M Fund Services, Inc., and Fund Management
Company.
- ---------------------------------------------------------------------------------------------------
DANA R. SUTTON (41) Vice President Vice President and Fund Controller, A I M
and Treasurer Advisors, Inc.; and Assistant Vice President
and Assistant Treasurer, Fund Management
Company.
- ---------------------------------------------------------------------------------------------------
EDGAR M. LARSEN (59) Vice President Vice President, A I M Capital Management, Inc.
- ---------------------------------------------------------------------------------------------------
</TABLE>
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. Crockett, Daly, Dunn
(Chairman), Fields, Frischling, Pennock and Sklar and Dr. Mathai-Davis. The
Audit Committee is responsible for: (i) considering management's recommendations
of independent accountants for each Fund and evaluating such accountants'
performance, costs and financial stability; (ii) with AIM, reviewing and
coordinating audit plans prepared by the Funds' independent accountants and
management's internal audit staff; and (iii) reviewing financial statements
contained in periodic reports to shareholders with the Funds' independent
accountants and management.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly, Dunn, Fields, Frischling, Pennock and Sklar (Chairman) and Dr.
Mathai-Davis. The Investment Committee is responsible for: (i) overseeing AIM's
investment-related compliance systems and procedures to ensure their continued
adequacy, and (ii) considering and acting, on an interim basis, between meetings
of the full Board, on investment-related matters requiring Board consideration,
including dividends and distributions, brokerage policies and pricing matters.
26
<PAGE> 393
The members of the Nominating and Compensation Committee are Messrs.
Crockett (Chairman), Daly, Dunn, Fields, Pennock and Sklar and Dr. Mathai-Davis.
The Nominating and Compensation Committee is responsible for: (i) considering
and nominating individuals to stand for election as independent trustees as long
as the Trust maintains a distribution plan pursuant to Rule 12b-1 under the 1940
Act; (ii) reviewing from time to time the compensation payable to the
independent trustees; and (iii) making recommendations to the Board regarding
matters related to compensation, including deferred compensation plans and
retirement plans for the independent trustees.
The Nominating and Compensation Committee will consider nominees
recommended by a shareholder to serve as trustees, provided (i) that such person
is a shareholder of record at the time he or she submits such names and is
entitled to vote at the meeting of shareholders at which trustees will be
elected, and (ii) that the Nominating and Compensation Committee or the Board,
as applicable, shall make the final determination of persons to be nominated.
All of the Trust's trustees also serve as directors or trustees of some
or all of the other investment companies managed or advised by AIM. All of the
Trust's executive officers hold similar offices with some or all of the other
investment companies managed or advised by AIM.
Remuneration of Trustees
Each trustee is reimbursed for expenses incurred in connection with each
meeting of the Board of Trustees or any committee attended. 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 director or trustee of 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.
27
<PAGE> 394
Set forth below is information regarding compensation paid or accrued for each
trustee of the Trust:
<TABLE>
<CAPTION>
===================================================================================================
Retirement
Aggregate Benefits Total
Compensation Accrued Compensation
from the By All AIM from all
Trustee Trust(1) Funds(2) AIM Funds(3)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer $ 0 $ 0 $ 0
- ---------------------------------------------------------------------------------------------------
Bruce L. Crockett 24,660 37,485 103,500
- ---------------------------------------------------------------------------------------------------
Owen Daly II 24,660 122,898 103,500
- ---------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. 24,659 0 103,500
- ---------------------------------------------------------------------------------------------------
Jack Fields 24,169 15,826 101,500
- ---------------------------------------------------------------------------------------------------
Carl Frischling(4) 24,541 97,791 103,500
- ---------------------------------------------------------------------------------------------------
Robert H. Graham 0 0 0
- ---------------------------------------------------------------------------------------------------
John F. Kroeger(5) 0 107,896 0
- ---------------------------------------------------------------------------------------------------
Prema Mathai-Davis 24,659 0 101,500
- ---------------------------------------------------------------------------------------------------
Lewis F. Pennock 24,541 45,766 103,500
- ---------------------------------------------------------------------------------------------------
Ian Robinson(6) 10,014 94,442 25,000
- ---------------------------------------------------------------------------------------------------
Louis S. Sklar 24,541 90,232 101,500
===================================================================================================
</TABLE>
(1) The total amount of compensation deferred by all directors of the Trust's
predecessor during the fiscal year ended October 31, 1999, including
earnings thereon, was $159,484.
(2) During the fiscal year ended October 31, 1999, the total amount of expenses
allocated to the Trust's predecessor in respect of such retirement benefits
was $215,041. Data reflects compensation for the calendar year ended
December 31, 1999.
(3) Each trustee serves as director or trustee of at least 12 registered
investment companies advised by AIM. Data reflects total compensation for
the calendar year ended December 31, 1999.
(4) During the fiscal year ended October 31, 1999, Charter, Constellation and
Weingarten, each paid $15,483, $31,683 and $20,003, respectively, on legal
fees to Mr. Frischling's law firm, Kramer Levin Naftalis and Frankel LLP for
services rendered. Mr. Frischling, a trustee of the Trust, is a partner in
such firm.
(5) Mr. Kroeger was a director of the Trust's predecessor until June 11, 1998,
when he resigned. On that date he became a consultant to the Trust's
predecessor. Mr. Kroeger passed away on November 26, 1998. Mr. Kroeger's
widow will receive his pension as described below under "AIM Funds
Retirement Plan for Eligible Directors/Trustees."
(6) Mr. Robinson was a director of the Trust's predecessor until March 12, 1999,
when he retired.
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, AIM Management or any of their affiliates) may be
28
<PAGE> 395
entitled to certain benefits upon retirement from the Board of Trustees.
Pursuant to the Plan, a trustee becomes eligible to retire and receive full
benefits under the Plan when he or she 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 or her date of
retirement equal to a maximum 75% of the annual 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) and based on the
number of such trustee's years of service (not in excess of 10 years of service)
completed with respect to any of the Applicable 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
all benefits under the Plan, 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 Applicable AIM Fund.
Set forth below is a table that shows the estimated annual benefits
payable to an eligible trustee upon retirement assuming the retainer amount
reflected below and various years of service. The estimated credited years of
service for Messrs. Crockett, Daly, Dunn, Fields, Frischling, Kroeger, Pennock,
Robinson and Sklar and Dr. Mathai-Davis are 13, 13, 2, 3, 23, 20, 18, 11, 10,
and 1 years, respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
--------------------------------------------
Number of
Years of Annual Retirement
Service With Compensation
the Applicable Paid By All Applicable
AIM Funds AIM Funds
--------------------------------------------
<S> <C>
10 $67,500
--------------------------------------------
9 $60,750
--------------------------------------------
8 $54,000
--------------------------------------------
7 $47,250
--------------------------------------------
6 $40,500
--------------------------------------------
5 $33,750
--------------------------------------------
</TABLE>
DEFERRED COMPENSATION AGREEMENTS
Messrs. Daly, Dunn, Fields, Frischling, Robinson and Sklar and Dr.
Mathai-Davis (the "Deferring Trustees") have each executed a Deferred
Compensation Agreement (collectively, the "Compensation Agreements"). Pursuant
to the Compensation Agreements, the Deferring Trustees may elect to defer
receipt of up to 100% of their compensation payable by the Trust, 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, generally in equal quarterly
installments over a period of five (5) or ten (10) years (depending on the
Compensation Agreement) beginning on the date the Deferring Trustee's retirement
benefits commence under the Plan. The Trust'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 Trust.
If a Deferring Trustee dies prior to the distribution of amounts in his or her
deferral account, the
29
<PAGE> 396
balance of the deferral account will be distributed to his or her designated
beneficiary in a single lump sum payment as soon as practicable after such
Deferring Trustee's death. The Compensation 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 Trust and of each other
AIM Fund from which they are deferring compensation.
INVESTMENT ADVISORY AND OTHER SERVICES
AIM is a direct wholly owned subsidiary of AIM Management, a holding
company that has been engaged in the financial services business since 1976. The
address of AIM is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. AIM was
organized in 1976, and, together with its subsidiaries, advises or manages over
120 investment portfolios encompassing a broad range of investment objectives.
AIM Management is an indirect wholly owned subsidiary of AMVESCAP PLC, 11
Devonshire Square, London EC2M 4YR, United Kingdom. AMVESCAP PLC and its
subsidiaries are an independent investment management group engaged in
institutional investment management and retail mutual fund businesses in the
United States, Europe and the Pacific Region. Certain of the trustees and
officers of AIM are also executive officers of the Trust and their affiliations
are shown under "Trustees and Officers".
AIM and the Trust 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
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 (subject to a
de minimis exception), and (iii) transactions involving securities being
considered for investment by an AIM Fund (subject to a de minimis exception);
and (d) abide by certain other provisions of the Code of Ethics. The de minimis
exception under the Code of Ethics covers situations where there is no material
conflict of interest because of the large market capitalization of a security
and the relatively small number of shares involved in a personal transaction.
The Code of Ethics also generally prohibits AIM employees who are registered
with the NASD from purchasing securities in initial public offerings. Personal
trading reports are periodically reviewed by AIM, and the Board of Trustees
reviews quarterly and annual reports (which summarize any significant violations
of the Code of Ethics). Sanctions for violating the Code of Ethics may include
censure, monetary penalties, suspension or termination of employment.
The Trust, on behalf of each Fund has entered into a Master Investment
Advisory Agreement dated May 26, 2000 (the "Master Advisory Agreement") and a
Master Administrative Services Agreement (the "Master Administrative Services
Agreement") with AIM. In addition, AIM has entered into a Master Sub-Advisory
Agreement (the "Master Sub-Advisory Agreement") with AIM Capital with respect to
Charter, Weingarten and Constellation. A prior investment advisory agreement
with substantially similar terms to the Master Advisory Agreement and a prior
administrative services agreement with substantially similar terms to the Master
Administrative Services Agreement were in effect until May 26, 2000.
Under the terms of the Master Advisory Agreement, AIM supervises all
aspects of the Funds' operations and provides investment advisory services to
the Funds. AIM obtains and evaluates economic, statistical and financial
information to formulate and implement investment programs for the Funds. AIM
will not be liable to the Funds or their shareholders except in the case of
AIM's willful misfeasance, bad faith, gross negligence or reckless disregard of
duty; provided, however that AIM may be liable for certain breaches of duty
under the 1940 Act.
Pursuant to the Master Administrative Services Agreement, AIM has agreed
to provide or arrange for the provision of certain accounting and other
administrative services to the Funds, including the services of a principal
financial officer of the Funds and related staff. As compensation to AIM for its
services under the Master Administrative Service Agreements, the Funds reimburse
AIM for expenses incurred by AIM or its subsidiaries in connection with such
services.
Under the terms of the Master Sub-Advisory Agreement, AIM has appointed
AIM Capital to provide certain investment advisory services for each of the
Funds, subject to overall supervision by AIM and the
30
<PAGE> 397
Trust's Board of Trustees. Certain of the trustees and officers of AIM Capital
are also executive officers of the Trust.
Both the Master Advisory Agreement and the Master Sub-Advisory Agreement
provide that the Fund will pay or cause to be paid all expenses of the Fund not
assumed by AIM or AIM Capital, including, without limitation: brokerage
commissions, taxes, legal, auditing or governmental fees, the cost of preparing
share certificates, custodian, transfer and shareholder service agent costs,
expenses of issue, sale, redemption, and repurchase of shares, expenses of
registering and qualifying shares for sale, expenses relating to 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 Funds' shareholders and all other charges and costs of the
Funds' operations unless otherwise explicitly provided.
The Master Advisory Agreement and the Master Sub-Advisory Agreement will
continue in effect until June 30, 2000 and thereafter from year to year only 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 Funds (as defined in the 1940 Act), and (ii) the affirmative
vote of a majority of the trustees who are not parties to the agreements or
"interested persons" of any such party (the "Non-Interested Trustees") by votes
cast in person at a meeting called for such purpose. Each agreement provides
that the Funds, AIM (in the case of the Master Advisory Agreement) or AIM
Capital (in the case of the Master Sub-Advisory Agreement) may terminate such
agreement on 60 days' written notice without penalty. Each agreement terminates
automatically in the event of its assignment.
AIM may from time to time waive or reduce its fee. Voluntary fee waivers
or reductions may be rescinded at any time without further notice to investors.
During period of voluntary fee waivers or reductions, AIM will retain its
ability to be reimbursed for such fee prior to the end of each fiscal year.
Contractual fee waivers or reductions set forth in the Fee Table in a Prospectus
may not be terminated or amended to the Funds' detriment during the period
stated in the agreement between AIM and the Fund. Fee waivers or reductions set
forth in the Master Advisory Agreement may not be terminated without shareholder
approval.
AIM has contractually agreed to a reduction of advisory fees for
Charter, Constellation and Weingarten at net asset levels higher than those
currently incorporated in the advisory fee schedule. Accordingly, with respect
to each of Charter and Constellation, AIM receives a fee calculated at an annual
rate of 1.0% of the first $30 million of such Fund's average daily net assets,
plus 0.75% of such Fund's average daily net assets in excess of $30 million to
and including $150 million, plus 0.625% of such Fund's average daily net assets
in excess of $150 million. With respect to Weingarten, AIM's fee is calculated
at an annual rate of 1.0% of the first $30 million of the Fund's average daily
net assets, plus 0.75% of the Fund's average daily net assets in excess of $30
million to and including $350 million, plus 0.625% of the Fund's average daily
net assets in excess of $350 million. As compensation for its services, AIM pays
50% of the advisory fees it receives pursuant to the Master Advisory Agreement
with respect to Charter, Constellation and Weingarten to AIM Capital.
31
<PAGE> 398
Each Fund paid to AIM the following advisory fees net of any expense
limitations (fee waivers) for the years ended October 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Charter........................ $39,884,618 $31,058,588 $24,725,606
Constellation.................. 87,350,901 86,555,468 80,116,284
Weingarten..................... 50,710,809 40,657,216 35,300,671
</TABLE>
For the fiscal year ended October 31, 1999, 1998 and 1997, AIM waived
advisory fees for each Fund as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Charter........................ $1,130,089 $ 762,337 $ 498,463
Constellation.................. 3,107,849 3,074,705 2,805,955
Weingarten..................... 4,288,405 2,917,461 2,187,021
</TABLE>
AIM, in turn, paid the following sub-advisory fees to AIM Capital, as
sub-advisor for Charter, Constellation and Weingarten, for the years ended
October 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Charter........................ $19,942,309 $15,529,294 $12,362,803
Constellation.................. 43,675,451 43,277,734 40,058,142
Weingarten..................... 25,355,405 20,328,608 17,650,335
</TABLE>
The payments set forth above were made pursuant to a substantially
similar advisory agreement between AIM and the Trust's predecessor.
In addition, if a Fund engages in securities lending, AIM will provide
the Fund investment advisory services and related administrative services. The
Master Investment Advisory Agreement describes the administrative services to be
rendered by AIM if a Fund engages in securities lending activities, as well as
the compensation AIM may receive for such administrative services. Services to
be provided include: (a) overseeing participation in the securities lending
program to ensure compliance with all applicable regulatory and investment
guidelines; (b) assisting the securities lending agent or principal (the agent)
in determining which specific securities are available for loan; (c) monitoring
the agent to ensure that securities loans are effected in accordance with AIM's
instructions and with procedures adopted by the Board; (d) preparing appropriate
periodic reports for, and seeking appropriate approvals from, the Board with
respect to securities lending activities; (e) responding to agent inquiries; and
(f) performing such other duties as may be necessary.
AIM's compensation for advisory services rendered in connection with
securities lending is included in the advisory fee schedule. As compensation for
the related administrative services AIM will provide, a lending Fund will pay
AIM a fee equal to 25% of the net monthly interest or fee income retained or
paid to the Fund from such activities. AIM currently intends to waive such fee,
and has agreed to seek Board approval prior to its receipt of all or a portion
of such fee.
The Master Administrative Services Agreement provides that AIM may
perform or arrange for the performance of certain accounting and other
administrative services to each Fund. For such services, AIM is entitled to
receive from each Fund reimbursement of its costs or such reasonable
compensation as may be approved by the Trust's Board of Trustees. The Master
Administrative Services Agreement will continue in effect until June 30, 2000
and thereafter from year to year only 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 Funds (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.
32
<PAGE> 399
In addition, the Transfer Agency and Service agreement for the Funds
provides that A I M Fund Services, Inc. ("AFS"), a registered transfer agent and
wholly-owned subsidiary of AIM, will perform certain shareholder services for
the Funds for a fee per account serviced. The 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 their accounts.
The Funds paid AIM the following amounts as reimbursement of
administrative services costs for the years ended October 31, 1999, 1998 and
1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Charter...................... $235,274 $ 152,008 $127,908
Constellation................ 431,120 295,926 251,513
Weingarten................... 281,500 179,633 163,243
</TABLE>
The payments set forth in the table above were made pursuant to a
substantially similar administrative services agreement between AIM and the
Trust's predecessor.
THE DISTRIBUTOR
The Trust, on behalf of the Institutional Class of each Fund, has
entered into a Master Distribution Agreement with FMC, a registered
broker-dealer and a wholly owned subsidiary of AIM to act as the exclusive
distributor of the Institutional Classes of the Funds' shares. The address of
FMC is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Certain trustees
and officers of the Trust are affiliated with FMC. The Distribution Agreement
provides that FMC has the exclusive right to distribute the Institutional
Classes of shares of the Funds either directly or through other broker-dealers.
The Distribution Agreement also provides that FMC will pay promotional expenses,
including the incremental costs of printing prospectuses and statements of
additional information, annual reports and other periodic reports for
distribution to persons who are not shareholders of the Institutional Classes of
the Funds and the costs of preparing and distributing any other supplemental
sales literature. FMC has not undertaken to sell any specified number of shares
of the Institutional Classes of the Funds. FMC does not receive any fees from
the Trust on behalf of the Institutional Classes pursuant to the Distribution
Agreement.
FMC may, from time to time, at its expense, pay a bonus or other
consideration or incentive to dealers or banks who sell a minimum dollar amount
of the shares of the Institutional Class of a Fund during a specific period of
time. In some instances, these incentives may be offered only to certain dealers
or institutions who have sold or may sell significant amounts of shares. The
total amount of such additional bonus payments or other consideration shall not
exceed .10% of the net asset value of the shares sold of such Institutional
Class. Any such bonus or incentive programs will not change the price paid by
investors for the purchase of shares or the amount received as proceeds from
such sales. Dealers or institutions may not use the sale of shares of the
Institutional Class of a Fund to qualify for any incentives to the extent that
such incentives may be prohibited by the laws of any jurisdiction.
The Distribution Agreement will continue from year to year only if such
continuation 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 Funds (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 Trust, on behalf of a Fund, or FMC may terminate
the Distribution Agreement on sixty days' written notice without penalty. The
Distribution Agreement will terminate automatically in the event of its
"assignment," as defined in the 1940 Act.
33
<PAGE> 400
HOW TO PURCHASE AND REDEEM SHARES
A complete description of the manner by which shares of the Funds may be
purchased appears in the Prospectus under the caption "Purchasing Shares."
Information concerning redemption of the Funds' shares is set forth in
the Prospectus under the caption "Redeeming Shares." Shares of the Funds may be
redeemed directly through FMC. The Funds intend to redeem all shares of the
Funds in cash. In addition to the Funds' obligation to redeem shares, FMC may
also repurchase shares as an accommodation to shareholders. A repurchase is
effected at the net asset value of the Fund next determined after such order is
received. Such arrangement is subject to timely receipt by AFS 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 Funds or by FMC when shares are redeemed or
repurchased, financial institutions may charge a fair service fee for handling
the transaction.
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.
NET ASSET VALUE DETERMINATION
The net asset value of a share of each Fund is determined once daily as
of the close of the customary trading session of the NYSE (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. For
purposes of determining net asset value per share, futures and options contract
closing prices which are available fifteen (15) minutes after the close of the
customary trading session of the NYSE will generally be used. The net asset
values per share of the Retail Classes and the Institutional Classes will differ
because different expenses are attributable to each class. The income or loss
and the expenses (except those listed below) of a Fund are allocated to each
class on the basis of the net assets of the Fund allocable to each such class,
calculated as of the close of business on the previous business day, as adjusted
for the current day's shareholder activity of each class. Distribution and
service fees and transfer agency fees (to the extent different rates are charged
to different classes) are allocated only to the class to which such expenses
relate. The net asset value per share of a class is determined by subtracting
the liabilities (e.g., the expenses) of the Fund allocated to the class from the
assets of the Fund allocated to the class and dividing the result by the total
number of shares outstanding of such class. Determination of each Fund's net
asset value per share is made in accordance with generally accepted accounting
principles.
A security listed or traded on an exchange (except convertible bonds) is
valued at its last sales price on the exchange where the security is principally
traded or, lacking any sales on a particular day, the security is valued at the
closing bid price on that day, prior to the determination of net asset value.
Each security traded in the over-the-counter market (but not including
securities reported on the NASDAQ National Market system) is valued on the basis
of prices provided by independent pricing services. Each security reported on
the NASDAQ National Market System is valued at the last sales price on the
valuation date, or lacking a last sale, at the closing bid price on that day;
option contracts are valued at the mean between the closing bid and asked prices
on the exchange where the contracts are principally traded; futures contracts
are valued at final settlement price quotations from the primary exchange on
which they are traded. Debt obligations (including convertible bonds) are valued
on the basis of prices provided by an independent pricing service. Prices
provided by an independent pricing service may be determined without exclusive
reliance on quoted prices and may reflect appropriate factors such as dividend
rate, yield, type of issue, coupon rate and maturity date. Securities for which
market quotations are not readily available or for which market quotations are
not reflective of fair value 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 of the Trust. Short-term
34
<PAGE> 401
obligations having sixty (60) days or less to maturity are valued at amortized
cost, which approximates market value. (See also "Purchasing Shares," "Redeeming
Shares" and "Pricing of Shares" in the Prospectus.)
Generally, trading in foreign securities, as well as corporate bonds,
U.S. Government securities and money market instruments, is substantially
completed each day at various times prior to the close of the NYSE. The values
of such securities used in computing the net asset value of a 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 they are determined and the close of the customary trading session of the
NYSE which will not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur during
such period, then these securities will be valued at their fair value as
determined in good faith by or under the supervision of the Board of Trustees.
Fund securities primarily traded in foreign markets may be traded in
such markets on days which are not business days of the Fund. Because the net
asset value per share of each Fund is determined only on business days of the
Fund, the net asset value per share of a Fund may be significantly affected on
days when an investor can not exchange or redeem shares of the Fund.
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 each Fund unless the
shareholder has requested in writing to receive such dividends and distributions
in cash or that they be invested in Institutional Class shares of another Fund,
subject to the terms and conditions set forth in the Prospectus. If a
shareholder's account does not have any shares in it on a dividend or capital
gains distribution payment date, the dividend or distribution will be paid in
cash whether or not the shareholder has elected to have such dividends or
distributions reinvested.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of each Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
Each Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Code. As a regulated investment company, each Fund is
not subject to federal income tax on the portion of its net investment income
(i.e., taxable interest, dividends and other taxable ordinary income, net of
expenses) and capital gain net income (i.e., the excess of capital gains over
capital losses) that it distributes to shareholders, provided that it
distributes at least 90% of its investment company taxable income (i.e., net
investment income and the excess of net short-term capital gain over net
long-term capital loss) for the taxable year (the "Distribution Requirement"),
and satisfies certain other requirements of the Code that are described below.
Distributions by a Fund made during the taxable year or, under specified
circumstances, within twelve 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.
Each Fund may use "equalization accounting" in determining the portion
of its net investment income and capital gain net income that has been
distributed. A Fund that elects to use equalization accounting will allocate a
portion of its realized investment income and capital gains to redemptions of
Fund shares and will reduce the amount of such income and gains that it
distributes in cash. However, each Fund intends to make cash distributions for
each taxable year in an aggregate amount that is sufficient to satisfy the
Distribution Requirement without taking into account its use of equalization
accounting. The Internal Revenue Service has not published any guidance
concerning the methods to be used in allocating investment income and
35
<PAGE> 402
capital gains to redemptions of shares. In the event that the Internal Revenue
Service determines that a Fund is using an improper method of allocation and has
under-distributed its net investment income and capital gain net income for any
taxable year, such Fund may be liable for additional federal income tax.
In addition to satisfying the Distribution Requirement, a regulated
investment company must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans, gains from the sale
or other disposition of stock or securities or foreign currencies (to the extent
such currency gains are directly related to the regulated investment company's
principal business of investing in stock or securities) and other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies (the "Income Requirement").
In addition to satisfying the requirements described above, each 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 each 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
companies, and securities of other issuers, 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 a 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 such 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.
DETERMINATION OF TAXABLE INCOME OF A REGULATED INVESTMENT COMPANY
In general, gain or loss recognized by a 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 a 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 unless the
Fund made an election to accrue market discount into income. In addition, under
the rules of Code Section 988, gain or loss recognized on the disposition of a
debt obligation denominated in a foreign currency or an option with respect
thereto (but only to the extent attributable to changes in foreign currency
exchange rates), and gain or loss recognized on the disposition of a foreign
currency forward contract or of foreign currency itself, will generally be
treated as ordinary income or loss.
In general, for purposes of determining whether capital gain or loss
recognized by a Fund on the disposition of an asset is long-term or short-term,
the holding period of the asset may be affected if (a) 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, (b) the
asset is otherwise held by the Fund as part of a "straddle", or (c) the asset is
stock and the Fund grants certain call options with respect thereto. In
addition, a 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 a Fund on
the lapse of, or any gain or loss recognized by a Fund from a closing
transaction with respect to, an option written by the Fund will generally be
treated as a short-term capital gain or loss. In the case of covered options,
gain or loss may be long-term.
Other hedging transactions that may be engaged in by certain of the
Funds (such as short sales "against the box") may be subject to special tax
treatment as "constructive sales" under section 1259 of the Code if a Fund holds
certain "appreciated financial positions" (defined generally as any interest
(including a futures or forward contract, short sale or option) with respect to
stock, certain debt instruments, or partnership interests if there would be a
gain were such interest sold, assigned, or otherwise terminated at its fair
market value). Upon entering into a constructive sales transaction with respect
to an appreciated financial position, a Fund will be deemed to have
constructively sold such appreciated financial position and will recognize gain
as if such position were sold, assigned, or otherwise terminated at its fair
market value on the date of such constructive sale (and will take into account
any gain for the taxable year which includes such date) unless the closed
transaction exception applies.
Some of the forward foreign currency exchange contracts, options and
futures contracts that certain of the Funds may enter into 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
combined with any other gain or loss that was previously recognized upon the
termination of Section 1256 contracts during that taxable year. The net amount
of such gain or loss for the entire taxable year (including gain or loss arising
as a consequence of the year-end deemed sale of such contracts) is deemed to be
60% long-term (taxable at a maximum rate of 20% for non-corporate shareholders)
and 40% short-term gain or loss. However, in the case of Section 1256 contracts
that are forward foreign currency exchange contracts the net gain or loss is
separately determined and (as discussed above) generally treated as ordinary
income or loss.
Because application of the rules governing Section 1256 contracts and
constructive sales may affect the character of gains or losses and/or accelerate
the recognition of gains or losses from the affected investment positions, the
amount which must be distributed to shareholders and which will be taxed to
shareholders as ordinary income or long-term capital gain may be increased as
compared to a fund that did not engage in transactions involving Section 1256
contracts or constructive sales.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails 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 (a)
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 (b) exclude 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).
Each 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,
in the event that the Internal Revenue Service determines that a Fund is using
an improper method of allocation for purposes of equalization accounting (as
discussed above), such Fund may be liable for excise tax. Moreover, investors
should note that a Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
Fund Distributions
Each Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal income
tax purposes, but they will qualify for the 70% dividends received deduction for
corporations only to the extent discussed below.
A Fund may either retain or distribute to shareholders its net capital
gain for each taxable year. Each 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. A shareholder of a Fund electing to use equalization
accounting, however, is likely to be taxed on less gain recognized prior to the
date the shareholder acquires his shares since such gain will in many cases have
been allocated to shares of the Fund that have previously been redeemed.
Conversely, if a Fund elects to retain its net capital gain, the Fund will be
taxed thereon (except to the extent of any available capital loss carry
forwards) at the 35% corporate tax rate. If a Fund elects to retain its net
capital gain, it is expected that the Fund also will elect to have shareholders
treated as if each received a distribution of its pro rata share of such gain,
with the result that each shareholder will be required to report its pro rata
share of such gain on its tax return as long-term capital gain, will receive a
refundable tax credit for its 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.
Ordinary income dividends paid by the Fund with respect to a taxable
year will qualify for the 70% dividends received deduction generally available
to corporations (other than corporations, such as "S" corporations, which are
not eligible for the deduction because of their special characteristics and
other than for purposes of special taxes such as the accumulated earnings tax
and the personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
A dividend received by the Fund will not be treated as a qualifying dividend (a)
if it has been received with respect to any share of stock that the Fund has
held for less than 46 days (91 days in the case of certain preferred stock),
excluding for this purpose under the rules of Code Section 246(c)(3)and(4) (i)
any day more than 45 days (or 90 days in the case of certain preferred stock)
after the date on which the stock becomes ex-dividend, and (ii) any period
during which the Fund has an option to sell, is under a contractual obligation
to sell, has made and not closed a short sale of, has granted certain options to
buy or has otherwise diminished its risk of loss by holding other positions with
respect to, such (or substantially identical) stock; (b) to the extent that the
Fund is under an obligation (pursuant to a short sale or otherwise) to make
related payments with respect to positions in substantially similar or related
property; or (c) to the extent the stock on which the dividend is paid is
treated as debt-financed under the rules of Code Section 246A. Moreover, the
dividends received deduction for a corporate shareholder may be disallowed or
reduced (a) if the corporate shareholder fails to satisfy the foregoing
requirements with respect to its shares of the Fund, or (b) by application of
Code Section 246(b) which in general limits the dividends received deduction to
70% of the shareholder's taxable income (determined without regard to the
dividends received deduction and certain other items).
Alternative minimum tax ("AMT") is imposed in addition to, but only to
the extent it exceeds, the regular tax and is computed at a maximum rate of 28%
for non-corporate taxpayers and 20% for corporate taxpayers on the excess of the
taxpayer's alternative minimum taxable income ("AMTI") over an exemption amount.
The corporate dividends received deduction is not itself an item of tax
preference that must be added back to taxable income or is otherwise disallowed
in determining a corporation's AMTI. However, corporate shareholders will
generally be required to take the full amount of any dividend received from the
Fund into account (without a dividend received deduction) in determining their
adjusted current earnings, which are used in computing an additional corporate
preference item (i.e., 75% of the excess of a corporate taxpayer's adjusted
current earnings over its AMTI (determined without regard to this item and the
AMTI net operating loss deduction)) that is includable in AMTI. For taxable
years beginning after 1997, however, certain small corporations are wholly
exempt from the AMT.
Investment income that may be received by certain of the Funds from
sources within foreign countries may be subject to foreign taxes withheld at the
source. The United States has entered into tax treaties with many foreign
countries which entitle any such Funds to a reduced rate of, or exemption from,
taxes on such income. It is impossible to determine the effective rate of
foreign tax in advance since the amount of any such Fund's assets to be invested
in various countries is not known.
Distributions by a 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 a 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 of another Fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date.
In addition, if the net asset value at the time a shareholder purchases
shares of a 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 a Fund
into account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year
in accordance with the guidance that has been provided by the IRS.
The Funds will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends, and
the proceeds of redemption of shares, paid to any shareholder (a) who has
provided either an incorrect tax identification number or no number at all, (b)
who is subject to backup withholding by the IRS for failure to report the
receipt of interest or dividend income properly, or (c) who has failed to
certify to a Fund that it is not subject to backup withholding or that it is a
corporation or other "exempt recipient."
Sale or Redemption of Shares
A shareholder will recognize gain or loss on the sale or redemption of
shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within thirty (30) days before or after the
sale or redemption. In general, any gain or loss arising from (or treated as
arising from) the sale or redemption of shares of a 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. Currently, any long-term capital gain
recognized by a non-corporate shareholder will be subject to tax at a maximum
rate of 20%. 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) (discussed above in connection with the dividends received deduction for
corporations) 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 that in some cases may be 19.6% 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 non-corporate taxpayer,
$3,000 of ordinary income.
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 a Fund
is "effectively connected" with a U.S. trade or business carried on by such
shareholder. If the income from a Fund is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, dividends and return of
capital distributions (other than distributions of long-term capital gain) 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
of shares of a Fund, capital gain dividends and amounts retained by a Fund that
are designated as undistributed net capital gains.
If the income from a 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, a Fund may be
required to withhold U.S. federal income tax at a rate of 31% on distributions
that are otherwise exempt from withholding tax (or taxable at a reduced treaty
rate) unless such shareholders furnish the Fund with proper notification of
their foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a Fund,
including the applicability of foreign taxes.
Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of U.S. federal income tax consequences
is based on the Code and the regulations issued thereunder as in effect on the
date of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation for ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are urged
to consult their tax advisers as to the consequences of these and other state
and local tax rules affecting investment in the Funds.
SHAREHOLDER INFORMATION
This information supplements the discussion in the Funds' Prospectus
under the title "Shareholder Information."
Share Certificates. Shareholders of the Funds do not have the right to
demand or require the Trust to issue share certificates, although the Trust in
its sole discretion may issue them.
Redemptions by Telephone. By signing an 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 FMC 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 FMC 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
Taxpayer Identification Number or 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 FMC 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
redemptions must be effected in writing by the investor.
Dividends and Distributions. 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.
Dividends and distributions will be reinvested at the net asset value
per share determined on the ex-dividend date.
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 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.
MISCELLANEOUS INFORMATION
Charges for Certain Account Information
The Transfer Agent may impose certain copying charges for requests of
shareholder account statements and other historical account information older
than the current year and the immediately preceding year.
Audit Reports
The Board of Trustees will issue semi-annual reports of the transactions
of the Funds to the shareholders. Financial statements, audited by independent
auditors, will be issued annually. The firm of KPMG LLP, 700 Louisiana, Bank of
America Building, Houston, Texas 77002, currently serves as the auditors of each
fund.
Legal Matters
Certain legal matters for the Trust have been passed upon by Ballard
Spahr Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, Pennsylvania
19103.
Custodian and Transfer Agent
State Street Bank and Trust Company (the "Custodian"), 225 Franklin
Street, Boston, Massachusetts 02110, is custodian of all securities and cash of
the Funds. The Custodian attends to the collection of principal and income, pays
and collects all monies for securities bought and sold by the Funds and performs
certain other ministerial duties. A I M Fund Services, Inc., a wholly owned
subsidiary of AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, acts
as transfer and dividend disbursing agent for the Funds. These services do not
include any supervisory function over management or provide any protection
against any possible depreciation of assets. The Funds pay the Custodian and the
Transfer Agent such compensation as may be agreed upon from time to time.
Principal Holders of Securities
Aggressive Growth
To the best of the knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding Class A, Class B and Class C shares
of Aggressive Growth as of March 1, 2000, and the amount of the outstanding
shares held of record and beneficially owned by such holders, are set forth
below:
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 14.33% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
The Manufacturers Life Insurance Co. 6.13% -0-
C/O Manulife Financial USA
Attn: Rosie Chuck Srs. Acctg.
250 Bloor Street East 7th Floor
Toronto, Ontario, Canada M4W 1E5
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 9.39% -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 27.58% -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246
Blue Chip
To the best of the knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding Class A, Class B and Class C shares
of Blue Chip as of March 1, 2000, and the amount of the outstanding shares held
of record and beneficially owned by such holders, are set forth below:
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 8.10% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 10.88% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 21.09% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Banc One Securities Corp. FBO 6.61% -0-
The One Investment Solution
733 Greencrest Drive
Westerville, OH 43081
Capital Development
To the best of the knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding Class A, Class B and Class C shares
of Capital Development as of March 1, 2000, and the amount of the outstanding
shares held of record and beneficially owned by such holders, are set forth
below:
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 10.78% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 14.79% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 19.40% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Coastgear & Company 7.16% -0-
State Street Bank & Trust
Attn: Kevin Smith
125 Rosemont Avenue
Westwood, MA 02090
Charter
To the best of the knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding Class A, Class B and Class C shares
of Charter as of March 1, 2000, and the Institutional Class of Charter as of
December 20, 1999, and the amount of the outstanding shares held of record and
beneficially owned by such holders, are set forth below:
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 13.21% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Great-West Life and Annuity Insurance Co. 7.04% - 0 -
401(k) Unit Valuations
Attn: Mutual Fund Trading 2T2
8515 E. Orchard
Englewood, CO 80111
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 8.57% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 19.40% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Institutional Class
Commonwealth of Massachusetts 96.09% - 0 -
One Ashburton Place
12th Floor
Boston, MA 02108
Constellation
To the best of the knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding Class A, Class B and Class C shares
of Constellation as of March 1, 2000, and of the Institutional Class of
Constellation as of December 20, 1999, and the amount of the outstanding shares
held of record and beneficially owned by such holders, are set forth below:
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 16.45% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 7.41% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 23.20% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Banc One Securities Corp. FBO 8.71% -0-
The One Investment Solution
733 Greencrest Drive
Westerville, OH 43081
Institutional Class
Nationwide Ohio Variable Account 39.14% - 0 -
P.O. Box 182029
C/O IPO Portfolio Accounting
Columbus, Ohio 43218
Commonwealth of Massachusetts 35.27% - 0 -
Deferred Compensation Plan Trust
One Ashburton Place
12th Floor
Boston, MA 02108
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
Frontier Trust FBO NDC's Retirement
Plans - NR 6.66% - 0 -
P. O. Box 20629
Columbus, OH 43220-0629
Demographic Trends
To the best of the knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding Class A, Class B and Class C shares
of Demographic Trends as of March 1, 2000, and the amount of the outstanding
shares held of record and beneficially owned by such holders, are set forth
below:
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 8.38% -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 18.25% -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 21.86% -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Emerging Growth
AIM provided the initial capitalization of Emerging Growth and,
accordingly, as of the date of this Statement of Additional Information, owned
more than 25% of the issued and outstanding shares of that Fund and therefore
could be deemed to "control" that Fund as that term is defined in the 1940 Act.
It is anticipated that after commencement of the public offering of the Fund's
shares, AIM will cease to control the Fund for purposes of the 1940 Act.
Large Cap Basic Value
To the best of the knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding Class A shares of Large Cap Basic
Value as of March 1, 2000, and the amount of the outstanding shares held of
record and beneficially owned by such holders, are set forth below:
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
Retail Class A Shares
A I M Advisors, Inc. 91.62%** -0-
Attn: David Hessel
11 Greenway Plaza, Suite 100
Houston, TX 77046
Large Cap Growth
To the best of the knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding Class A, Class B and Class C shares
of Large Cap Growth as of March 1, 2000, and the amount of the outstanding
shares held of record and beneficially owned by such holders, are set forth
below:
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only Beneficially
Retail Class A Shares
A I M Advisors, Inc. 17.82% -0-
Attn: David Hessel
11 Greenway Plaza, Suite 100
Houston, TX 77046
Retail Class C Shares
Donaldson Lufkin Jenrette 8.15% -0-
Securities Corporation Inc.
P. O. Box 2052
Jersey City, NJ 07303-9998
Mid Cap
To the best of the knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding Class A, Class B and Class C shares
of Mid Cap as of March 1, 2000, and the amount of the outstanding shares held of
record and beneficially owned by such holders, are set forth below:
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only Beneficially
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 11.16%** -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 35.59%** -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 31.76%** -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Weingarten
To the best of the knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding Class A, Class B and Class C shares
of Weingarten as of March 1, 2000, and the Institutional Class of Weingarten as
of December 20, 1999, and the amount of the outstanding shares held of record
and beneficially owned by such holders, are set forth below:
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 16.72% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Great-West Life and Annuity 5.47% - 0 -
Insurance Co.
401(K) Unit Valuations
Attn: Mutual Fund Trading 2T2
8515 E. Orchard
Englewood, CO 80111
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 9.77% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 19.80% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Institutional Class
Commonwealth of Massachusetts 86.87% - 0 -
Deferred Compensation Plan Trust
One Ashburton Place
12th Floor
Boston, MA 02108
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only Beneficially
Frontier Trust FBO NDC's 6.67% -0-
Retirement Plans - NR
Attn: Reconciliation Dept.
P. O. Box 20629
Columbus, OH 43220-0629
* The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
As of March 1, 2000, the trustees and officers of the Trust as a group
owned beneficially less than 1% of the outstanding shares of each class of
Aggressive Growth, Blue Chip, Capital Development, Charter, Constellation,
Demographic Trends, Emerging Growth, Large Cap Basic Value, Large Cap Growth and
Weingarten. As of March 1, 2000, the trustees and officers of the Trust as a
group owned 1.44% of the outstanding Class A shares of Mid Cap.
Other Information
The Prospectus and this Statement of Additional Information omit certain
information contained in the Registration Statement which the Trust has filed
with the SEC under the 1933 Act and reference is hereby made to the Registration
Statement for further information with respect to the Funds and the securities
offered hereby. The Registration Statement is available for inspection by the
public at the SEC in Washington, D.C.
<PAGE> 403
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032400 (3) skb A-1
APPENDIX
Description of Commercial Paper Ratings
Standard & Poor's
Commercial paper rated by Standard & Poor's has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well-established, and the issuer has a strong position
within the industry. The reliability and quality of management are unquestioned.
The relative strength or weakness of the above factors determines whether the
issuer's Commercial Paper is rated A-1 or A-2. A-1 indicates the degree of
safety regarding time of payment is very strong. A-2 indicates that the capacity
for timely payment is strong, but that the relative degree of safety is not as
overwhelming as for issues designated A-1.
Moody's
Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service. Among the factors considered by Moody's
in assigning ratings are the following: (a) evaluation of the management of the
issuer; (b) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (c)
evaluation of the issuer's products in relation to competition and customer
acceptance; (d) liquidity; (e) amount and quality of long-term debt; (f) trend
of earnings over a period of ten years; (g) financial strength of a parent
company and the relationships which exist with the issuer; and (h) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations. Relative
strength or weakness of the above factors determines whether the issuer's
commercial paper is rated Prime-1 or Prime-2.
Description of Corporate Bond Ratings
Standard & Poor's
AAA -- Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.
Moody's
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as "high-grade bonds." They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
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FINANCIAL STATEMENTS
<PAGE> 405
capital gains to redemptions of shares. In the event that the Internal Revenue
Service determines that a Fund is using an improper method of allocation and has
under-distributed its net investment income and capital gain net income for any
taxable year, such Fund may be liable for additional federal income tax.
In addition to satisfying the Distribution Requirement, a regulated
investment company must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans, gains from the sale
or other disposition of stock or securities or foreign currencies (to the extent
such currency gains are directly related to the regulated investment company's
principal business of investing in stock or securities) and other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies (the "Income Requirement").
In addition to satisfying the requirements described above, each 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 each 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
companies, and securities of other issuers, 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 a 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 such 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.
DETERMINATION OF TAXABLE INCOME OF A REGULATED INVESTMENT COMPANY
In general, gain or loss recognized by a 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 a 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 unless the
Fund made an election to accrue market discount into income. In addition, under
the rules of Code Section 988, gain or loss recognized on the disposition of a
debt obligation denominated in a foreign currency or an option with respect
thereto (but only to the extent attributable to changes in foreign currency
exchange rates), and gain or loss recognized on the disposition of a foreign
currency forward contract or of foreign currency itself, will generally be
treated as ordinary income or loss.
In general, for purposes of determining whether capital gain or loss
recognized by a Fund on the disposition of an asset is long-term or short-term,
the holding period of the asset may be affected if (a) 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, (b) the
asset is otherwise held by the Fund as part of a "straddle", or (c) the asset is
stock and the Fund grants certain call options with respect thereto. In
addition, a 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 a Fund on
the lapse of, or any gain or loss recognized by a Fund from a closing
transaction with respect to, an option written by the Fund will generally be
treated as a short-term capital gain or loss. In the case of covered options,
gain or loss may be long-term.
Other hedging transactions that may be engaged in by certain of the
Funds (such as short sales "against the box") may be subject to special tax
treatment as "constructive sales" under section 1259 of the Code if a Fund holds
certain "appreciated financial positions" (defined generally as any interest
(including a futures or forward contract, short sale or option) with respect to
stock, certain debt instruments, or partnership interests if there would be a
gain were such interest sold, assigned, or otherwise terminated at its fair
market
36
<PAGE> 406
value). Upon entering into a constructive sales transaction with respect
to an appreciated financial position, a Fund will be deemed to have
constructively sold such appreciated financial position and will recognize gain
as if such position were sold, assigned, or otherwise terminated at its fair
market value on the date of such constructive sale (and will take into account
any gain for the taxable year which includes such date) unless the closed
transaction exception applies.
Some of the forward foreign currency exchange contracts, options and
futures contracts that certain of the Funds may enter into 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
combined with any other gain or loss that was previously recognized upon the
termination of Section 1256 contracts during that taxable year. The net amount
of such gain or loss for the entire taxable year (including gain or loss arising
as a consequence of the year-end deemed sale of such contracts) is deemed to be
60% long-term (taxable at a maximum rate of 20% for non-corporate shareholders)
and 40% short-term gain or loss. However, in the case of Section 1256 contracts
that are forward foreign currency exchange contracts the net gain or loss is
separately determined and (as discussed above) generally treated as ordinary
income or loss.
Because application of the rules governing Section 1256 contracts and
constructive sales may affect the character of gains or losses and/or accelerate
the recognition of gains or losses from the affected investment positions, the
amount which must be distributed to shareholders and which will be taxed to
shareholders as ordinary income or long-term capital gain may be increased as
compared to a fund that did not engage in transactions involving Section 1256
contracts or constructive sales.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails 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 (a)
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 (b) exclude 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).
Each 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,
in the event that the Internal Revenue Service determines that a Fund is using
an improper method of allocation for purposes of equalization accounting (as
discussed above), such Fund may be liable for excise tax. Moreover, investors
should note that a Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
FUND DISTRIBUTIONS
Each Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal income
tax purposes, but they will qualify for the 70% dividends received deduction for
corporations only to the extent discussed below.
37
<PAGE> 407
A Fund may either retain or distribute to shareholders its net capital
gain for each taxable year. Each 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. A shareholder of a Fund electing to use equalization
accounting, however, is likely to be taxed on less gain recognized prior to the
date the shareholder acquires his shares since such gain will in many cases have
been allocated to shares of the Fund that have previously been redeemed.
Conversely, if a Fund elects to retain its net capital gain, the Fund will be
taxed thereon (except to the extent of any available capital loss carry
forwards) at the 35% corporate tax rate. If a Fund elects to retain its net
capital gain, it is expected that the Fund also will elect to have shareholders
treated as if each received a distribution of its pro rata share of such gain,
with the result that each shareholder will be required to report its pro rata
share of such gain on its tax return as long-term capital gain, will receive a
refundable tax credit for its 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.
Ordinary income dividends paid by the Fund with respect to a taxable
year will qualify for the 70% dividends received deduction generally available
to corporations (other than corporations, such as "S" corporations, which are
not eligible for the deduction because of their special characteristics and
other than for purposes of special taxes such as the accumulated earnings tax
and the personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
A dividend received by the Fund will not be treated as a qualifying dividend (a)
if it has been received with respect to any share of stock that the Fund has
held for less than 46 days (91 days in the case of certain preferred stock),
excluding for this purpose under the rules of Code Section 246(c)(3)and(4) (i)
any day more than 45 days (or 90 days in the case of certain preferred stock)
after the date on which the stock becomes ex-dividend, and (ii) any period
during which the Fund has an option to sell, is under a contractual obligation
to sell, has made and not closed a short sale of, has granted certain options to
buy or has otherwise diminished its risk of loss by holding other positions with
respect to, such (or substantially identical) stock; (b) to the extent that the
Fund is under an obligation (pursuant to a short sale or otherwise) to make
related payments with respect to positions in substantially similar or related
property; or (c) to the extent the stock on which the dividend is paid is
treated as debt-financed under the rules of Code Section 246A. Moreover, the
dividends received deduction for a corporate shareholder may be disallowed or
reduced (a) if the corporate shareholder fails to satisfy the foregoing
requirements with respect to its shares of the Fund, or (b) by application of
Code Section 246(b) which in general limits the dividends received deduction to
70% of the shareholder's taxable income (determined without regard to the
dividends received deduction and certain other items).
Alternative minimum tax ("AMT") is imposed in addition to, but only to
the extent it exceeds, the regular tax and is computed at a maximum rate of 28%
for non-corporate taxpayers and 20% for corporate taxpayers on the excess of the
taxpayer's alternative minimum taxable income ("AMTI") over an exemption amount.
The corporate dividends received deduction is not itself an item of tax
preference that must be added back to taxable income or is otherwise disallowed
in determining a corporation's AMTI. However, corporate shareholders will
generally be required to take the full amount of any dividend received from the
Fund into account (without a dividend received deduction) in determining their
adjusted current earnings, which are used in computing an additional corporate
preference item (i.e., 75% of the excess of a corporate taxpayer's adjusted
current earnings over its AMTI (determined without regard to this item and the
AMTI net operating loss deduction)) that is includable in AMTI. For taxable
years beginning after 1997, however, certain small corporations are wholly
exempt from the AMT.
Investment income that may be received by certain of the Funds from
sources within foreign countries may be subject to foreign taxes withheld at the
source. The United States has entered into tax treaties with many foreign
countries which entitle any such Funds to a reduced rate of, or exemption from,
taxes on such income. It is impossible to determine the effective rate of
foreign tax in advance since the amount of any such Fund's assets to be invested
in various countries is not known.
Distributions by a 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.
38
<PAGE> 408
Distributions by a 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 of another Fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date.
In addition, if the net asset value at the time a shareholder purchases
shares of a 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 a Fund
into account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year
in accordance with the guidance that has been provided by the IRS.
The Funds will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends, and
the proceeds of redemption of shares, paid to any shareholder (a) who has
provided either an incorrect tax identification number or no number at all, (b)
who is subject to backup withholding by the IRS for failure to report the
receipt of interest or dividend income properly, or (c) who has failed to
certify to a Fund that it is not subject to backup withholding or that it is a
corporation or other "exempt recipient."
SALE OR REDEMPTION OF SHARES
A shareholder will recognize gain or loss on the sale or redemption of
shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within thirty (30) days before or after the
sale or redemption. In general, any gain or loss arising from (or treated as
arising from) the sale or redemption of shares of a 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. Currently, any long-term capital gain
recognized by a non-corporate shareholder will be subject to tax at a maximum
rate of 20%. 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) (discussed above in connection with the dividends received deduction for
corporations) 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 that in some cases may be 19.6% 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 non-corporate taxpayer,
$3,000 of ordinary income.
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 a Fund
is "effectively connected" with a U.S. trade or business carried on by such
shareholder. If the income from a Fund is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, dividends and return of
capital distributions (other than distributions of long-term capital gain) 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
of shares of a Fund, capital gain dividends and amounts retained by a Fund that
are designated as undistributed net capital gains.
39
<PAGE> 409
If the income from a 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, a Fund may be
required to withhold U.S. federal income tax at a rate of 31% on distributions
that are otherwise exempt from withholding tax (or taxable at a reduced treaty
rate) unless such shareholders furnish the Fund with proper notification of
their foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a Fund,
including the applicability of foreign taxes.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS
The foregoing general discussion of U.S. federal income tax consequences
is based on the Code and the regulations issued thereunder as in effect on the
date of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation for ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are urged
to consult their tax advisers as to the consequences of these and other state
and local tax rules affecting investment in the Funds.
SHAREHOLDER INFORMATION
This information supplements the discussion in the Funds' Prospectus
under the title "Shareholder Information."
SHARE CERTIFICATES. Shareholders of the Funds do not have the right to
demand or require the Trust to issue share certificates, although the Trust in
its sole discretion may issue them.
REDEMPTIONS BY TELEPHONE. By signing an 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 FMC 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 FMC 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
Taxpayer Identification Number or 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 FMC 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
redemptions must be effected in writing by the investor.
DIVIDENDS AND DISTRIBUTIONS. 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.
40
<PAGE> 410
Dividends and distributions will be reinvested at the net asset value
per share determined on the ex-dividend date.
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 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.
MISCELLANEOUS INFORMATION
CHARGES FOR CERTAIN ACCOUNT INFORMATION
The Transfer Agent may impose certain copying charges for requests of
shareholder account statements and other historical account information older
than the current year and the immediately preceding year.
AUDIT REPORTS
The Board of Trustees will issue semi-annual reports of the transactions
of the Funds to the shareholders. Financial statements, audited by independent
auditors, will be issued annually. The firm of KPMG LLP, 700 Louisiana, Bank of
America Building, Houston, Texas 77002, currently serves as the auditors of each
fund.
LEGAL MATTERS
Certain legal matters for the Trust have been passed upon by Ballard
Spahr Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, Pennsylvania
19103.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company (the "Custodian"), 225 Franklin
Street, Boston, Massachusetts 02110, is custodian of all securities and cash of
the Funds. The Custodian attends to the collection of principal and income, pays
and collects all monies for securities bought and sold by the Funds and performs
certain other ministerial duties. A I M Fund Services, Inc., a wholly owned
subsidiary of AIM, 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, acts
as transfer and dividend disbursing agent for the Funds. These services do not
include any supervisory function over management or provide any protection
against any possible depreciation of assets. The Funds pay the Custodian and the
Transfer Agent such compensation as may be agreed upon from time to time.
PRINCIPAL HOLDERS OF SECURITIES
AGGRESSIVE GROWTH
To the best of the knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding Class A, Class B and Class C shares
of Aggressive Growth as of March 1, 2000, and the amount of the outstanding
shares held of record and beneficially owned by such holders, are set forth
below:
41
<PAGE> 411
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
- ---------------- ------------ -------------
<S> <C> <C>
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 14.33% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
The Manufacturers Life Insurance Co. 6.13% -0-
C/O Manulife Financial USA
Attn: Rosie Chuck Srs. Acctg.
250 Bloor Street East 7th Floor
Toronto, Ontario, Canada M4W 1E5
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 9.39% -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 27.58% -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246
</TABLE>
- ---------------------
* The Funds have no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
42
<PAGE> 412
BLUE CHIP
To the best of the knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding Class A, Class B and Class C shares
of Blue Chip as of March 1, 2000, and the amount of the outstanding shares held
of record and beneficially owned by such holders, are set forth below:
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
- ---------------- ------------ -------------
<S> <C> <C>
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 8.10% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 10.88% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 21.09% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Banc One Securities Corp. FBO 6.61% -0-
The One Investment Solution
733 Greencrest Drive
Westerville, OH 43081
</TABLE>
- --------------------
* The Funds have no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
43
<PAGE> 413
CAPITAL DEVELOPMENT
To the best of the knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding Class A, Class B and Class C shares
of Capital Development as of March 1, 2000, and the amount of the outstanding
shares held of record and beneficially owned by such holders, are set forth
below:
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
- --------------- ------------ -------------
<S> <C> <C>
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 10.78% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 14.79% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 19.40% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Coastgear & Company 7.16% -0-
State Street Bank & Trust
Attn: Kevin Smith
125 Rosemont Avenue
Westwood, MA 02090
</TABLE>
- ---------------------
* The Funds have no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
44
<PAGE> 414
CHARTER
To the best of the knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding Class A, Class B and Class C shares
of Charter as of March 1, 2000, and the Institutional Class of Charter as of
December 20, 1999, and the amount of the outstanding shares held of record and
beneficially owned by such holders, are set forth below:
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
- --------------- ------------ -------------
<S> <C> <C>
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 13.21% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Great-West Life and Annuity Insurance Co. 7.04% - 0 -
401(k) Unit Valuations
Attn: Mutual Fund Trading 2T2
8515 E. Orchard
Englewood, CO 80111
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 8.57% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 19.40% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Institutional Class
Commonwealth of Massachusetts 96.09% - 0 -
One Ashburton Place
12th Floor
Boston, MA 02108
</TABLE>
- ------------------
* The Funds have no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
45
<PAGE> 415
CONSTELLATION
To the best of the knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding Class A, Class B and Class C shares
of Constellation as of March 1, 2000, and of the Institutional Class of
Constellation as of December 20, 1999, and the amount of the outstanding shares
held of record and beneficially owned by such holders, are set forth below:
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
- --------------- ------------ -------------
[S] [C] [C]
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 16.45% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 7.41% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 23.20% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Banc One Securities Corp. FBO 8.71% -0-
The One Investment Solution
733 Greencrest Drive
Westerville, OH 43081
Institutional Class
Nationwide Ohio Variable Account 39.14% - 0 -
P.O. Box 182029
C/O IPO Portfolio Accounting
Columbus, Ohio 43218
Commonwealth of Massachusetts 35.27% - 0 -
Deferred Compensation Plan Trust
One Ashburton Place
12th Floor
Boston, MA 02108
- -------------------
* The Funds have no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
46
<PAGE> 416
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
- --------------- ------------ -------------
<S> <C> <C>
Frontier Trust FBO NDC's Retirement
Plans - NR 6.66% - 0 -
P. O. Box 20629
Columbus, OH 43220-0629
</TABLE>
DEMOGRAPHIC TRENDS
To the best of the knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding Class A, Class B and Class C shares
of Demographic Trends as of March 1, 2000, and the amount of the outstanding
shares held of record and beneficially owned by such holders, are set forth
below:
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
- --------------- ------------ -------------
<S> <C> <C>
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 8.38% -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 18.25% -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 21.86% -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
</TABLE>
EMERGING GROWTH
AIM provided the initial capitalization of Emerging Growth and,
accordingly, as of the date of this Statement of Additional Information, owned
more than 25% of the issued and outstanding shares of that Fund and therefore
could be deemed to "control" that Fund as that term is defined in the 1940 Act.
It is anticipated that after commencement of the public offering of the Fund's
shares, AIM will cease to control the Fund for purposes of the 1940 Act.
- ---------------------
* The Funds have no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
47
<PAGE> 417
LARGE CAP BASIC VALUE
To the best of the knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding Class A shares of Large Cap Basic
Value as of March 1, 2000, and the amount of the outstanding shares held of
record and beneficially owned by such holders, are set forth below:
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
- ---------------- ------------ -------------
<S> <C> <C>
Retail Class A Shares
A I M Advisors, Inc. 91.62%** -0-
Attn: David Hessel
11 Greenway Plaza, Suite 100
Houston, TX 77046
</TABLE>
LARGE CAP GROWTH
To the best of the knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding Class A, Class B and Class C shares
of Large Cap Growth as of March 1, 2000, and the amount of the outstanding
shares held of record and beneficially owned by such holders, are set forth
below:
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only Beneficially
- --------------- ----------- -------------
<S> <C> <C>
Retail Class A Shares
A I M Advisors, Inc. 17.82% -0-
Attn: David Hessel
11 Greenway Plaza, Suite 100
Houston, TX 77046
Retail Class C Shares
Donaldson Lufkin Jenrette 8.15% -0-
Securities Corporation Inc.
P. O. Box 2052
Jersey City, NJ 07303-9998
</TABLE>
- -------------------
* The Funds have no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a fund may
be presumed to be in "control" of such fund as defined in the 1940 Act.
48
<PAGE> 418
MID CAP
To the best of the knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding Class A, Class B and Class C shares
of Mid Cap as of March 1, 2000, and the amount of the outstanding shares held of
record and beneficially owned by such holders, are set forth below:
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only Beneficially
- --------------- ----------- -------------
<S> <C> <C>
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 11.16%** -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 35.59%** -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 31.76%** -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
</TABLE>
- -----------------------
** A shareholder who holds 25% or more of the outstanding shares of a fund may
be presumed to be in "control" of such fund as defined in the 1940 Act.
49
<PAGE> 419
WEINGARTEN
To the best of the knowledge of the Trust, the names and addresses of
the holders of 5% or more of the outstanding Class A, Class B and Class C shares
of Weingarten as of March 1, 2000, and the Institutional Class of Weingarten as
of December 20, 1999, and the amount of the outstanding shares held of record
and beneficially owned by such holders, are set forth below:
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only* Beneficially
- ---------------- ------------ -------------
<S> <C> <C>
Retail Class A Shares
Merrill Lynch Pierce Fenner & Smith 16.72% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Great-West Life and Annuity 5.47% - 0 -
Insurance Co.
401(K) Unit Valuations
Attn: Mutual Fund Trading 2T2
8515 E. Orchard
Englewood, CO 80111
Retail Class B Shares
Merrill Lynch Pierce Fenner & Smith 9.77% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Retail Class C Shares
Merrill Lynch Pierce Fenner & Smith 19.80% - 0 -
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Institutional Class
Commonwealth of Massachusetts 86.87% - 0 -
Deferred Compensation Plan Trust
One Ashburton Place
12th Floor
Boston, MA 02108
</TABLE>
- -------------------
* The Funds have no knowledge as to whether all or any portion of the shares
owned of record only are also owned beneficially.
50
<PAGE> 420
<TABLE>
<CAPTION>
Percent Percent Owned
Name and Address Owned of of Record and
of Record Owner Record only Beneficially
- ---------------- ----------- -------------
<S> <C> <C>
Frontier Trust FBO NDC's 6.67% -0-
Retirement Plans - NR
Attn: Reconciliation Dept.
P. O. Box 20629
Columbus, OH 43220-0629
</TABLE>
- -------------------
* The Funds have no knowledge as to whether all or any portion of the
shares owned of record only are also owned beneficially.
As of March 1, 2000, the trustees and officers of the Trust as a group
owned beneficially less than 1% of the outstanding shares of each class of
Aggressive Growth, Blue Chip, Capital Development, Charter, Constellation,
Demographic Trends, Emerging Growth, Large Cap Basic Value, Large Cap Growth and
Weingarten. As of March 1, 2000, the trustees and officers of the Trust as a
group owned 1.44% of the outstanding Class A shares of Mid Cap.
OTHER INFORMATION
The Prospectus and this Statement of Additional Information omit certain
information contained in the Registration Statement which the Trust has filed
with the SEC under the 1933 Act and reference is hereby made to the Registration
Statement for further information with respect to the Funds and the securities
offered hereby. The Registration Statement is available for inspection by the
public at the SEC in Washington, D.C.
51
<PAGE> 421
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
STANDARD & POOR'S
Commercial paper rated by Standard & Poor's has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well-established, and the issuer has a strong position
within the industry. The reliability and quality of management are unquestioned.
The relative strength or weakness of the above factors determines whether the
issuer's Commercial Paper is rated A-1 or A-2. A-1 indicates the degree of
safety regarding time of payment is very strong. A-2 indicates that the capacity
for timely payment is strong, but that the relative degree of safety is not as
overwhelming as for issues designated A-1.
MOODY'S
Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service. Among the factors considered by Moody's
in assigning ratings are the following: (a) evaluation of the management of the
issuer; (b) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (c)
evaluation of the issuer's products in relation to competition and customer
acceptance; (d) liquidity; (e) amount and quality of long-term debt; (f) trend
of earnings over a period of ten years; (g) financial strength of a parent
company and the relationships which exist with the issuer; and (h) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations. Relative
strength or weakness of the above factors determines whether the issuer's
commercial paper is rated Prime-1 or Prime-2.
DESCRIPTION OF CORPORATE BOND RATINGS
STANDARD & POOR'S
AAA -- Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.
Moody's
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt-edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as "high-grade bonds." They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A-1
<PAGE> 422
FINANCIAL STATEMENTS
FS
<PAGE> 423
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Equity Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of the AIM Charter Fund (a portfolio of AIM
Equity Funds, Inc.), including the schedule of
investments, as of October 31, 1999, 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 five-year period
then ended. 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 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 October 31, 1999, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Charter
Fund as of October 31, 1999, 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 five-year period then ended, in conformity
with generally accepted accounting principles.
/s/KPMG LLP
-----------
KPMG LLP
December 3, 1999
Houston, Texas
FS-1
<PAGE> 424
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-92.27%
BANKS (MONEY CENTER)-2.97%
Chase Manhattan Corp. (The) 2,500,000 $ 218,437,500
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO
& CABLE)-4.67%
AT&T Corp.-Liberty Media
Group-Class A(a) 1,000,000 39,687,500
- ---------------------------------------------------------------
Comcast Corp.-Class A 3,000,000 126,375,000
- ---------------------------------------------------------------
MediaOne Group, Inc.(a) 2,500,000 177,656,250
- ---------------------------------------------------------------
343,718,750
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-4.90%
Corning, Inc. 500,000 39,312,500
- ---------------------------------------------------------------
Lucent Technologies Inc. 1,755,000 112,758,750
- ---------------------------------------------------------------
Motorola, Inc. 850,000 82,821,875
- ---------------------------------------------------------------
Nokia Oyj-ADR (Finland) 800,000 92,450,000
- ---------------------------------------------------------------
QUALCOMM, Inc.(a) 150,000 33,412,500
- ---------------------------------------------------------------
360,755,625
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-6.27%
Dell Computer Corp.(a) 1,500,000 60,187,500
- ---------------------------------------------------------------
International Business Machines
Corp.(b) 2,250,000 221,343,750
- ---------------------------------------------------------------
Sun Microsystems, Inc.(a) 1,700,000 179,881,250
- ---------------------------------------------------------------
461,412,500
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-2.51%
Cisco Systems, Inc.(a) 2,500,000 185,000,000
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-2.33%
EMC Corp.(a) 1,250,000 91,250,000
- ---------------------------------------------------------------
Lexmark International Group,
Inc.-Class A(a) 1,024,500 79,975,031
- ---------------------------------------------------------------
171,225,031
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-10.27%
America Online, Inc.(a) 600,000 77,812,500
- ---------------------------------------------------------------
Microsoft Corp.(a) 3,800,000 351,737,500
- ---------------------------------------------------------------
Novell, Inc.(a) 11,000,000 220,687,500
- ---------------------------------------------------------------
VERITAS Software Corp.(a) 650,000 70,118,750
- ---------------------------------------------------------------
Yahoo! Inc.(a) 200,000 35,812,500
- ---------------------------------------------------------------
756,168,750
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONSUMER FINANCE-0.74%
Providian Financial Corp. 500,000 $ 54,500,000
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-2.76%
General Electric Co. 1,500,000 203,343,750
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-1.55%
Linear Technology Corp. 600,000 41,962,500
- ---------------------------------------------------------------
Texas Instruments, Inc. 800,000 71,800,000
- ---------------------------------------------------------------
113,762,500
- ---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-0.82%
Applied Materials, Inc.(a) 500,000 44,906,250
- ---------------------------------------------------------------
Teradyne, Inc.(a) 400,000 15,400,000
- ---------------------------------------------------------------
60,306,250
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-7.81%
American Express Co. 1,500,000 231,000,000
- ---------------------------------------------------------------
Citigroup, Inc. 2,300,000 124,487,500
- ---------------------------------------------------------------
Fannie Mae 1,000,000 70,750,000
- ---------------------------------------------------------------
Freddie Mac 2,750,000 148,671,875
- ---------------------------------------------------------------
574,909,375
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-7.55%
American Home Products Corp. 1,400,000 73,150,000
- ---------------------------------------------------------------
Bristol-Myers Squibb Co. 2,000,000 153,625,000
- ---------------------------------------------------------------
Johnson & Johnson 1,500,001 157,125,084
- ---------------------------------------------------------------
Warner-Lambert Co. 2,150,000 171,596,875
- ---------------------------------------------------------------
555,496,959
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-4.05%
Pfizer, Inc. 3,750,000 148,125,000
- ---------------------------------------------------------------
Pharmacia & Upjohn, Inc. 950,000 51,240,625
- ---------------------------------------------------------------
Schering-Plough Corp. 2,000,000 99,000,000
- ---------------------------------------------------------------
298,365,625
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.64%
Guidant Corp. 1,750,000 86,406,250
- ---------------------------------------------------------------
Medtronic, Inc. 1,000,000 34,625,000
- ---------------------------------------------------------------
121,031,250
- ---------------------------------------------------------------
</TABLE>
AIM CHARTER FUND
FS-2
<PAGE> 425
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (MULTI-LINE)-2.80%
American International Group,
Inc. 2,000,000 $ 205,875,000
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-3.74%
Goldman Sachs Group, Inc. (The) 150,000 10,650,000
- ---------------------------------------------------------------
Merrill Lynch & Co., Inc. 500,000 39,250,000
- ---------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 1,250,000 137,890,625
- ---------------------------------------------------------------
Schwab (Charles) Corp. (The) 2,250,000 87,609,375
- ---------------------------------------------------------------
275,400,000
- ---------------------------------------------------------------
LODGING-HOTELS-0.76%
Carnival Corp. 1,250,000 55,625,000
- ---------------------------------------------------------------
MANUFACTURING
(DIVERSIFIED)-5.19%
Tyco International Ltd.(b) 8,650,000 345,459,375
- ---------------------------------------------------------------
United Technologies Corp. 600,000 36,300,000
- ---------------------------------------------------------------
381,759,375
- ---------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-1.50%
Baker Hughes, Inc. 1,250,000 34,921,875
- ---------------------------------------------------------------
Halliburton Co. 800,000 30,150,000
- ---------------------------------------------------------------
Schlumberger Ltd. 750,000 45,421,875
- ---------------------------------------------------------------
110,493,750
- ---------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-0.33%
Conoco, Inc.-Class B 900,000 24,412,500
- ---------------------------------------------------------------
OIL (INTERNATIONAL
INTEGRATED)-1.18%
Mobil Corp. 900,000 86,850,000
- ---------------------------------------------------------------
RAILROADS-0.48%
Kansas City Southern Industries,
Inc. 750,000 35,578,125
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-1.89%
Home Depot, Inc. (The) 749,993 56,624,472
- ---------------------------------------------------------------
Lowe's Companies, Inc. 1,500,000 82,500,000
- ---------------------------------------------------------------
139,124,472
- ---------------------------------------------------------------
RETAIL (COMPUTERS &
ELECTRONICS)-2.13%
Best Buy Co., Inc.(a) 1,400,000 77,787,500
- ---------------------------------------------------------------
Tandy Corp. 1,250,000 78,671,875
- ---------------------------------------------------------------
156,459,375
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.54%
Kroger Co. (The)(a) 1,916,900 39,895,481
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (GENERAL
MERCHANDISE)-5.38%
Costco Wholesale Corp.(a) 400,000 $ 32,125,000
- ---------------------------------------------------------------
Dayton Hudson Corp. 3,000,000 193,875,000
- ---------------------------------------------------------------
Wal-Mart Stores, Inc. 3,000,000 170,062,500
- ---------------------------------------------------------------
396,062,500
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-0.48%
Amazon.com, Inc.(a) 500,000 35,312,500
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-1.33%
Concord EFS, Inc.(a) 1,500,000 40,593,750
- ---------------------------------------------------------------
First Data Corp. 1,250,000 57,109,375
- ---------------------------------------------------------------
97,703,125
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-2.33%
MCI WorldCom, Inc.(a) 2,000,000 171,625,000
- ---------------------------------------------------------------
TELEPHONE-1.37%
GTE Corp. 500,000 37,500,000
- ---------------------------------------------------------------
SBC Communications, Inc. 1,250,000 63,671,875
- ---------------------------------------------------------------
101,171,875
- ---------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$4,615,196,054) 6,791,781,943
- ---------------------------------------------------------------
CONVERTIBLE PREFERRED
STOCKS-2.32%
BROADCASTING (TELEVISION, RADIO
& CABLE)-0.76%
Mediaone Group, Inc.-$2.25
Series D Conv. Pfd. 400,000 56,200,000
- ---------------------------------------------------------------
ELECTRIC COMPANIES-1.56%
Houston Industries, Inc.-$3.29
Conv. Pfd. 1,000,000 114,750,000
- ---------------------------------------------------------------
Total Convertible Preferred
Stocks (Cost $123,420,376) 170,950,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE BONDS & NOTES-2.09%
COMPUTERS (HARDWARE)-0.30%
Candescent Technology Corp.,
Conv. Sr. Sub. Deb., 7.00%,
05/01/03 (Acquired
04/17/98-11/30/98; Cost
$27,943,750)(c) $ 28,300,000 22,074,000
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-0.94%
VERITAS Software Corp., Conv.
Notes, 5.25%, 11/01/04 13,500,000 69,001,875
- ---------------------------------------------------------------
</TABLE>
AIM CHARTER FUND
FS-3
<PAGE> 426
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
RETAIL (SPECIALTY)-0.51%
Amazon.com, Inc., Conv. Sub.
Deb., 4.75%, 02/01/09 $ 35,000,000 $ 37,275,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.34%
Global Telesystems Group, Inc.,
Conv. Sr. Unsec. Sub. Notes,
8.75%, 06/30/00 (Acquired
02/05/98; Cost $13,002,080)(c) 10,000,000 25,025,000
- ---------------------------------------------------------------
Total Convertible Bonds &
Notes
(Cost $95,916,763) 153,375,875
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS-4.93%
STIC Liquid Assets Portfolio(d) 181,461,397 $ 181,461,397
- ---------------------------------------------------------------
STIC Prime Portfolio(d) 181,461,397 181,461,397
- ---------------------------------------------------------------
Total Money Market Funds
(Cost $362,922,794) 362,922,794
- ---------------------------------------------------------------
TOTAL INVESTMENTS-101.61% 7,479,030,612
- ---------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(1.61%) (118,345,314)
- ---------------------------------------------------------------
NET ASSETS-100.00% $7,360,685,298
===============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
Pfd. - Preferred
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
Notes to Schedule of Investments:
(a)Non-income producing security.
(b)A portion of this security is subject to call options written. See Note 7.
(c)Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of 1933,
as amended. The valuation of these securities has been determined in
accordance with the procedures established by the Board of Directors. The
aggregate market value of these securities at 10/31/99 was $47,099,000 which
represented 0.64% of the Fund's net assets.
(d)The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
AIM CHARTER FUND
FS-4
<PAGE> 427
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$5,197,455,987) $7,479,030,612
- ------------------------------------------------------------
Receivables for:
Investments sold 11,818,345
- ------------------------------------------------------------
Capital stock sold 10,408,480
- ------------------------------------------------------------
Dividends and interest 7,301,796
- ------------------------------------------------------------
Investment for deferred compensation plan 83,490
- ------------------------------------------------------------
Other assets 140,597
- ------------------------------------------------------------
Total assets 7,508,783,320
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 105,957,126
- ------------------------------------------------------------
Capital stock reacquired 8,011,254
- ------------------------------------------------------------
Deferred compensation 83,490
- ------------------------------------------------------------
Options written (Premiums received
$25,481,560) 25,656,250
- ------------------------------------------------------------
Accrued advisory fees 3,634,922
- ------------------------------------------------------------
Accrued administrative services fees 27,618
- ------------------------------------------------------------
Accrued directors' fees 3,913
- ------------------------------------------------------------
Accrued distribution fees 3,681,163
- ------------------------------------------------------------
Accrued transfer agent fees 637,952
- ------------------------------------------------------------
Accrued operating expenses 404,334
- ------------------------------------------------------------
Total liabilities 148,098,022
- ------------------------------------------------------------
Net assets applicable to shares outstanding $7,360,685,298
============================================================
NET ASSETS:
Class A $4,948,665,737
============================================================
Class B $2,206,751,605
============================================================
Class C $ 138,467,127
============================================================
Institutional Class $ 66,800,829
============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 288,328,877
============================================================
Class B:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 130,030,549
============================================================
Class C:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 8,139,220
============================================================
Institutional Class:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 3,855,460
============================================================
Class A:
Net asset value and redemption price per
share $ 17.16
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $17.16 / 94.50%) $ 18.16
============================================================
Class B:
Net asset value and offering price per
share $ 16.97
============================================================
Class C:
Net asset value and offering price per
share $ 17.01
============================================================
Institutional Class:
Net asset value, offering and redemption
price per share $ 17.33
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $157,812 foreign
withholding tax) $ 49,869,261
- ------------------------------------------------------------
Interest 25,693,052
- ------------------------------------------------------------
Total investment income 75,562,313
- ------------------------------------------------------------
EXPENSES:
Advisory fees 41,014,707
- ------------------------------------------------------------
Administrative services fees 235,274
- ------------------------------------------------------------
Custodian fees 364,030
- ------------------------------------------------------------
Directors' fees 50,623
- ------------------------------------------------------------
Distribution fees-Class A 13,556,239
- ------------------------------------------------------------
Distribution fees-Class B 18,631,086
- ------------------------------------------------------------
Distribution fees-Class C 809,325
- ------------------------------------------------------------
Transfer agent fees-Class A 4,930,725
- ------------------------------------------------------------
Transfer agent fees-Class B 3,087,342
- ------------------------------------------------------------
Transfer agent fees-Class C 149,576
- ------------------------------------------------------------
Transfer agent fees-Institutional Class 6,136
- ------------------------------------------------------------
Other 1,214,166
- ------------------------------------------------------------
Total expenses 84,049,229
- ------------------------------------------------------------
Less: Fees waived by advisor (1,130,089)
- ------------------------------------------------------------
Expenses paid indirectly (149,110)
- ------------------------------------------------------------
Net expenses 82,770,030
- ------------------------------------------------------------
Net investment income (loss) (7,207,717)
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES
AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 668,004,945
- ------------------------------------------------------------
Foreign currencies (1,105,968)
- ------------------------------------------------------------
Option contracts written (9,533,983)
- ------------------------------------------------------------
657,364,994
- ------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 1,116,385,588
- ------------------------------------------------------------
Foreign currencies (47,768)
- ------------------------------------------------------------
Option contracts written 214,221
- ------------------------------------------------------------
1,116,552,041
- ------------------------------------------------------------
Net gain from investment securities,
foreign currencies and option contracts 1,773,917,035
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $1,766,709,318
============================================================
</TABLE>
See Notes to Financial Statements.
AIM CHARTER FUND
FS-5
<PAGE> 428
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
--------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (7,207,717) $ 37,825,223
- -----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and option contracts 657,364,994 206,268,933
- -----------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies, futures and option
contracts 1,116,552,041 254,914,824
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,766,709,318 499,008,980
- -----------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (9,134,542) (28,039,987)
- -----------------------------------------------------------------------------------------------
Class B -- (3,013,337)
- -----------------------------------------------------------------------------------------------
Class C -- (47,378)
- -----------------------------------------------------------------------------------------------
Institutional Class (216,682) (445,449)
- -----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (149,620,112) (346,531,949)
- -----------------------------------------------------------------------------------------------
Class B (57,712,333) (108,856,197)
- -----------------------------------------------------------------------------------------------
Class C (1,614,093) (819,962)
- -----------------------------------------------------------------------------------------------
Institutional Class (1,761,967) (3,989,466)
- -----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 151,495,357 235,195,827
- -----------------------------------------------------------------------------------------------
Class B 370,892,559 350,425,592
- -----------------------------------------------------------------------------------------------
Class C 84,930,162 32,069,085
- -----------------------------------------------------------------------------------------------
Institutional Class 9,431,197 3,464,509
- -----------------------------------------------------------------------------------------------
Net increase in net assets 2,163,398,864 628,420,268
- -----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 5,197,286,434 4,568,866,166
- -----------------------------------------------------------------------------------------------
End of period $ 7,360,685,298 $5,197,286,434
===============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 4,466,453,244 $3,821,903,969
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (217,108) 9,291,857
- -----------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and option
contracts 613,057,085 201,250,572
- -----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, futures and option contracts 2,281,392,077 1,164,840,036
- -----------------------------------------------------------------------------------------------
$ 7,360,685,298 $5,197,286,434
===============================================================================================
</TABLE>
See Notes to Financial Statements.
AIM CHARTER FUND
FS-6
<PAGE> 429
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Charter Fund (the "Fund") is a series portfolio of AIM Equity Funds, Inc.
(the "Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of ten separate portfolios. The
Fund currently offers four different classes of shares: Class A shares, Class B
shares, Class C shares and the Institutional Class. Class A shares are sold with
a front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is growth of capital with a secondary
objective of current income.
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 the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) 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 any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. 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 Company's officers in a
manner specifically authorized by the Board of Directors of the Company.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. For purposes of determining
net asset value per share, futures and options contracts generally will be
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities 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 the 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 they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was increased by
$7,049,976, undistributed net realized gains decreased by $34,849,976 and
paid-in capital increased by $27,800,000 in order to comply with the
requirements of the American Institute of Certified Public Accountants
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassification discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
D. Futures Contracts -- The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits required
upon entering into futures contracts are satisfied by the segregation of
specific securities as collateral for the account of the broker (the Fund's
agent in acquiring the futures position). During the period the futures
contracts are open, changes in the value of the contracts are recognized as
unrealized gains or losses by "marking to market" on a daily basis to reflect
the market value of the contracts at the end of each day's trading. Variation
margin payments are made or received depending upon whether unrealized gains
or losses are incurred. When the contracts are closed, the Fund recognizes a
realized gain or loss equal to the difference between the proceeds from, or
cost of, the closing transaction and the Fund's basis in the contract. Risks
include the possibility of an illiquid market and that a change in value
AIM CHARTER FUND
FS-7
<PAGE> 430
of the contracts may not correlate with changes in the value of the
securities being hedged.
E. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions. The Fund does
not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
F. Foreign Currency Contracts -- A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
G. Covered Call Options -- The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may be
below, equal to, or above the current market value of the underlying security
at the time the option is written. When the Fund writes a covered call
option, an amount equal to the premium received by the Fund is recorded as an
asset and an equivalent liability. The amount of the liability is
subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the mean
between the last bid and asked prices on that day. If a written call option
expires on the stipulated expiration date, or if the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or a loss if the
closing purchase transaction exceeds the premium received when the option was
written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the sale
of the underlying security and the proceeds of the sale are increased by the
premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
H. Put Options -- The Fund may purchase put options. By purchasing a put option,
the Fund obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed strike price. In return for this right, the
Fund pays an option premium. The option's underlying instrument may be a
security or a futures contract. Put options may be used by the Fund to hedge
securities it owns by locking in a minimum price at which the Fund can sell.
If security prices fall, the put option could be exercised to offset all or a
portion of the Fund's resulting losses. At the same time, because the maximum
the Fund has at risk is the cost of the option, purchasing put options does
not eliminate the potential for the Fund to profit from an increase in the
value of the securities hedged.
I. Bond Premiums -- It is the policy of the Fund not to amortize market
premiums on bonds for financial reporting purposes.
J. Expenses -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment agreement, the
Fund pays an advisory fee to AIM at the annual rate of 1.0% of the first $30
million of the Fund's average daily net assets, plus 0.75% of the Fund's average
daily net assets in excess of $30 million to and including $150 million, plus
0.625% of the Fund's average daily net assets in excess of $150 million. AIM has
contractually agreed to waive a portion of its advisory fees paid by the Fund to
AIM to the extent necessary to reduce the fees paid by the Fund at net asset
levels higher than those currently incorporated in the present advisory fee
schedule. Under the contractual waiver, AIM will receive a fee calculated at the
annual rate of 1.0% of the first $30 million of the Fund's average daily net
assets, plus 0.75% of the Fund's average daily net assets in excess of $30
million to and including $150 million, plus 0.625% of the Fund's average daily
net assets in excess of $150 million to and including $2 billion, plus 0.60% of
the Fund's average daily net assets in excess of $2 billion. The waiver is
contractual and may not be terminated without approval of the Board of
Directors. During the year ended October 31, 1999, AIM waived fees of
$1,130,089. Under the terms of a master sub-advisory agreement between AIM and
A I M Capital Management, Inc. ("AIM Capital"), AIM pays AIM Capital 50% of the
amount paid by the Fund to AIM.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1999, AIM was
paid $235,274 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for
AIM CHARTER FUND
FS-8
<PAGE> 431
providing transfer agency and shareholder services to the Fund. During the year
ended October 31, 1999, AFS was paid $4,807,681 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares and a master distribution agreement with
Fund Management Company ("FMC) to serve as the distributor for the Institutional
Class shares of the Fund. The Company has adopted a plan pursuant to Rule 12b-1
under the 1940 Act with respect to the Fund's Class A shares, Class B shares and
Class C shares (collectively the "Plans"). The Fund , pursuant to the Plans,
pays AIM Distributors compensation at the annual rate of 0.30% of the Fund's
average daily net assets of Class A shares and 1.00% of the average daily net
assets of Class B and C shares. Of these amounts, the Fund may pay a service fee
of 0.25% of the average daily net assets of the Class A, Class B or Class C
shares to selected dealers and financial institutions who furnish continuing
personal shareholder services to their customers who purchase and own the
appropriate class of shares of the Fund. Any amounts not paid as a service fee
under the Plans would constitute an asset-based sales charge. The Plans also
impose a cap on the total sales charges, including asset-based sales charges
that may be paid by the respective classes. During the year ended October 31,
1999, the Class A, Class B and Class C shares paid AIM Distributors $13,556,239,
$18,631,086 and $809,325, respectively, as compensation under the Plans.
AIM Distributors received commissions of $2,030,454 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1999,
AIM Distributors received $96,080 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and directors of the Company are
officers and directors of AIM, AFS, FMC and AIM Distributors.
During the year ended October 31, 1999, the Fund paid legal fees of $15,483
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$76,809 and $72,301, respectively, under expense offset arrangements. The effect
of the above arrangements resulted in a reduction of the Fund's total expenses
of $149,110 during the year ended October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 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. During the year
ended October 31, 1999, 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 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$7,032,932,257 and $6,722,183,283, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $2,293,837,834
- ----------------------------------------------------------
Aggregate unrealized appreciation
(depreciation) of investment securities (24,022,713)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $2,269,815,121
==========================================================
Cost of investments for tax purposes is $5,209,215,491.
</TABLE>
AIM CHARTER FUND
FS-9
<PAGE> 432
NOTE 7-CALL OPTION CONTRACTS
Transactions in call options written during the year ended October 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ------------
<S> <C> <C>
Beginning of year 31,202 $ 8,091,351
- --------------------------------------------------------------------------------------
Written 62,592 40,059,097
- --------------------------------------------------------------------------------------
Closed (54,607) (18,452,621)
- --------------------------------------------------------------------------------------
Exercised (14,921) (4,076,636)
- --------------------------------------------------------------------------------------
Expired (1,766) (139,631)
- --------------------------------------------------------------------------------------
End of year 22,500 $ 25,481,560
======================================================================================
</TABLE>
Open call option contracts written at October 31, 1999 were as follows:
<TABLE>
<CAPTION>
OCTOBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS 1999 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
- --------------------------------------- -------- ------ --------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
International Business Machines Corp. Jan-00 $80 12,500 $20,804,105 $25,156,250 $(4,352,145)
- --------------------------------------------------------------------------------------------------------------------
Tyco International Ltd. Nov-99 50 10,000 4,677,455 500,000 4,177,455
- --------------------------------------------------------------------------------------------------------------------
22,500 $25,481,560 $25,656,250 $ (174,690)
====================================================================================================================
</TABLE>
NOTE 8-PUT OPTION CONTRACTS
Transactions in put options during the year ended October 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
PUT OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS PAID
--------- -----------
<S> <C> <C>
Beginning of year -- $ --
- -------------------------------------------------------------------------------------
Purchased 24,165 6,379,447
- -------------------------------------------------------------------------------------
Closed (20,165) (4,215,217)
- -------------------------------------------------------------------------------------
Exercised -- --
- -------------------------------------------------------------------------------------
Expired (4,000) (2,164,230)
- -------------------------------------------------------------------------------------
End of year -- $ --
=====================================================================================
</TABLE>
NOTE 9-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 51,272,783 $ 809,088,837 65,753,775 $ 868,543,898
- --------------------------------------------------------------------------------------------------------------------
Class B 36,310,602 576,056,633 32,991,364 431,938,545
- --------------------------------------------------------------------------------------------------------------------
Class C 6,968,661 111,866,437 2,736,777 36,139,093
- --------------------------------------------------------------------------------------------------------------------
Institutional Class 828,138 13,421,969 568,334 7,594,968
- --------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 10,532,077 149,384,623 29,328,588 355,378,824
- --------------------------------------------------------------------------------------------------------------------
Class B 3,894,826 54,866,091 8,807,895 105,930,618
- --------------------------------------------------------------------------------------------------------------------
Class C 107,859 1,525,822 67,166 810,828
- --------------------------------------------------------------------------------------------------------------------
Institutional Class 134,608 1,929,704 351,483 4,295,496
- --------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (51,731,503) (806,978,103) (75,327,509) (988,726,895)
- --------------------------------------------------------------------------------------------------------------------
Class B (16,551,587) (260,030,165) (14,417,738) (187,443,571)
- --------------------------------------------------------------------------------------------------------------------
Class C (1,788,368) (28,462,097) (376,288) (4,880,836)
- --------------------------------------------------------------------------------------------------------------------
Institutional Class (372,429) (5,920,476) (636,014) (8,425,955)
- --------------------------------------------------------------------------------------------------------------------
39,605,667 $ 616,749,275 49,847,833 $ 621,155,013
====================================================================================================================
</TABLE>
AIM CHARTER FUND
FS-10
<PAGE> 433
NOTE 10-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Institutional Class
capital stock outstanding during each of the years in the five-year period ended
October 31, 1999.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.42 $ 13.48 $ 11.24 $ 10.66 $ 8.93
- ------------------------------------------------------------ ------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.09 0.18 0.16 0.24 0.23
- ------------------------------------------------------------ ------- ------- ------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) 4.43 1.24 2.91 1.44 2.07
- ------------------------------------------------------------ ------- ------- ------- ------- -------
Total from investment operations 4.52 1.42 3.07 1.68 2.30
- ------------------------------------------------------------ ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.07) (0.14) (0.16) (0.20) (0.24)
- ------------------------------------------------------------ ------- ------- ------- ------- -------
Distributions from net realized gains (0.54) (1.34) (0.67) (0.90) (0.33)
- ------------------------------------------------------------ ------- ------- ------- ------- -------
Total distributions (0.61) (1.48) (0.83) (1.10) (0.57)
- ------------------------------------------------------------ ------- ------- ------- ------- -------
Net asset value, end of period $ 17.33 $ 13.42 $ 13.48 $ 11.24 $ 10.66
============================================================ ======= ======= ======= ======= =======
Total return 34.61% 11.69% 29.05% 17.29% 27.45%
============================================================ ======= ======= ======= ======= =======
Net assets, end of period (000s omitted) $66,801 $43,815 $40,191 $29,591 $25,538
============================================================ ======= ======= ======= ======= =======
Ratio of expenses (exclusive of interest) to average net
assets(a) 0.65%(b) 0.66% 0.67% 0.69% 0.74%
============================================================ ======= ======= ======= ======= =======
Ratio of net investment income to average net assets(c) 0.51%(b) 1.37% 1.21% 2.24% 1.98%
============================================================ ======= ======= ======= ======= =======
Portfolio turnover rate 107% 154% 170% 164% 161%
============================================================ ======= ======= ======= ======= =======
</TABLE>
(a) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.67%, 0.67%, 0.68% and 0.70% for 1999-1996.
(b) Ratios are based on average net assets of $57,565,832.
(c) After fee waivers and/or expense reimbursements. Ratios of net investment
income prior to fee waivers and/or expense reimbursements were 0.49%, 1.36%,
1.20% and 2.23% for 1999-1996.
AIM CHARTER FUND
FS-11
<PAGE> 434
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Equity Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of the AIM Constellation Fund (a portfolio of
AIM Equity Funds, Inc.), including the schedule of
investments, as of October 31, 1999, 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 five-year period
then ended. 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 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 October 31, 1999, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM
Constellation Fund as of October 31, 1999, and 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 five-year period then ended,
in conformity with generally accepted accounting
principles.
/s/KPMG LLP
-----------
KPMG LLP
December 3, 1999
Houston, Texas
AIM CONSTELLATION FUND
FS-12
<PAGE> 435
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-95.54%
AIRLINES-0.25%
Southwest Airlines Co. 2,250,000 $ 37,828,125
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.67%
Danaher Corp. 1,250,000 60,390,625
- ---------------------------------------------------------------
SPX Corp.(a) 500,000 42,375,000
- ---------------------------------------------------------------
102,765,625
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.58%
Northern Trust Corp. 925,000 89,320,312
- ---------------------------------------------------------------
BANKS (REGIONAL)-1.01%
Bank United Corp.-Class A 1,000,000 39,000,000
- ---------------------------------------------------------------
Compass Bancshares, Inc. 1,000,000 26,687,500
- ---------------------------------------------------------------
Old Kent Financial Corp. 817,425 33,310,069
- ---------------------------------------------------------------
TCF Financial Corp. 700,000 20,650,000
- ---------------------------------------------------------------
Zions Bancorp 600,000 35,362,500
- ---------------------------------------------------------------
155,010,069
- ---------------------------------------------------------------
BIOTECHNOLOGY-1.53%
Biogen, Inc.(a) 2,500,000 185,312,500
- ---------------------------------------------------------------
Chiron Corp.(a) 1,000,000 28,562,500
- ---------------------------------------------------------------
Genzyme Corp.(a) 527,300 20,169,225
- ---------------------------------------------------------------
234,044,225
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO
& CABLE)-4.64%
Adelphia Communications Corp.(a) 1,000,000 54,625,000
- ---------------------------------------------------------------
AMFM Inc.(a) 2,250,000 157,500,000
- ---------------------------------------------------------------
AT&T Corp.-Liberty Media
Group-Class A(a) 3,000,000 119,062,500
- ---------------------------------------------------------------
Cox Communications, Inc.-Class
A(a) 1,500,000 68,156,250
- ---------------------------------------------------------------
Hispanic Broadcasting Corp.(a) 1,050,000 85,050,000
- ---------------------------------------------------------------
Univision Communications,
Inc.-Class A(a) 1,465,400 124,650,587
- ---------------------------------------------------------------
USA Networks, Inc.(a) 1,317,800 59,383,362
- ---------------------------------------------------------------
Westwood One, Inc.(a) 887,400 40,931,325
- ---------------------------------------------------------------
709,359,024
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-9.95%
ADC Telecommunications, Inc.(a) 1,750,000 83,453,125
- ---------------------------------------------------------------
Comverse Technology, Inc.(a) 1,500,000 170,250,000
- ---------------------------------------------------------------
Corning, Inc. 3,186,600 250,546,425
- ---------------------------------------------------------------
General Instrument Corp.(a) 1,900,000 102,243,750
- ---------------------------------------------------------------
JDS Uniphase Corp.(a) 1,500,000 250,312,500
- ---------------------------------------------------------------
Lucent Technologies Inc.(b) 3,849,120 247,305,960
- ---------------------------------------------------------------
Motorola, Inc. 750,000 73,078,125
- ---------------------------------------------------------------
Nokia Oyj-ADR (Finland) 1,500,000 173,343,750
- ---------------------------------------------------------------
QUALCOMM, Inc.(a) 250,000 55,687,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMUNICATIONS EQUIPMENT-(CONTINUED)
Scientific-Atlanta, Inc. 2,000,000 $ 114,500,000
- ---------------------------------------------------------------
1,520,721,135
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-1.39%
Apple Computer, Inc.(a) 1,000,000 80,125,000
- ---------------------------------------------------------------
Gateway, Inc.(a) 2,000,000 132,125,000
- ---------------------------------------------------------------
212,250,000
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-0.87%
Exodus Communications, Inc.(a) 341,700 29,386,200
- ---------------------------------------------------------------
VeriSign, Inc.(a) 835,000 103,122,500
- ---------------------------------------------------------------
132,508,700
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-3.06%
Adaptec, Inc.(a) 3,000,000 135,000,000
- ---------------------------------------------------------------
EMC Corp.(a)(b)(c) 3,500,000 255,500,000
- ---------------------------------------------------------------
Lexmark International Group,
Inc.- Class A(a) 1,000,000 78,062,500
- ---------------------------------------------------------------
468,562,500
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-15.30%
America Online, Inc.(a) 2,625,000 340,429,687
- ---------------------------------------------------------------
At Home Corp.(a) 1,150,000 42,981,250
- ---------------------------------------------------------------
BMC Software, Inc.(a) 2,500,000 160,468,750
- ---------------------------------------------------------------
Business Objects S.A.-ADR
(France)(a) 675,000 48,600,000
- ---------------------------------------------------------------
Check Point Software
Technologies Ltd. (Israel)(a) 750,000 86,765,625
- ---------------------------------------------------------------
Citrix Systems, Inc.(a) 2,800,000 179,550,000
- ---------------------------------------------------------------
Compuware Corp.(a) 1,250,000 34,765,625
- ---------------------------------------------------------------
Electronic Arts, Inc.(a) 1,250,000 101,015,625
- ---------------------------------------------------------------
Electronics for Imaging, Inc.(a) 2,000,000 80,625,000
- ---------------------------------------------------------------
Inktomi Corp.(a) 750,000 76,078,125
- ---------------------------------------------------------------
Intuit, Inc.(a) 3,750,000 109,218,750
- ---------------------------------------------------------------
J.D. Edwards & Co.(a) 1,050,000 25,134,375
- ---------------------------------------------------------------
Lycos, Inc.(a) 3,000,000 160,500,000
- ---------------------------------------------------------------
Microsoft Corp.(a) 1,150,000 106,446,875
- ---------------------------------------------------------------
Novell, Inc.(a) 1,000,000 20,062,500
- ---------------------------------------------------------------
RealNetworks, Inc.(a) 1,000,000 109,687,500
- ---------------------------------------------------------------
Siebel Systems, Inc.(a) 600,000 65,887,500
- ---------------------------------------------------------------
Synopsys, Inc.(a) 1,000,000 62,312,500
- ---------------------------------------------------------------
Verio, Inc.(a) 2,125,000 79,289,063
- ---------------------------------------------------------------
VERITAS Software Corp.(a) 2,500,000 269,687,500
- ---------------------------------------------------------------
Yahoo! Inc.(a) 1,000,000 179,062,500
- ---------------------------------------------------------------
2,338,568,750
- ---------------------------------------------------------------
</TABLE>
AIM CONSTELLATION FUND
FS-13
<PAGE> 436
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONSUMER FINANCE-2.41%
Capital One Financial Corp. 2,323,700 $ 123,156,100
- ---------------------------------------------------------------
Providian Financial Corp. 1,800,000 196,200,000
- ---------------------------------------------------------------
SLM Holding Corp. 1,000,000 48,937,500
- ---------------------------------------------------------------
368,293,600
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-5.18%
American Power Conversion
Corp.(a) 5,250,000 117,796,875
- ---------------------------------------------------------------
Conexant Systems, Inc.(a) 2,000,000 186,750,000
- ---------------------------------------------------------------
Sanmina Corp.(a) 1,000,000 90,062,500
- ---------------------------------------------------------------
Solectron Corp.(a) 3,000,000 225,750,000
- ---------------------------------------------------------------
Symbol Technologies, Inc. 2,625,000 104,343,750
- ---------------------------------------------------------------
Vishay Intertechnology, Inc.(a) 2,750,000 67,203,125
- ---------------------------------------------------------------
791,906,250
- ---------------------------------------------------------------
ELECTRONICS (COMPONENT
DISTRIBUTORS)-0.11%
AVX Corp. 428,100 17,124,000
- ---------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.29%
General Motors Corp.-Class H(a) 600,000 43,687,500
- ---------------------------------------------------------------
ELECTRONICS
(INSTRUMENTATION)-0.88%
PE Corp-PE Biosystems Group 1,550,000 100,556,250
- ---------------------------------------------------------------
Waters Corp.(a) 650,000 34,531,250
- ---------------------------------------------------------------
135,087,500
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-9.30%
Altera Corp.(a) 2,875,000 139,796,875
- ---------------------------------------------------------------
Analog Devices, Inc.(a) 3,000,000 159,375,000
- ---------------------------------------------------------------
ASM Lithography Holding N.V.
(Netherlands)(a) 650,000 47,206,250
- ---------------------------------------------------------------
Atmel Corp.(a) 916,800 35,411,400
- ---------------------------------------------------------------
Cypress Semiconductor Corp.(a) 4,000,000 102,250,000
- ---------------------------------------------------------------
Linear Technology Corp. 2,000,000 139,875,000
- ---------------------------------------------------------------
LSI Logic Corp.(a) 2,000,000 106,375,000
- ---------------------------------------------------------------
Maxim Integrated Products,
Inc.(a) 1,500,000 118,406,250
- ---------------------------------------------------------------
Microchip Technology, Inc.(a) 1,338,375 89,169,234
- ---------------------------------------------------------------
PMC-Sierra, Inc.(a) 2,499,700 235,596,725
- ---------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 2,000,000 91,750,000
- ---------------------------------------------------------------
Xilinx, Inc.(a) 2,000,000 157,250,000
- ---------------------------------------------------------------
1,422,461,734
- ---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-1.67%
Applied Materials, Inc.(a) 500,000 44,906,250
- ---------------------------------------------------------------
KLA-Tencor Corp.(a) 1,200,000 95,025,000
- ---------------------------------------------------------------
Novellus Systems, Inc.(a) 500,000 38,750,000
- ---------------------------------------------------------------
Teradyne, Inc.(a) 2,000,000 77,000,000
- ---------------------------------------------------------------
255,681,250
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.36%
American Express Co. 575,000 88,550,000
- ---------------------------------------------------------------
Citigroup, Inc. 1,100,000 59,537,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCIAL (DIVERSIFIED)-(CONTINUED)
MGIC Investment Corp. 1,000,000 $ 59,750,000
- ---------------------------------------------------------------
207,837,500
- ---------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-0.46%
Park Place Entertainment(a) 5,304,000 69,615,000
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-1.80%
Forest Laboratories, Inc.(a) 1,500,000 68,812,500
- ---------------------------------------------------------------
Jones Pharma, Inc.(d) 3,691,275 114,429,525
- ---------------------------------------------------------------
Medicis Pharmaceutical
Corp.-Class A(a) 1,200,000 36,600,000
- ---------------------------------------------------------------
MedImmune, Inc.(a) 500,000 56,000,000
- ---------------------------------------------------------------
275,842,025
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.32%
Express Scripts, Inc.-Class A(a) 1,000,000 49,125,000
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.38%
Bausch & Lomb, Inc. 1,000,000 54,000,000
- ---------------------------------------------------------------
Biomet, Inc. 2,500,000 75,312,500
- ---------------------------------------------------------------
Medtronic, Inc. 1,500,000 51,937,500
- ---------------------------------------------------------------
Sybron International Corp.(a) 1,250,000 29,765,625
- ---------------------------------------------------------------
211,015,625
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.33%
AFLAC, Inc. 1,000,000 51,125,000
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-1.02%
Schwab (Charles) Corp. (The) 4,000,000 155,750,000
- ---------------------------------------------------------------
INVESTMENT MANAGEMENT-0.53%
Federated Investors, Inc.-Class
B 2,064,000 35,604,000
- ---------------------------------------------------------------
Knight/Trimark Group, Inc.-Class
A(a) 1,750,000 45,609,375
- ---------------------------------------------------------------
81,213,375
- ---------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.91%
Harley-Davidson, Inc. 2,350,000 139,384,375
- ---------------------------------------------------------------
NATURAL GAS-0.40%
El Paso Energy Corp. 1,500,000 61,500,000
- ---------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-3.60%
Baker Hughes, Inc. 2,000,000 55,875,000
- ---------------------------------------------------------------
BJ Services Co.(a) 2,000,000 68,625,000
- ---------------------------------------------------------------
Cooper Cameron Corp.(a)(d) 2,750,000 106,390,625
- ---------------------------------------------------------------
Diamond Offshore Drilling, Inc. 1,000,000 31,750,000
- ---------------------------------------------------------------
Global Industries Ltd.(a) 3,000,000 24,000,000
- ---------------------------------------------------------------
R&B Falcon Corporation(a) 3,716,600 46,225,213
- ---------------------------------------------------------------
Rowan Companies, Inc.(a) 2,250,000 35,015,625
- ---------------------------------------------------------------
Smith International, Inc.(a) 1,750,000 60,484,375
- ---------------------------------------------------------------
</TABLE>
AIM CONSTELLATION FUND
FS-14
<PAGE> 437
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT)-(CONTINUED)
Transocean Offshore, Inc. 1,500,000 $ 40,781,250
- ---------------------------------------------------------------
Varco International, Inc.(a) 2,499,400 26,399,913
- ---------------------------------------------------------------
Weatherford International,
Inc.(a) 1,600,000 54,200,000
- ---------------------------------------------------------------
549,747,001
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-0.99%
Apache Corp. 1,790,000 69,810,000
- ---------------------------------------------------------------
EOG Resources, Inc. 3,200,000 66,600,000
- ---------------------------------------------------------------
Santa Fe Snyder Corp.(a) 1,750,000 15,093,750
- ---------------------------------------------------------------
151,503,750
- ---------------------------------------------------------------
PERSONAL CARE-0.23%
Estee Lauder Cos. Inc.-Class A 750,000 34,968,750
- ---------------------------------------------------------------
PUBLISHING-0.43%
McGraw-Hill Cos., Inc. (The) 1,100,000 65,587,500
- ---------------------------------------------------------------
RAILROADS-0.70%
Kansas City Southern Industries,
Inc. 2,250,000 106,734,375
- ---------------------------------------------------------------
RESTAURANTS-0.78%
Brinker International, Inc.(a) 2,000,000 46,625,000
- ---------------------------------------------------------------
Outback Steakhouse, Inc.(a) 1,750,000 40,250,000
- ---------------------------------------------------------------
Papa John's International,
Inc.(a) 851,500 31,824,813
- ---------------------------------------------------------------
118,699,813
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.58%
Lowe's Companies, Inc. 1,600,000 88,000,000
- ---------------------------------------------------------------
RETAIL (COMPUTERS &
ELECTRONICS)-2.95%
Best Buy Co., Inc.(a) 1,750,000 97,234,375
- ---------------------------------------------------------------
CDW Computer Centers, Inc.(a) 1,954,600 120,696,550
- ---------------------------------------------------------------
Circuit City Stores-Circuit City
Group 2,500,000 106,718,750
- ---------------------------------------------------------------
Tandy Corp. 2,000,000 125,875,000
- ---------------------------------------------------------------
450,524,675
- ---------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.98%
Kohl's Corp.(a) 2,000,000 149,625,000
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-1.17%
Dollar Tree Stores, Inc.(a) 1,810,600 78,874,263
- ---------------------------------------------------------------
Family Dollar Stores, Inc. 2,850,000 58,781,250
- ---------------------------------------------------------------
Ross Stores, Inc. 2,000,000 41,250,000
- ---------------------------------------------------------------
178,905,513
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.27%
Kroger Co. (The)(a) 2,000,000 41,625,000
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-2.80%
Barnes & Noble, Inc.(a) 1,153,000 23,996,813
- ---------------------------------------------------------------
Bed Bath & Beyond, Inc.(a) 2,750,100 91,612,706
- ---------------------------------------------------------------
eToys, Inc.(a) 1,169,000 69,847,750
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY)-(CONTINUED)
Linens 'n Things, Inc.(a) 1,285,300 $ 51,090,675
- ---------------------------------------------------------------
Staples, Inc.(a) 6,000,000 133,125,000
- ---------------------------------------------------------------
Williams-Sonoma, Inc.(a) 1,077,500 57,915,625
- ---------------------------------------------------------------
427,588,569
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-1.76%
American Eagle Outfitters,
Inc.(a) 808,300 34,605,344
- ---------------------------------------------------------------
Intimate Brands, Inc. 1,000,000 41,000,000
- ---------------------------------------------------------------
Men's Wearhouse, Inc. (The)(d) 2,310,075 50,677,270
- ---------------------------------------------------------------
Talbots, Inc. (The) 1,302,100 61,280,081
- ---------------------------------------------------------------
TJX Companies, Inc. (The) 3,000,000 81,375,000
- ---------------------------------------------------------------
268,937,695
- ---------------------------------------------------------------
SERVICES (ADVERTISING/
MARKETING)-3.31%
CMGI, Inc.(a) 500,000 54,718,750
- ---------------------------------------------------------------
Interpublic Group of Companies,
Inc. 1,000,000 40,625,000
- ---------------------------------------------------------------
Lamar Advertising Co.(a)(d) 3,025,000 163,350,000
- ---------------------------------------------------------------
Omnicom Group, Inc. 2,500,000 220,000,000
- ---------------------------------------------------------------
TMP Worldwide, Inc.(a) 450,000 28,096,875
- ---------------------------------------------------------------
506,790,625
- ---------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-0.91%
ChoicePoint, Inc.(a) 617,300 38,156,856
- ---------------------------------------------------------------
Cintas Corp. 1,500,000 90,375,000
- ---------------------------------------------------------------
Viad Corp. 400,500 9,837,281
- ---------------------------------------------------------------
138,369,137
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-3.02%
Affiliated Computer Services,
Inc.-Class A(a) 1,000,000 38,000,000
- ---------------------------------------------------------------
Concord EFS, Inc.(a) 6,750,000 182,671,875
- ---------------------------------------------------------------
DST Systems, Inc.(a) 750,000 47,765,625
- ---------------------------------------------------------------
Fiserv, Inc.(a) 3,750,000 120,000,000
- ---------------------------------------------------------------
Paychex, Inc. 1,875,000 73,828,125
- ---------------------------------------------------------------
462,265,625
- ---------------------------------------------------------------
SPECIALTY PRINTING-0.32%
Valassis Communications, Inc.(a) 1,125,000 48,375,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.63%
Crown Castle International
Corp.(a) 2,750,000 52,937,500
- ---------------------------------------------------------------
Metromedia Fiber Network,
Inc.-Class A(a) 1,290,000 42,650,625
- ---------------------------------------------------------------
95,588,125
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.23%
Global TeleSystems Group,
Inc.(a) 1,500,000 35,906,250
- ---------------------------------------------------------------
TELEPHONE-1.38%
CenturyTel, Inc. 2,249,925 90,981,342
- ---------------------------------------------------------------
</TABLE>
AIM CONSTELLATION FUND
FS-15
<PAGE> 438
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELEPHONE-(CONTINUED)
Cincinnati Bell, Inc.(a) 1,000,000 $ 20,812,500
- ---------------------------------------------------------------
NTL, Inc.(a) 687,500 51,820,313
- ---------------------------------------------------------------
RCN Corp.(a) 1,000,000 47,875,000
- ---------------------------------------------------------------
211,489,155
- ---------------------------------------------------------------
TEXTILES (APPAREL)-0.90%
Jones Apparel Group, Inc.(a) 2,563,800 81,080,175
- ---------------------------------------------------------------
Tommy Hilfiger Corp.(a) 2,000,000 56,500,000
- ---------------------------------------------------------------
137,580,175
- ---------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$8,597,266,374) 14,606,399,932
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION MARKET
CONTRACTS PRICE DATE VALUE
<S> <C> <C> <C> <C>
OPTIONS
PURCHASED-0.00%
COMPUTERS
(PERIPHERALS)-0.00%
EMC Corp. (Cost
$1,338,808) 5,691 $60 Dec-99 $604,669
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS-4.63%
STIC Liquid Assets Portfolio(e) 353,486,756 353,486,756
- ----------------------------------------------------------------
STIC Prime Portfolio(e) 353,486,756 353,486,756
- ----------------------------------------------------------------
Total Money Market Funds
(Cost $706,973,512) 706,973,512
- ----------------------------------------------------------------
TOTAL INVESTMENTS-100.17% 15,313,978,113
- ----------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(0.17%) (25,496,319)
- ----------------------------------------------------------------
NET ASSETS-100.00% $15,288,481,794
- ----------------------------------------------------------------
</TABLE>
Investment Abbreviation:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a)Non-income producing security.
(b)A portion of this security is subject to call options.
(c)A portion of this security is subject to put options.
(d)Affiliated issuers are those in which the Fund's holdings of an issuer
represents 5% or more of the outstanding voting securities of the issuer. The
Fund has not owned enough of the outstanding voting securities of any issuer
to have control (as defined in the Investment Company Act of 1940) of that
issuer. The aggregate market value of these securities as of 10/31/99 was
$434,847,420 which represented 2.84% of the Fund's net assets.
(e)The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
AIM CONSTELLATION FUND
FS-16
<PAGE> 439
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$9,305,578,694) $15,313,978,113
- ------------------------------------------------------------
Receivables for:
Investments sold 71,399,488
- ------------------------------------------------------------
Capital stock sold 10,526,738
- ------------------------------------------------------------
Dividends and interest 2,290,468
- ------------------------------------------------------------
Investment for deferred compensation plan 183,244
- ------------------------------------------------------------
Other assets 52,373
- ------------------------------------------------------------
Total assets 15,398,430,424
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 56,379,176
- ------------------------------------------------------------
Capital stock reacquired 30,978,770
- ------------------------------------------------------------
Deferred compensation 183,244
- ------------------------------------------------------------
Options written (premiums received
$3,848,894) 5,097,494
- ------------------------------------------------------------
Accrued advisory fees 7,461,612
- ------------------------------------------------------------
Accrued administrative services fees 70,930
- ------------------------------------------------------------
Accrued directors' fees 9,103
- ------------------------------------------------------------
Accrued distribution fees 5,519,204
- ------------------------------------------------------------
Accrued transfer agent fees 3,222,924
- ------------------------------------------------------------
Accrued operating expenses 1,026,173
- ------------------------------------------------------------
Total liabilities 109,948,630
- ------------------------------------------------------------
Net assets applicable to shares outstanding $15,288,481,794
============================================================
NET ASSETS:
Class A $14,292,905,417
============================================================
Class B $ 589,717,520
============================================================
Class C $ 161,489,815
============================================================
Institutional Class $ 244,369,042
============================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 1,000,000,000
- ------------------------------------------------------------
Outstanding 412,537,590
============================================================
Class B:
Authorized 1,000,000,000
- ------------------------------------------------------------
Outstanding 17,344,531
============================================================
Class C:
Authorized 750,000,000
- ------------------------------------------------------------
Outstanding 4,751,201
============================================================
Institutional Class:
Authorized 200,000,000
- ------------------------------------------------------------
Outstanding 6,787,086
============================================================
Class A:
Net asset value and redemption price per
share $ 34.65
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $34.65 / 94.50%) $ 36.67
============================================================
Class B:
Net asset value and offering price per
share $ 34.00
============================================================
Class C:
Net asset value and offering price per
share $ 33.99
============================================================
Institutional Class:
Net asset value, offering and redemption
price per share $ 36.01
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $242,135 foreign
withholding tax) $ 43,615,002
- ------------------------------------------------------------
Interest 42,276,941
- ------------------------------------------------------------
Total investment income 85,891,943
- ------------------------------------------------------------
EXPENSES:
Advisory fees 90,458,750
- ------------------------------------------------------------
Administrative services fees 431,120
- ------------------------------------------------------------
Custodian fees 801,999
- ------------------------------------------------------------
Directors' fees 93,740
- ------------------------------------------------------------
Distribution fees-Class A 40,983,445
- ------------------------------------------------------------
Distribution fees-Class B 4,365,731
- ------------------------------------------------------------
Distribution fees-Class C 1,175,217
- ------------------------------------------------------------
Transfer agent fees-Class A 23,308,682
- ------------------------------------------------------------
Transfer agent fees-Class B 1,540,074
- ------------------------------------------------------------
Transfer agent fees-Class C 368,612
- ------------------------------------------------------------
Transfer agent fees-Institutional Class 22,937
- ------------------------------------------------------------
Other 2,563,084
- ------------------------------------------------------------
Total expenses 166,113,391
- ------------------------------------------------------------
Less: Fees waived by advisor (3,107,849)
- ------------------------------------------------------------
Expenses paid indirectly (238,341)
- ------------------------------------------------------------
Net expenses 162,767,201
- ------------------------------------------------------------
Net investment income (loss) (76,875,258)
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES,
AND OPTION CONTRACTS:
Net realized gain from:
Investment securities 1,641,321,263
- ------------------------------------------------------------
Option contracts written 2,695,940
- ------------------------------------------------------------
1,644,017,203
- ------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 2,670,530,284
- ------------------------------------------------------------
Foreign currencies (1,219)
- ------------------------------------------------------------
Option contracts written (1,395,306)
- ------------------------------------------------------------
2,669,133,759
- ------------------------------------------------------------
Net gain from investment securities,
foreign currencies, and option
contracts 4,313,150,962
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $4,236,275,704
============================================================
</TABLE>
See Notes to Financial Statements.
AIM CONSTELLATION FUND
FS-17
<PAGE> 440
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (76,875,258) $ (68,697,946)
- -------------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, and option contracts 1,644,017,203 459,324,772
- -------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies, and option
contracts 2,669,133,759 (647,916,119)
- -------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 4,236,275,704 (257,289,293)
- -------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (337,206,115) (1,023,550,465)
- -------------------------------------------------------------------------------------------------
Class B (8,290,207) (2,750,431)
- -------------------------------------------------------------------------------------------------
Class C (2,229,567) (2,040,204)
- -------------------------------------------------------------------------------------------------
Institutional Class (5,075,580) (13,510,099)
- -------------------------------------------------------------------------------------------------
Share transactions-net:
Class A (1,783,881,252) (667,156,467)
- -------------------------------------------------------------------------------------------------
Class B 205,093,817 292,437,630
- -------------------------------------------------------------------------------------------------
Class C 55,508,352 60,444,760
- -------------------------------------------------------------------------------------------------
Institutional Class (4,793,973) 17,436,212
- -------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 2,355,401,179 (1,595,978,357)
- -------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 12,933,080,615 14,529,058,972
- -------------------------------------------------------------------------------------------------
End of period $15,288,481,794 $12,933,080,615
=================================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 7,663,956,851 $ 9,156,848,152
- -------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (551,737) (994,714)
- -------------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, and option contracts 1,617,926,281 439,210,537
- -------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, and option contracts 6,007,150,399 3,338,016,640
- -------------------------------------------------------------------------------------------------
$15,288,481,794 $12,933,080,615
=================================================================================================
</TABLE>
See Notes to Financial Statements.
AIM CONSTELLATION FUND
FS-18
<PAGE> 441
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Constellation Fund (the "Fund") is a series portfolio of AIM Equity Funds,
Inc. (the "Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of ten separate portfolios. The
Fund currently offers four different classes of shares: Class A shares, Class B
shares, Class C shares and the Institutional Class. Class A shares are sold with
a front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is growth of capital.
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 the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) 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 any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. 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 Company's officers in a
manner specifically authorized by the Board of Directors of the Company.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. For purposes of determining
net asset value per share, futures and options contracts generally will be
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities 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 the 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 they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income increased by
$77,318,235, undistributed net realized gains decreased by $112,499,990 and
paid in capital increased $35,181,755 as a result of net operating tax loss
in order to comply with the requirements of the American Institute of
Certified Public Accountants Statement of Position 93-2. Net assets of the
Fund were unaffected by the reclassification discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
D. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions. The Fund does
not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
AIM CONSTELLATION FUND
FS-19
<PAGE> 442
E. Foreign Currency Contracts -- A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
F. Covered Call Options -- The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may be
below, equal to, or above the current market value of the underlying security
at the time the option is written. When the Fund writes a covered call
option, an amount equal to the premium received by the Fund is recorded as an
asset and an equivalent liability. The amount of the liability is
subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the mean
between the last bid and asked prices on that day. If a written call option
expires on the stipulated expiration date, or if the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or a loss if the
closing purchase transaction exceeds the premium received when the option was
written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the sale
of the underlying security and the proceeds of the sale are increased by the
premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
G. Put Options -- The Fund may purchase put options. By purchasing a put option,
the Fund obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed strike price. In return for this right, the
Fund pays an option premium. The option's underlying instrument may be a
security or a futures contract. Put options may be used by the Fund to hedge
securities it owns by locking in a minimum price at which the Fund can sell.
If security prices fall, the put option could be exercised to offset all or a
portion of the Fund's resulting losses. At the same time, because the maximum
the Fund has at risk is the cost of the option, purchasing put options does
not eliminate the potential for the Fund to profit from an increase in the
value of the securities hedged.
H. Expenses -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment agreement, the
Fund pays an advisory fee to AIM at the annual rate of 1.0% of the first $30
million of the Fund's average daily net assets, plus 0.75% of the Fund's average
daily net assets in excess of $30 million to and including $150 million, plus
0.625% of the Fund's average daily net assets in excess of $150 million. AIM has
contractually agreed to waive a portion of its advisory fees paid by the Fund to
AIM to the extent necessary to reduce the fees paid by the Fund at net asset
levels higher than those currently incorporated in the present advisory fee
schedule. Under the contractual waiver, AIM will receive a fee calculated at the
annual rate of 1.0% of the first $30 million of the Fund's average daily net
assets, plus 0.75% of the Fund's average daily net assets in excess of $30
million to and including $150 million, plus 0.625% of the Fund's average daily
net assets in excess of $150 million to and including $2 billion, plus 0.60% of
the Fund's average daily net assets in excess of $2 billion. The waiver is
contractual and may not be terminated without approval of the Board of
Directors. During the year ended October 31, 1999, AIM waived fees of
$3,107,849. Under the terms of a master sub-advisory agreement between AIM and
A I M Capital Management, Inc. ("AIM Capital"), AIM pays AIM Capital 50% of the
amount paid by the Fund to AIM.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1999, AIM was
paid $431,120 for such services.
The Fund, pursuant to a transfer agency 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 Fund. During the year ended October 31, 1999, AFS
was paid $11,438,795 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares and a master distribution agreement with
Fund Management Company ("FMC) to serve as the distributor for the Institutional
Class shares of the Fund. The Company has adopted a plan pursuant to Rule 12b-1
under the 1940 Act with respect to the Fund's Class A shares, Class B shares and
Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays
AIM Distributors compensation at the annual rate of 0.30% of the Fund's average
daily net assets of Class A shares and 1.00% of the average daily net assets of
Class B and C shares. Of these amounts, the Fund may pay a service fee of
AIM CONSTELLATION FUND
FS-20
<PAGE> 443
0.25% of the average daily net assets of the Class A, Class B or Class C shares
to selected dealers and financial institutions who furnish continuing personal
shareholder services to their customers who purchase and own the appropriate
class of shares of the Fund. Any amounts not paid as a service fee under the
Plans would constitute an asset-based sales charge. The Plans also impose a cap
on the total sales charges, including asset-based sales charges that may be paid
by the respective classes. During the year ended October 31, 1999, the Class A,
Class B and Class C shares paid AIM Distributors $40,983,445, $4,365,731 and
$1,175,217, respectively, as compensation under the Plans.
AIM Distributors received commissions of $3,182,696 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1999,
AIM Distributors received $605,519 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and directors of the Company are
officers and directors of AIM, AFS, FMC and AIM Distributors.
During the year ended October 31, 1999, the Fund paid legal fees of $31,683
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$170,495 and $67,846, respectively, under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $238,341 during the year ended October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 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. During the year
ended October 31, 1999, 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 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$8,369,125,551 and $10,276,104,460, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $6,146,948,281
- ----------------------------------------------------------
Aggregate unrealized appreciation
(depreciation) of investment securities (161,712,109)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $5,985,236,172
=========================================================
Cost of investments for tax purposes is $9,328,741,941.
</TABLE>
AIM CONSTELLATION FUND
FS-21
<PAGE> 444
NOTE 7-CALL OPTION CONTRACTS
Transactions in call options written during the year ended October 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of period 1,875 $ 357,644
- -------------------------------------------------------------------------------------
Written 41,226 7,516,095
- -------------------------------------------------------------------------------------
Closed (17,190) (3,487,198)
- -------------------------------------------------------------------------------------
Expired (3,820) (537,647)
- -------------------------------------------------------------------------------------
End of period 22,091 $ 3,848,894
=====================================================================================
</TABLE>
Open call option contracts written at October 31, 1999 were as follows:
<TABLE>
<CAPTION>
OCTOBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS 1999 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
- --------------------------------------- -------- ------ --------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
EMC Corp. Jan. 00 $75 2,846 $1,162,552 $1,849,900 $ (687,348)
- -------------------------------------------------------------------------------------------------------------------
Lucent Technologies Inc. Nov. 99 65 19,245 2,686,342 3,247,594 (561,252)
- -------------------------------------------------------------------------------------------------------------------
22,091 $3,848,894 $5,097,494 $(1,248,600)
===================================================================================================================
</TABLE>
NOTE 8-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 98,564,141 $ 2,981,238,092 271,511,337 $ 7,555,171,888
- ------------------------------------------------------------------------------------------------------------------------
Class B 10,942,571 332,728,027 12,877,388 356,713,527
- ------------------------------------------------------------------------------------------------------------------------
Class C 5,133,893 156,450,704 2,960,570 81,123,332
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class 1,596,295 51,100,608 2,149,830 60,442,629
- ------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 11,320,463 318,895,308 38,633,795 977,878,833
- ------------------------------------------------------------------------------------------------------------------------
Class B 286,888 7,992,642 104,498 2,643,686
- ------------------------------------------------------------------------------------------------------------------------
Class C 75,962 2,115,494 76,723 1,938,518
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class 170,003 4,957,282 494,582 12,886,955
- ------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (167,354,090) (5,084,014,652) (330,045,727) (9,200,207,188)
- ------------------------------------------------------------------------------------------------------------------------
Class B (4,443,036) (135,626,852) (2,423,778) (66,919,583)
- ------------------------------------------------------------------------------------------------------------------------
Class C (3,390,263) (103,057,846) (842,846) (22,617,090)
- ------------------------------------------------------------------------------------------------------------------------
Institutional Class (1,915,980) (60,851,863) (1,977,243) (55,893,372)
- ------------------------------------------------------------------------------------------------------------------------
(49,013,153) $(1,528,073,056) (6,480,871) $ (296,837,865)
========================================================================================================================
</TABLE>
AIM CONSTELLATION FUND
FS-22
<PAGE> 445
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Institutional Class
capital stock outstanding during each of the years in the five-year period ended
October 31, 1999.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 27.25 $ 30.00 $ 26.01 $ 24.05 $ 18.49
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss) (0.01) -- 0.02 0.04 0.02
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 9.50 (0.65) 4.86 2.67 6.06
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations 9.49 (0.65) 4.88 2.71 6.08
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Distributions from net realized gains (0.73) (2.10) (0.89) (0.75) (0.52)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 36.01 $ 27.25 $ 30.00 $ 26.01 $ 24.05
============================================================ ======== ======== ======== ======== ========
Total return 35.46% (1.85)% 19.42% 11.81% 34.09%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $244,369 $189,039 $188,109 $293,035 $138,918
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets(a) 0.64%(b) 0.63% 0.65% 0.66% 0.66%
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income (loss) to average net
assets(c) (0.04)%(b) (0.01)% 0.06% 0.21% 0.18%
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 62% 76% 67% 58% 45%
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.66%, 0.65%, 0.67%, 0.67% and 0.68% for 1999-1995.
(b) Ratios are based on average net assets of $216,157,183.
(c) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) prior to fee waivers and/or expense reimbursements were
(0.06)%, (0.03)%, 0.04%, 0.20% and 0.16% for 1999-1995.
- --------------------------------------------------------------------------------
AIM CONSTELLATION FUND
FS-23
<PAGE> 446
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
AIM Equity Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of AIM Weingarten Fund (a portfolio of AIM
Equity Funds, Inc.), including the schedule of
investments, as of October 31, 1999, 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 financial
highlights for each of the years in the five-year period
then ended. 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 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 October 31, 1999, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM
Weingarten Fund as of October 31, 1999, 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 five-year period then ended in
conformity with generally accepted accounting principles.
/s/KPMG LLP
-----------
KPMG LLP
December 3, 1999
Houston, Texas
AIM WEINGARTEN FUND
FS-24
<PAGE> 447
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS & OTHER
EQUITY INTERESTS-94.51%
BIOTECHNOLOGY-0.32%
Amgen, Inc.(a) 386,300 $ 30,807,425
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-7.88%
AT&T Corp. - Liberty Media
Group-Class A(a) 3,300,000 130,968,750
- ---------------------------------------------------------------
Cablevision Systems Corp.-Class
A(a) 579,700 39,165,981
- ---------------------------------------------------------------
Clear Channel Communications,
Inc.(a) 2,000,000 160,750,000
- ---------------------------------------------------------------
Comcast Corp.-Class A 6,554,600 276,112,525
- ---------------------------------------------------------------
Cox Communications, Inc.-Class
A(a) 2,330,900 105,910,269
- ---------------------------------------------------------------
Infinity Broadcasting Corp.-Class
A(a) 1,274,500 44,049,906
- ---------------------------------------------------------------
756,957,431
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-9.33%
General Instrument Corp.(a) 2,822,200 151,869,637
- ---------------------------------------------------------------
JDS Uniphase Corp.(a) 250,000 41,718,750
- ---------------------------------------------------------------
Lucent Technologies Inc. 2,500,000 160,625,000
- ---------------------------------------------------------------
Motorola, Inc. 1,100,000 107,181,250
- ---------------------------------------------------------------
Nokia Oyj-ADR (Finland) 1,000,000 115,562,500
- ---------------------------------------------------------------
Nortel Networks Corp. (Canada) 3,250,000 201,296,875
- ---------------------------------------------------------------
QUALCOMM, Inc.(a) 247,700 55,175,175
- ---------------------------------------------------------------
Tellabs, Inc.(a) 988,000 62,491,000
- ---------------------------------------------------------------
895,920,187
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-6.54%
Apple Computer, Inc.(a) 1,000,000 80,125,000
- ---------------------------------------------------------------
Gateway, Inc.(a) 3,600,000 237,825,000
- ---------------------------------------------------------------
International Business Machines
Corp. 1,000,000 98,375,000
- ---------------------------------------------------------------
Sun Microsystems, Inc.(a)(b) 2,000,000 211,625,000
- ---------------------------------------------------------------
627,950,000
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-2.22%
Cisco Systems, Inc.(a)(b) 2,879,800 213,105,200
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-1.66%
EMC Corp.(a)(b) 900,000 65,700,000
- ---------------------------------------------------------------
Lexmark International Group,
Inc.-Class A(a) 1,204,400 94,018,475
- ---------------------------------------------------------------
159,718,475
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-13.02%
America Online, Inc.(a)(b) 2,000,000 259,375,000
- ---------------------------------------------------------------
BMC Software, Inc.(a) 634,800 40,746,225
- ---------------------------------------------------------------
Citrix Systems, Inc.(a) 1,581,700 101,426,512
- ---------------------------------------------------------------
Compuware Corp.(a)(b) 421,400 11,720,187
- ---------------------------------------------------------------
Intuit, Inc.(a) 1,198,200 34,897,575
- ---------------------------------------------------------------
Microsoft Corp.(a) 4,750,000 439,671,875
- ---------------------------------------------------------------
Oracle Corp.(a) 248,600 11,824,037
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
Rational Software Corp.(a) 528,600 $ 22,597,650
- ---------------------------------------------------------------
Unisys Corp.(a) 2,977,600 72,206,800
- ---------------------------------------------------------------
VERITAS Software Corp.(a)(b) 1,250,000 134,843,750
- ---------------------------------------------------------------
Yahoo! Inc.(a)(b) 675,000 120,867,188
- ---------------------------------------------------------------
1,250,176,799
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-4.42%
General Electric Co. 1,000,000 135,562,500
- ---------------------------------------------------------------
Koninklijke (Royal) Philips
Electronics N.V.-ADR
(Netherlands) 506,000 52,592,375
- ---------------------------------------------------------------
Koninklijke (Royal) Philips
Electronics N.V. (Netherlands) 948,520 97,294,320
- ---------------------------------------------------------------
Sanmina Corp.(a)(b) 1,023,000 92,133,938
- ---------------------------------------------------------------
Symbol Technologies, Inc. 1,188,000 47,223,000
- ---------------------------------------------------------------
424,806,133
- ---------------------------------------------------------------
ELECTRONICS
(INSTRUMENTATION)-0.44%
Waters Corp.(a) 800,000 42,500,000
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-5.88%
Analog Devices, Inc.(a) 1,300,000 69,062,500
- ---------------------------------------------------------------
Cypress Semiconductor Corp.(a) 2,500,000 63,906,250
- ---------------------------------------------------------------
Intel Corp.(b) 720,000 55,755,000
- ---------------------------------------------------------------
LSI Logic Corp.(a) 1,250,000 66,484,375
- ---------------------------------------------------------------
Texas Instruments, Inc. 1,700,000 152,575,000
- ---------------------------------------------------------------
Xilinx, Inc.(a) 2,000,000 157,250,000
- ---------------------------------------------------------------
565,033,125
- ---------------------------------------------------------------
ENTERTAINMENT-1.38%
Time Warner, Inc. 1,900,000 132,406,250
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-4.96%
American Express Co. 700,000 107,800,000
- ---------------------------------------------------------------
Fannie Mae 2,263,900 160,170,925
- ---------------------------------------------------------------
Freddie Mac 3,859,600 208,659,625
- ---------------------------------------------------------------
476,630,550
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-7.95%
Bristol-Myers Squibb Co. 2,500,000 192,031,250
- ---------------------------------------------------------------
Johnson & Johnson 2,785,947 291,827,948
- ---------------------------------------------------------------
Warner-Lambert Co. 3,500,000 279,343,750
- ---------------------------------------------------------------
763,202,948
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-2.73%
Pfizer, Inc. 1,076,200 42,509,900
- ---------------------------------------------------------------
Pharmacia & Upjohn, Inc. 1,500,000 80,906,250
- ---------------------------------------------------------------
Schering-Plough Corp. 2,795,700 138,387,150
- ---------------------------------------------------------------
261,803,300
- ---------------------------------------------------------------
</TABLE>
AIM WEINGARTEN FUND
FS-25
<PAGE> 448
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-2.44%
Bausch & Lomb, Inc. 412,200 $ 22,258,800
- ---------------------------------------------------------------
Guidant Corp. 4,297,100 212,169,313
- ---------------------------------------------------------------
234,428,113
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-2.18%
American International Group,
Inc. 2,030,500 209,014,594
- ---------------------------------------------------------------
LODGING-HOTELS-2.05%
Carnival Corp. 2,318,800 103,186,600
- ---------------------------------------------------------------
Royal Caribbean Cruises Ltd. 1,762,300 93,512,044
- ---------------------------------------------------------------
196,698,644
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-2.50%
Tyco International Ltd. 6,000,000 239,625,000
- ---------------------------------------------------------------
NATURAL GAS-0.48%
Enron Corp. 1,150,000 45,928,125
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-4.10%
Home Depot, Inc. (The) 3,275,000 247,262,500
- ---------------------------------------------------------------
Lowe's Companies, Inc. 2,660,000 146,300,000
- ---------------------------------------------------------------
393,562,500
- ---------------------------------------------------------------
RETAIL (COMPUTERS &
ELECTRONICS)-2.51%
Best Buy Co., Inc.(a) 1,340,000 74,453,750
- ---------------------------------------------------------------
Circuit City Stores-Circuit City
Group 1,700,000 72,568,750
- ---------------------------------------------------------------
Tandy Corp. 1,500,000 94,406,250
- ---------------------------------------------------------------
241,428,750
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.15%
Dollar Tree Stores, Inc.(a) 324,600 14,140,388
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.42%
Kroger Co. (The)(a) 1,950,000 40,584,375
- ---------------------------------------------------------------
RETAIL (GENERAL
MERCHANDISE)-3.01%
Costco Wholesale Corp.(a) 700,000 56,218,750
- ---------------------------------------------------------------
Dayton Hudson Corp. 1,405,300 90,817,513
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (GENERAL MERCHANDISE)-(CONTINUED)
Wal-Mart Stores, Inc. 2,500,000 $ 141,718,750
- ---------------------------------------------------------------
288,755,013
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-0.38%
Tiffany & Co. 609,000 36,235,500
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.65%
Gap, Inc. (The) 670,000 24,873,750
- ---------------------------------------------------------------
Intimate Brands, Inc.(c) 909,100 37,273,100
- ---------------------------------------------------------------
62,146,850
- ---------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-2.43%
Outdoor Systems, Inc.(a) 5,500,000 233,062,500
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.94%
Concord EFS, Inc.(a) 323,700 8,760,131
- ---------------------------------------------------------------
First Data Corp. 1,440,000 65,790,000
- ---------------------------------------------------------------
Fiserv, Inc.(a) 477,175 15,269,600
- ---------------------------------------------------------------
89,819,731
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-1.54%
Nextel Communications, Inc.-Class
A(a) 1,300,000 112,043,750
- ---------------------------------------------------------------
Western Wireless Corp.-Class A(a) 672,900 35,579,588
- ---------------------------------------------------------------
147,623,338
- ---------------------------------------------------------------
Total Domestic Common Stocks
& Other Equity Interests
(Cost $5,900,438,167) 9,074,071,244
- ---------------------------------------------------------------
MONEY MARKET FUNDS-6.05%
STIC Liquid Assets Portfolio(d) 290,412,117 290,412,117
- ---------------------------------------------------------------
STIC Prime Portfolio(d) 290,412,117 290,412,117
- ---------------------------------------------------------------
Total Money Market Funds
(Cost $580,824,234) 580,824,234
- ---------------------------------------------------------------
TOTAL INVESTMENTS-100.56% 9,654,895,478
- ---------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(0.56%) (54,205,007)
- ---------------------------------------------------------------
NET ASSETS-100.00% $9,600,690,471
===============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 7.
(c) Affiliated issuers are those in which the Fund's holdings of an issuer
represent 5% or more of the outstanding voting securities of the issuer. The
Fund has not owned enough of the outstanding voting securities of the issuer
to have control (as defined in the Investment Company Act of 1940) of that
issuer. The market value as of 10/31/99 represented 0.39% of the Fund's net
assets.
(d) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
AIM WEINGARTEN FUND
FS-26
<PAGE> 449
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$6,481,262,401) $9,654,895,478
- --------------------------------------------------------
Receivables for:
Investments sold 292,802,227
- --------------------------------------------------------
Capital stock sold 9,059,459
- --------------------------------------------------------
Dividends and interest 3,724,856
- --------------------------------------------------------
Investment for deferred compensation
plan 132,089
- --------------------------------------------------------
Other assets 170,438
- --------------------------------------------------------
Total assets 9,960,784,547
- --------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 200,543,565
- --------------------------------------------------------
Capital stock reacquired 11,182,096
- --------------------------------------------------------
Deferred compensation 132,089
- --------------------------------------------------------
Options written (premiums received
$116,996,621) 137,381,137
- --------------------------------------------------------
Accrued advisory fees 4,560,939
- --------------------------------------------------------
Accrued administrative services fees 33,365
- --------------------------------------------------------
Accrued directors' fees 3,745
- --------------------------------------------------------
Accrued distribution fees 4,061,117
- --------------------------------------------------------
Accrued transfer agent fees 1,100,647
- --------------------------------------------------------
Accrued operating expenses 1,095,376
- --------------------------------------------------------
Total liabilities 360,094,076
- --------------------------------------------------------
Net assets applicable to shares
outstanding $9,600,690,471
========================================================
NET ASSETS:
Class A $8,089,739,193
========================================================
Class B $1,291,455,555
========================================================
Class C $ 105,419,980
========================================================
Institutional Class $ 114,075,743
========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER
SHARE:
Class A:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 285,748,483
========================================================
Class B:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 47,327,507
========================================================
Class C:
Authorized 750,000,000
- --------------------------------------------------------
Outstanding 3,860,919
========================================================
Institutional Class:
Authorized 200,000,000
- --------------------------------------------------------
Outstanding 3,938,787
========================================================
Class A:
Net asset value and redemption price
per share $ 28.31
- --------------------------------------------------------
Offering price per share:
(Net asset value of
$28.31 / 94.50%) $ 29.96
========================================================
Class B:
Net asset value and offering price per
share $ 27.29
========================================================
Class C:
Net asset value and offering price per
share $ 27.30
========================================================
Institutional Class:
Net asset value, offering and
redemption price per share $ 28.96
========================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $491,673 foreign
withholding tax) $ 35,922,859
- ----------------------------------------------------------
Interest 20,631,177
- ----------------------------------------------------------
Total investment income 56,554,036
- ----------------------------------------------------------
EXPENSES:
Advisory fees 54,999,214
- ----------------------------------------------------------
Administrative services fees 281,500
- ----------------------------------------------------------
Custodian fees 560,875
- ----------------------------------------------------------
Directors' fees 63,384
- ----------------------------------------------------------
Distribution fees-Class A 22,561,363
- ----------------------------------------------------------
Distribution fees-Class B 10,382,904
- ----------------------------------------------------------
Distribution fees-Class C 593,913
- ----------------------------------------------------------
Transfer agent fees-Class A 8,377,262
- ----------------------------------------------------------
Transfer agent fees-Class B 2,106,122
- ----------------------------------------------------------
Transfer agent fees-Class C 144,793
- ----------------------------------------------------------
Transfer agent fees-Institutional Class 11,831
- ----------------------------------------------------------
Other 2,155,285
- ----------------------------------------------------------
Total expenses 102,238,446
- ----------------------------------------------------------
Less: Fees waived by advisor (4,288,405)
- ----------------------------------------------------------
Expenses paid indirectly (164,622)
- ----------------------------------------------------------
Net expenses 97,785,419
- ----------------------------------------------------------
Net investment income (loss) (41,231,383)
- ----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FUTURES AND OPTION
CONTRACTS:
Net realized gain (loss) from:
Investment securities 1,362,280,575
- ----------------------------------------------------------
Foreign currencies (5,296,267)
- ----------------------------------------------------------
Futures contracts 10,089,965
- ----------------------------------------------------------
Option contracts purchased (4,655,890)
- ----------------------------------------------------------
Option contracts written (109,805,107)
- ----------------------------------------------------------
1,252,613,276
- ----------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 1,465,393,764
- ----------------------------------------------------------
Foreign currencies 25,402
- ----------------------------------------------------------
Futures contracts (6,756,866)
- ----------------------------------------------------------
Option contracts purchased (3,182,585)
- ----------------------------------------------------------
Option contracts written (27,511,086)
- ----------------------------------------------------------
1,427,968,629
- ----------------------------------------------------------
Net gain from investment securities,
foreign currencies, futures and option
contracts 2,680,581,905
- ----------------------------------------------------------
Net increase in net assets resulting from
operations $2,639,350,522
==========================================================
</TABLE>
AIM WEINGARTEN FUND
FS-27
<PAGE> 450
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (41,231,383) $ 89,216
- ----------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and option contracts 1,252,613,276 514,276,104
- ----------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies, futures and option
contracts 1,427,968,629 255,708,695
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,639,350,522 770,074,015
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (3,691,627) --
- ----------------------------------------------------------------------------------------------
Institutional Class (343,112) --
- ----------------------------------------------------------------------------------------------
Distribution in excess of net investment income:
Class A (377,640)
- ----------------------------------------------------------------------------------------------
Institutional Class (5,008)
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (404,965,108) (864,947,763)
- ----------------------------------------------------------------------------------------------
Class B (49,731,739) (76,736,323)
- ----------------------------------------------------------------------------------------------
Class C (1,700,816) (626,936)
- ----------------------------------------------------------------------------------------------
Institutional Class (4,837,664) (9,231,714)
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 95,538,920 442,079,076
- ----------------------------------------------------------------------------------------------
Class B 347,953,526 240,674,117
- ----------------------------------------------------------------------------------------------
Class C 70,937,422 21,194,188
- ----------------------------------------------------------------------------------------------
Institutional Class 16,644,022 12,302,794
- ----------------------------------------------------------------------------------------------
Net increase in net assets 2,704,771,698 534,781,454
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 6,895,918,773 6,361,137,319
- ----------------------------------------------------------------------------------------------
End of period $9,600,690,471 $6,895,918,773
==============================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $5,279,351,381 $4,682,377,491
- ----------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (317,554) 4,034,739
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and option
contracts 1,168,419,727 484,238,255
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, futures and option contracts 3,153,236,917 1,725,268,288
- ----------------------------------------------------------------------------------------------
$9,600,690,471 $6,895,918,773
==============================================================================================
</TABLE>
See Notes to Financial Statements.
AIM WEINGARTEN FUND
FS-28
<PAGE> 451
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Weingarten Fund (the "Fund") is a series portfolio of AIM Equity Funds, Inc.
(the "Company"). The Company is a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of ten separate portfolios. The
Fund currently offers four different classes of shares: Class A shares, Class B
shares, Class C shares and the Institutional Class. Class A shares are sold with
a front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is growth of capital primarily by
investing in common stocks of seasoned and better-capitalized companies.
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 the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) 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 any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. 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 Company's officers in a
manner specifically authorized by the Board of Directors of the Company.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. For purposes of determining
net asset value per share, futures and options contracts generally will be
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities 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 the 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 they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. The Fund may elect to use a portion of the proceeds of
capital stock redemptions as distributions for Federal income tax purposes.
Distributions from income and net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was increased by
$41,296,477, undistributed net realized gains decreased by $107,196,477 and
paid-in capital increased by $65,900,000 as a result of differing book/tax
treatment of foreign currency transactions, equalization credits and net
operating loss reclassifications in order to comply with the requirements of
the American Institute of Certified Public Accountants Statement of Position
93-2. Net assets of the Fund were unaffected by the reclassification
discussed above.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
D. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions. The Fund does
not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
E. Foreign Currency Contracts -- A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a
AIM WEINGARTEN FUND
FS-29
<PAGE> 452
foreign currency contract to attempt to minimize the risk to the Fund from
adverse changes in the relationship between currencies. The Fund may also
enter into a foreign currency contract for the purchase or sale of a security
denominated in a foreign currency in order to "lock in" the U.S. dollar price
of that security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value of
the foreign currency changes unfavorably.
F. Futures Contracts -- The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits required
upon entering into futures contracts are satisfied by the segregation of
specific securities as collateral for the account of the broker (the Fund's
agent in acquiring the futures position). During the period the futures
contracts are open, changes in the value of the contracts are recognized as
unrealized gains or losses by "marking to market" on a daily basis to reflect
the market value of the contracts at the end of each day's trading. Variation
margin payments are made or received depending upon whether unrealized gains
or losses are incurred. When the contracts are closed, the Fund recognizes a
realized gain or loss equal to the difference between the proceeds from, or
cost of, the closing transaction and the Fund's basis in the contract. Risks
include the possibility of an illiquid market and that a change in value of
the contracts may not correlate with changes in the value of the securities
being hedged.
G. Covered Call Options -- The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may be
below, equal to, or above the current market value of the underlying security
at the time the option is written. When the Fund writes a covered call
option, an amount equal to the premium received by the Fund is recorded as an
asset and an equivalent liability. The amount of the liability is
subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the mean
between the last bid and asked prices on that day. If a written call option
expires on the stipulated expiration date, or if the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or a loss if the
closing purchase transaction exceeds the premium received when the option was
written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the sale
of the underlying security and the proceeds of the sale are increased by the
premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
H. Put Options -- The Fund may purchase put options. By purchasing a put option,
the Fund obtains the right (but not the obligation) to sell the option's
underlying instrument at a fixed strike price. In return for this right, the
Fund pays an option premium. The option's underlying instrument may be a
security or a futures contract. Put options may be used by the Fund to hedge
securities it owns by locking in a minimum price at which the Fund can sell.
If security prices fall, the put option could be exercised to offset all or a
portion of the Fund's resulting losses. At the same time, because the maximum
the Fund has at risk is the cost of the option, purchasing put options does
not eliminate the potential for the Fund to profit from an increase in the
value of the securities hedged.
I. Expenses -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.0% of
the first $30 million of the Fund's average daily net assets, plus 0.75% of the
Fund's average daily net assets in excess of $30 million to and including $350
million, plus 0.625% of the Fund's average daily net assets in excess of $350
million. AIM has contractually agreed to waive a portion of its advisory fees
payable by the Fund to AIM to the extent necessary to reduce the fees paid by
the Fund at net asset levels higher than those currently incorporated in the
present advisory fee schedule. AIM will receive a fee calculated at the annual
rate of 1.0% of the first $30 million of the Fund's average daily net assets,
plus 0.75% of the Fund's average daily net assets in excess of $30 million to
and including $350 million, plus 0.625% of the Fund's average daily net assets
in excess of $350 million to and including $2 billion, plus 0.60% of the Fund's
average daily net assets in excess of $2 billion to and including $3 billion,
plus 0.575% of the Fund's average daily net assets in excess of $3 billion to
and including $4 billion, plus 0.55% of the Fund's average daily net assets in
excess of $4 billion. The waiver is contractual and may not be terminated
without approval of the Board of Directors. During the year ended October 31,
1999, AIM waived fees of $4,288,405. Under the terms of a master sub-advisory
agreement between AIM and A I M Capital Management, Inc. ("AIM Capital"), AIM
pays AIM Capital 50% of the amount paid by the Fund to AIM.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended October 31, 1999, AIM was
paid $281,500 for such services.
AIM WEINGARTEN FUND
FS-30
<PAGE> 453
The Fund, pursuant to a transfer agency 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 Fund. During the year ended October 31, 1999, AFS
was paid $5,776,859 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares and a master distribution agreement with
Fund Management Company ("FMC) to serve as the distributor for the Institutional
Class shares of the Fund. The Company has adopted a plan pursuant to Rule 12b-1
under the 1940 Act with respect to the Fund's Class A shares, Class B shares and
Class C shares (collectively the "Plans"). The Fund, pursuant to the Plans, pays
AIM Distributors compensation at the annual rate of 0.30% of the Fund's average
daily net assets of Class A shares and 1.00% of the average daily net assets of
Class B and C shares. Of these amounts, the Fund may pay a service fee of 0.25%
of the average daily net assets of the Class A, Class B or Class C shares to
selected dealers and financial institutions who furnish continuing personal
shareholder services to their customers who purchase and own the appropriate
class of shares of the Fund. Any amounts not paid as a service fee under the
Plans would constitute an asset-based sales charge. The Plans also impose a cap
on the total sales charges, including asset-based sales charges that may be paid
by the respective classes. During the year ended October 31, 1999, the Class A,
Class B and Class C shares paid AIM Distributors $22,561,363, $10,382,904 and
$593,913, respectively, as compensation under the Plans.
AIM Distributors received commissions of $2,209,013 from sales of the Class A
shares of the Fund during the year ended October 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended October 31, 1999,
AIM Distributors received $156,642 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and directors of the Company are
officers and directors of AIM, AFS, FMC and AIM Distributors.
During the year ended October 31, 1999, the Fund paid legal fees of $20,003
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$102,746 and $61,876, respectively, under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $164,622 during the year ended October 31, 1999.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 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. During the year
ended October 31, 1999, 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 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$10,278,536,302 and $10,386,655,927, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $3,184,683,541
- ----------------------------------------------------------
Aggregate unrealized appreciation
(depreciation) of investment securities (14,585,229)
- ----------------------------------------------------------
Net unrealized appreciation of investment
securities $3,170,098,312
==========================================================
Cost of investments for tax purposes is $6,484,797,166.
</TABLE>
AIM WEINGARTEN FUND
FS-31
<PAGE> 454
NOTE 7-CALL OPTION CONTRACTS
Transactions in call options written during the year ended October 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -------------
<S> <C> <C>
Beginning of period 76,233 $ 44,508,416
- ---------------------------------------------------------------------------------------
Written 341,015 393,780,650
- ---------------------------------------------------------------------------------------
Closed (271,232) (293,502,772)
- ---------------------------------------------------------------------------------------
Exercised (46,212) (3,522,927)
- ---------------------------------------------------------------------------------------
Expired (7,902) (24,266,746)
- ---------------------------------------------------------------------------------------
End of period 91,902 $ 116,996,621
=======================================================================================
</TABLE>
Open call option contracts written at October 31, 1999 were as follows:
<TABLE>
<CAPTION>
OCTOBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS 1999 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
- -------------------------------------- -------- ------ --------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
America Online, Inc. Apr-00 $120 20,000 $ 44,712,107 $51,500,000 $ (6,787,893)
- --------------------------------------------------------------------------------------------------------------------
Cisco Systems, Inc. Jan-00 70 28,798 22,892,140 24,118,325 (1,226,185)
- --------------------------------------------------------------------------------------------------------------------
Compuware Corp. Jan-00 30 4,214 1,409,536 1,211,525 198,011
- --------------------------------------------------------------------------------------------------------------------
EMC Corp. Apr-00 70 9,000 8,164,527 11,306,250 (3,141,723)
- --------------------------------------------------------------------------------------------------------------------
Intel Corp. Apr-00 75 7,200 6,278,190 7,875,000 (1,596,810)
- --------------------------------------------------------------------------------------------------------------------
Sanmina Corp. Jan-00 85 6,230 5,665,996 7,281,312 (1,615,316)
- --------------------------------------------------------------------------------------------------------------------
Sun Microsystems, Inc. Apr-00 90 5,609 7,835,511 13,636,881 (5,801,370)
- --------------------------------------------------------------------------------------------------------------------
VERITAS Software Corp. Dec-99 95 7,530 6,471,819 13,083,375 (6,611,556)
- --------------------------------------------------------------------------------------------------------------------
Yahoo! Inc. Jan-00 175 3,321 13,566,795 7,368,469 6,198,326
- --------------------------------------------------------------------------------------------------------------------
91,902 $116,996,621 137,381,137 (20,384,516)
====================================================================================================================
</TABLE>
NOTE 8-CAPITAL STOCK
Changes in capital stock outstanding during the years ended October 31, 1999 and
1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 38,697,927 $ 994,480,979 62,788,326 $ 1,368,867,407
- ---------------------------------------------------------------------------------------------------------------------
Class B 17,982,789 456,125,945 12,056,594 257,385,548
- ---------------------------------------------------------------------------------------------------------------------
Class C 3,622,407 92,753,207 1,204,025 25,772,311
- ---------------------------------------------------------------------------------------------------------------------
Institutional Class 826,477 21,885,030 593,328 13,533,791
- ---------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 16,540,521 383,078,048 41,795,514 813,441,370
- ---------------------------------------------------------------------------------------------------------------------
Class B 2,102,927 47,274,883 3,831,332 73,061,374
- ---------------------------------------------------------------------------------------------------------------------
Class C 71,213 1,602,275 31,251 600,022
- ---------------------------------------------------------------------------------------------------------------------
Institutional Class 217,868 5,146,039 456,144 9,035,386
- ---------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (50,133,647) (1,282,020,107) (79,734,776) (1,740,229,701)
- ---------------------------------------------------------------------------------------------------------------------
Class B (6,174,366) (155,447,302) (4,228,997) (89,772,805)
- ---------------------------------------------------------------------------------------------------------------------
Class C (926,007) (23,418,060) (246,074) (5,178,145)
- ---------------------------------------------------------------------------------------------------------------------
Institutional Class (391,478) (10,387,047) (458,838) (10,266,383)
- ---------------------------------------------------------------------------------------------------------------------
22,436,631 $ 531,073,890 38,087,829 $ 716,250,175
=====================================================================================================================
</TABLE>
AIM WEINGARTEN FUND
FS-32
<PAGE> 455
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of the Institutional Class
capital stock outstanding during each of the years in the five-year period ended
October 31, 1999.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
-------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 22.18 $ 23.05 $ 20.46 $ 20.48 $ 17.94
- -------------------------------- -------- ------- -------- -------- --------
Income from investment
operations:
Net investment income 0.02 0.10 0.08 0.17 0.10
- -------------------------------- -------- ------- -------- -------- --------
Net gains on securities (both
realized and unrealized) 8.32 2.43 4.90 2.52 4.35
- -------------------------------- -------- ------- -------- -------- --------
Total from investment
operations 8.34 2.53 4.98 2.69 4.45
- -------------------------------- -------- ------- -------- -------- --------
Less distributions:
Dividends from net investment
income (0.10) -- (0.15) -- (0.13)
- -------------------------------- -------- ------- -------- -------- --------
Distributions from net
realized gains (1.46) (3.40) (2.24) (2.71) (1.78)
- -------------------------------- -------- ------- -------- -------- --------
Total distributions (1.56) (3.40) (2.39) (2.71) (1.91)
- -------------------------------- -------- ------- -------- -------- --------
Net asset value, end of period $ 28.96 $ 22.18 $ 23.05 $ 20.46 $ 20.48
================================ ======== ======= ======== ======== ========
Total return 39.20% 12.79% 27.37% 15.34% 28.69%
================================ ======== ======= ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $114,076 $72,884 $ 62,124 $ 60,483 $ 54,332
================================ ======== ======= ======== ======== ========
Ratio of expenses to average net
assets(a) 0.63%(b) 0.62% 0.64% 0.65% 0.70%
================================ ======== ======= ======== ======== ========
Ratio of net investment income
to average net assets(c) 0.02%(b) 0.49% 0.50% 0.80% 0.45%
================================ ======== ======= ======== ======== ========
Portfolio turnover rate 124% 125% 128% 159% 139%
================================ ======== ======= ======== ======== ========
</TABLE>
(a) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
0.68%, 0.67%, 0.68%, 0.68% and 0.72% for 1998-1995.
(b) Ratios are based on average net assets of $99,738,345.
(c) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were (0.03)%, 0.44%, 0.46%, 0.77% and 0.43% for 1998-1995.
AIM WEINGARTEN FUND
FS-33
<PAGE> 456
PART C: OTHER INFORMATION
Item 23 Exhibits
a (1) - (a) Articles of Incorporation of Registrant, as filed with
the State of Maryland on May 20, 1988, were filed as an
Exhibit to Post-Effective Amendment No. 34 on June 13,
1988, and were filed electronically as an Exhibit to
Post-Effective Amendment No. 47 on December 29, 1995.
- (b) Articles Supplementary, as filed with the State of
Maryland on March 27, 1991, were filed as an Exhibit to
Post-Effective Amendment No. 40 on February 26, 1992, and
were filed electronically as an Exhibit to Post-Effective
Amendment No. 47 on December 29, 1995.
- (c) Articles Supplementary, as filed with the State of
Maryland on December 23, 1991, were filed as an Exhibit to
Post-Effective Amendment No. 40 on February 26, 1992, and
were filed electronically as an Exhibit to Post-Effective
Amendment No. 47 on December 29, 1995.
- (d) Articles Supplementary, as filed with the State of
Maryland on October 8, 1993, were filed as an Exhibit to
Post-Effective Amendment No. 43 on February 28, 1994, and
were filed electronically as an Exhibit to Post-Effective
Amendment No. 47 on December 29, 1995.
- (e) Articles of Amendment, as filed with the State of
Maryland on June 5, 1995, were filed electronically as an
Exhibit to Post-Effective Amendment No. 47 on December 29,
1995.
- (f) Articles Supplementary, as filed with the State of
Maryland on June 5, 1995, were filed electronically as an
Exhibit to Post-Effective Amendment No. 47 on December 29,
1995.
- (g) Articles Supplementary, as filed with the State of
Maryland on December 19, 1995, were filed electronically as
an Exhibit to Post-Effective Amendment No. 47 on December
29, 1995.
- (h) Articles Supplementary, as filed with the State of
Maryland on June 26, 1996, were filed electronically as an
Exhibit to Post-Effective Amendment No. 50 on July 24,
1996.
- (i) Articles Supplementary, as filed with the State of
Maryland on June 24, 1997, were filed electronically as an
Exhibit to Post-Effective Amendment No. 53 on October 9,
1997.
- (j) Articles Supplementary, as filed with the State of
Maryland on October 1, 1997, were filed electronically as
an Exhibit to Post-Effective Amendment No. 53 on October 9,
1997.
- (k) Articles Supplementary, as filed with the State of
Maryland on November 24, 1998, were filed electronically as
an Exhibit to Post-Effective Amendment No. 55 on December
11, 1998.
- (l) Articles Supplementary, as filed with the State of
Maryland on December 11, 1998, were filed electronically as
an Exhibit to Post-Effective Amendment No. 56 on February
23, 1999.
- (m) Articles Supplementary, as filed with the State of
Maryland on March 15, 1999 were filed electronically as an
Exhibit to Post-Effective Amendment No. 57 on March 24,
1999.
- (n) Articles of Amendment, as filed with the State of
Maryland on July 13, 1999, were filed as an Exhibit to
Post-Effective Amendment No. 62 on January 6, 2000.
- (o) Articles Supplementary, as filed with the State of
Maryland on July 13, 1999, were filed as an Exhibit to
Post-Effective Amendment No. 62 on January 6, 2000.
C-1
<PAGE> 457
- (p) Articles Supplementary, as filed with the State of
Maryland on December 29, 1999, were filed as Exhibits to
Post-Effective Amendment No. 63 on January 7, 2000.
- (q) Articles Supplementary, as filed with the State of
Maryland on December 29, 1999, were filed as Exhibits to
Post-Effective Amendment No. 63 on January 7, 2000.
(2) - Agreement and Declaration of Trust of AIM Equity Funds,
dated December 6, 1999, is filed herewith electronically.
b (1) - By-Laws of Registrant were filed as an Exhibit to
Post-Effective Amendment No. 34 on June 13, 1988.
(2) - (a) Amended and Restated By-Laws of Registrant were filed
as an Exhibit to Post-Effective Amendment No. 37 on
February 28, 1990.
- (b) First Amendment, dated April 22, 1991, to Amended and
Restated By-Laws was filed as an Exhibit to Post-Effective
Amendment No. 40 on February 26, 1992.
- (c) Second Amendment, dated September 28, 1994, to Amended
and Restated By-Laws was filed as an Exhibit to
Post-Effective Amendment No. 44 on February 24, 1995.
(3) - (a) Amended and Restated Bylaws, dated effective December
11, 1996, were filed electronically as an Exhibit to
Post-Effective Amendment No. 51 on January 15, 1997.
- (b) First Amendment, dated June 9, 1999, to Amended and
Restated By-Laws was filed as an Exhibit to Post-Effective
Amendment No. 62 on January 6, 2000.
(4) - By-Laws of Registrant, dated effective December 6, 1999,
are filed herewith electronically.
c - Instruments Defining Rights of Security Holders - None.
d (1) - Investment Advisory Agreement, dated September 30, 1988,
between Registrant and A I M Advisors, Inc., was filed as
an Exhibit to Post-Effective Amendment No. 38 on February
28, 1991.
(2) - Investment Advisory Agreement, dated August 6, 1993,
between Registrant's AIM Aggressive Growth Fund and A I M
Advisors, Inc., was filed as an Exhibit to Post-Effective
Amendment No. 43 on February 28, 1994.
(3) - (a) Master Investment Advisory Agreement, dated October 18,
1993, between Registrant and A I M Advisors, Inc., was
filed as an Exhibit to Post-Effective Amendment No. 43 on
February 28, 1994, and was filed electronically as an
Exhibit to Post-Effective Amendment No. 47 on December 29,
1995.
- (b) Amendment No. 1, dated November 14, 1994, to the Master
Investment Advisory Agreement, dated October 18, 1993,
between Registrant and A I M Advisors, Inc., was filed as
an Exhibit to Post-Effective Amendment No. 44 on February
24, 1995, and was filed electronically as an Exhibit to
Post-Effective Amendment No. 47 on December 29, 1995.
- (c) Amendment No. 2, dated March 12, 1996, to the Master
Investment Advisory Agreement, dated October 18, 1993,
between Registrant and A I M Advisors, Inc., was filed
electronically as an Exhibit to Post-Effective Amendment
No. 49 on May 31, 1996.
C-2
<PAGE> 458
(4) - (a) Master Investment Advisory Agreement, dated February
28, 1997, between Registrant and A I M Advisors, Inc. was
filed electronically as an Exhibit to Post-Effective
Amendment No. 53 on October 9, 1997, and is hereby
incorporated by reference.
- (b) Amendment No. 1, dated as of March 1, 1999, to the
Master Investment Advisory Agreement, dated February 28,
1997, between Registrant and A I M Advisors, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment
No. 56 on February 23, 1999, and is hereby incorporated by
reference.
- (c) Amendment No. 2, dated May 12, 1999, to the Master
Investment Advisory Agreement between Registrant and A I M
Advisors, Inc. was filed electronically as an Exhibit to
Post-Effective Amendment No. 60 on July 15, 1999, and is
hereby incorporated by reference.
- (d) Amendment No. 3, dated July 15, 1999, to the Master
Investment Advisory Agreement between Registrant and A I M
Advisors, Inc. was filed as an Exhibit to Post-Effective
Amendment No. 62 on January 6, 2000, and is hereby
incorporated by reference.
- (e) Amendment No. 4, dated September 28, 1999, to the
Master Investment Advisory Agreement between Registrant and
A I M Advisors, Inc. was filed as an Exhibit to
Post-Effective Amendment No. 62 on January 6, 2000, and is
hereby incorporated by reference.
(5) - Form of Advisory Agreement between Registrant and A I M
Advisors, Inc. is filed herewith electronically.
(6) - (a) Foreign Country Selection and Mandatory Securities
Depository Responsibilities Delegation Agreement, dated
September 9, 1998, between Registrant and A I M Advisors,
Inc. was filed electronically as an Exhibit to
Post-Effective Amendment No. 55 on December 11, 1998, and
is hereby incorporated by reference.
- (b) Amendment No. 1, dated September 28, 1998, to Foreign
Country Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement, dated September 9,
1998, between Registrant and A I M Advisors, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment
No. 55 on December 11, 1998, and is hereby incorporated by
reference.
- (c) Amendment No. 2, dated as of December 14, 1998, to
Foreign Country Selection and Mandatory Securities
Depository Responsibilities Delegation Agreement, dated
September 9, 1998, between Registrant and A I M Advisors,
Inc. was filed electronically as an Exhibit to
Post-Effective Amendment No. 57 on March 24, 1999, and is
hereby incorporated by reference.
- (d) Amendment No. 3, dated as of December 22, 1998, to
Foreign Country Selection and Mandatory Securities
Depository Responsibilities Delegation Agreement, dated
September 9, 1998, between Registrant and A I M Advisors,
Inc. was filed electronically as an Exhibit to
Post-Effective Amendment No. 57 on March 24, 1999, and is
hereby incorporated by reference.
- (e) Amendment No. 4, dated as of January 26, 1999, to
Foreign Country Selection and Mandatory Securities
Depository Responsibilities Delegation Agreement, dated
September 9, 1998, between Registrant and A I M Advisors,
Inc. was filed electronically as an Exhibit to
Post-Effective Amendment No. 57 on March 24, 1999, and is
hereby incorporated by reference.
- (f) Amendment No. 5, dated as of March 1, 1999, to Foreign
Country Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement, dated September 9,
1998,
C-3
<PAGE> 459
between Registrant and A I M Advisors, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment
No. 57 on March 24, 1999, and is hereby incorporated by
reference.
- (g) Amendment No. 6, dated as of March 18, 1999, to Foreign
Country Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement, dated September 9,
1998, between Registrant and A I M Advisors, Inc. was filed
as an Exhibit to Post-Effective Amendment No. 62 on January
6, 2000, and is hereby incorporated by reference.
- (h) Amendment No. 7, dated as of November 15, 1999, to
Foreign Country Selection and Mandatory Securities
Depository Responsibilities Delegation Agreement, dated
September 9, 1998, between Registrant and A I M Advisors,
Inc. was filed as an Exhibit to Post-Effective Amendment
No. 62 on January 6, 2000, and is hereby incorporated by
reference.
(7) - Sub-Advisory Agreement, dated September 30, 1988, between
Registrant, A I M Advisors, Inc. and A I M Capital
Management, Inc., was filed as an Exhibit to Post-Effective
Amendment No. 38 on February 28, 1991.
(8) - Master Sub-Advisory Agreement, dated October 18, 1993,
between Registrant, A I M Advisors, Inc. and A I M Capital
Management, Inc., was filed as an Exhibit to Post-Effective
Amendment No. 43 on February 28, 1994, and was filed
electronically as an Exhibit to Post-Effective Amendment
No. 51 on January 15, 1997.
(9) - Master Sub-Advisory Agreement, dated February 28, 1997,
between Registrant, A I M Advisors, Inc. and A I M Capital
Management, Inc. was filed electronically as an Exhibit to
Post-Effective Amendment No. 53 on October 9, 1997, and is
hereby incorporated by reference.
(10) - Sub-Advisory Agreement dated May 12, 1999, between A I M
Advisors, Inc. and H. S. Dent Advisors, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment
No. 60 on July 15, 1999, and is hereby incorporated by
reference.
e (1) - Distribution Agreement, dated May 24, 1988, between
Registrant and A I M Distributors, Inc., was filed as an
Exhibit to Post-Effective Amendment No. 38 on February 28,
1991.
(2) - Distribution Agreement, dated March 15, 1991, between
Registrant and Fund Management Company, was filed as an
Exhibit to Post-Effective Amendment No. 39 on March 1,
1991.
(3) - Distribution Agreement, dated August 6, 1993, between
Registrant's AIM Aggressive Growth Fund and A I M
Distributors, Inc., was filed as an Exhibit to
Post-Effective Amendment No. 43 on February 28, 1994.
(4) - Master Distribution Agreement, dated October 18, 1993,
between Registrant and Fund Management Company, was filed
as an Exhibit to Post-Effective Amendment No. 43 on
February 28, 1994.
(5) - (a) Master Distribution Agreement, dated October 18, 1993,
between Registrant (on behalf of the portfolio's Class A
shares) and A I M Distributors, Inc., was filed as an
Exhibit to Post-Effective Amendment No. 43 on February 28,
1994, and was filed electronically as an Exhibit to
Post-Effective Amendment No. 47 on December 29, 1995.
- (b) Amendment No. 1, dated December 4, 1995, to Master
Distribution Agreement, dated October 18, 1993, between
Registrant (on behalf of the portfolio's Class A shares)
and A I M Distributors, Inc., was filed electronically as
an Exhibit to Post-Effective Amendment No. 49 on May 31,
1996.
C-4
<PAGE> 460
(6) - (a) Master Distribution Agreement, dated June 14, 1995,
between Registrant (on behalf of the portfolio's Class B
shares) and A I M Distributors, Inc., was filed
electronically as an Exhibit to Post-Effective Amendment
No. 47 on December 29, 1995.
- (b) Amendment No. 1, dated June 11, 1996, to Master
Distribution Agreement, dated June 14, 1995, between
Registrant (on behalf of the portfolio's Class B shares)
and A I M Distributors, Inc., was filed electronically as
an Exhibit to Post-Effective Amendment No. 50 on July 24,
1996, and was filed electronically as an Exhibit to
Post-Effective Amendment No. 53 on October 9, 1997.
(7) - Master Distribution Agreement, dated February 28, 1997,
between Registrant and Fund Management Company was filed
electronically as an Exhibit to Post-Effective Amendment
No. 53 on October 9, 1997, and is hereby incorporated by
reference.
(8) - Master Distribution Agreement, dated February 28, 1997,
between Registrant (on behalf of Registrant's Class A
shares) and A I M Distributors, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment
No. 53 on October 9, 1997.
(9) - (a) Master Distribution Agreement, dated August 4, 1997,
between Registrant (on behalf of the portfolio's Class A
and Class C shares) and A I M Distributors, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment
No. 53 on October 9, 1997, and is hereby incorporated by
reference.
- (b) Amendment No. 1, dated as of March 1, 1999, to the
Master Distribution Agreement dated August 4, 1997, between
Registrant (on behalf of Registrant's Class A and Class C
shares) and A I M Distributors, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment
No. 56 on February 23, 1999, and is hereby incorporated by
reference.
- (c) Amendment No. 2, dated as of March 1, 1999, to the
Master Distribution Agreement dated August 4, 1997, between
Registrant (on behalf of Registrant's Class A and Class C
shares) and A I M Distributors, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment
No. 56 on February 23, 1999, and is hereby incorporated by
reference.
- (d) Amendment No. 3, dated May 12, 1999, to the Master
Distribution Agreement, dated August 4, 1997, between
Registrant (on behalf of Registrant's Class A and C shares)
and A I M Distributors, Inc. was filed electronically as an
Exhibit to Post-Effective Amendment No. 60 on July 15,
1999, and is hereby incorporated by reference.
- (e) Amendment No. 4, dated July 15, 1999, to the Master
Distribution Agreement, dated August 4, 1997, between
Registrant (on behalf of Registrant's Class A and Class C
shares) and A I M Distributors, Inc. was filed as an
Exhibit to Post-Effective Amendment No. 62 on January 6,
2000, and is hereby incorporated by reference.
- (f) Amendment No. 5, dated September 28, 1999, to the
Master Distribution Agreement, dated August 4, 1997,
between Registrant (on behalf of Registrant's Class A and
Class C shares) and A I M Distributors, Inc. was filed as
an Exhibit to Post-Effective Amendment No. 62 on January 6,
2000, and is hereby incorporated by reference.
- (g) Form of Amendment No. 6 to the Master Distribution
Agreement between Registrant and A I M Distributors, Inc.
was filed as an Exhibit to Post-Effective Amendment No. 63
on January 7, 2000, and is hereby incorporated by
reference.
(10) - (a) Master Distribution Agreement, dated February 28, 1997,
between Registrant (on behalf of Registrant's Class B
shares) and A I M Distributors, Inc. was filed
electronically as an
C-5
<PAGE> 461
Exhibit to Post-Effective Amendment No. 53 on October 9,
1997, and is hereby incorporated by reference.
- (b) Amendment No. 1 to the Master Distribution Agreement,
dated February 28, 1997, between Registrant (on behalf of
the Class B shares of AIM Constellation Fund) and A I M
Distributors, Inc. was filed electronically as an Exhibit
to Post-Effective Amendment No. 54 on February 27, 1998,
and is hereby incorporated by reference.
- (c) Amendment No. 2, dated as of March 1, 1999, to the
Master Distribution Agreement, dated February 28, 1997,
between Registrant (on behalf of Registrant's Class B
shares) and A I M Distributors, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment
No. 56 on February 23, 1999 and is hereby incorporated by
reference.
- (d) Amendment No. 3, dated as of March 1, 1999, to the
Master Distribution Agreement, dated February 28, 1997,
between Registrant (on behalf of Registrant's Class B
shares) and A I M Distributors, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment
No. 56 on February 23, 1999, and is hereby incorporated by
reference.
- (e) Amendment No. 4, dated May 12, 1999, to the Master
Distribution Agreement, dated February 28, 1997, between
Registrant (on behalf of Registrant's Class B shares) and
A I M Distributors, Inc. was filed electronically as an
Exhibit to Post-Effective Amendment No. 60 on July 15,
1999, and is hereby incorporated by reference.
- (f) Amendment No. 5, dated July 15, 1999, to the Master
Distribution Agreement, dated February 28, 1997, between
Registrant (on behalf of Registrant's Class B shares) and
A I M Distributors, Inc. was filed as an Exhibit to
Post-Effective Amendment No. 62 on January 6, 2000, and is
hereby incorporated by reference.
- (g) Amendment No. 6, dated September 28, 1999, to the
Master Distribution Agreement, dated February 28, 1997,
between Registrant (on behalf of Registrant's Class B
shares) and A I M Distributors, Inc. was filed as an
Exhibit to Post-Effective Amendment No. 62 on January 6,
2000, and is hereby incorporated by reference.
- (h) Form of Amendment No. 7 to the Master Distribution
Agreement between Registrant (on behalf of Registrant's
Class B shares) and A I M Distributors, Inc. was filed as
an Exhibit to Post-Effective Amendment No. 63 on January 7,
2000, and is hereby incorporated by reference.
(11) - Form of Selected Dealer Agreement between A I M
Distributors, Inc. and selected dealers was filed
electronically as an Exhibit to Post-Effective Amendment
No. 55 on December 11, 1998, and is hereby incorporated by
reference.
(12) - Form of Bank Selling Group Agreement between A I M
Distributors, Inc. and banks was filed electronically as an
Exhibit to Post-Effective Amendment No. 55 on December 11,
1998, and is hereby incorporated by reference.
f (1) - Form of Deferred Compensation Agreement for Registrant's
Non-Affiliated Directors was filed as an Exhibit to
Post-Effective Amendment No. 44 on February 24, 1995.
(2) - Form of Deferred Compensation Agreement for Registrant's
Non-Affiliated Directors, as approved December 5, 1995, was
filed electronically as an Exhibit to Post-Effective
Amendment No. 47 on December 29, 1995.
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<PAGE> 462
(3) - Form of Deferred Compensation Agreement for Registrants
Non-Affiliated Directors as approved March 12, 1997, was
filed electronically as an Exhibit to Post-Effective
Amendment No. 54 on February 27, 1998, and is hereby
incorporated by reference.
(4) - Retirement Plan for Registrant's Non-Affiliated Directors
was filed as an Exhibit to Post-Effective Amendment No. 44
on February 24, 1995.
(5) - Retirement Plan for Registrant's Non-Affiliated Directors,
effective as of March 8, 1994, as restated September 18,
1995, was filed electronically as an Exhibit to
Post-Effective Amendment No. 47 on December 29, 1995, and
is hereby incorporated by reference.
g (1) - (a) Custodian Contract, dated October 1, 1992, between
Registrant and State Street Bank and Trust Company, was
filed as an Exhibit to Post-Effective Amendment No. 41 on
February 26, 1993, and was filed electronically as an
Exhibit to Post-Effective Amendment No. 47 on December 29,
1995, and is hereby incorporated by reference.
- (b) Amendment No. 1, dated October 15, 1993, to the
Custodian Contract, dated October 1, 1992, between
Registrant and State Street Bank and Trust Company, was
filed electronically as an Exhibit to Post-Effective
Amendment No. 47 on December 29, 1995, and is hereby
incorporated by reference.
- (c) Amendment No. 2, dated September 19, 1995, to the
Custodian Contract, dated October 1, 1992, between
Registrant and State Street Bank and Trust Company, was
filed electronically as an Exhibit to Post-Effective
Amendment No. 47 on December 29, 1995, and is hereby
incorporated by reference.
- (d) Amendment No. 3, dated December 4, 1995, to the
Custodian Contract, dated October 1, 1992, between
Registrant and State Street Bank and Trust Company, was
filed electronically as an Exhibit to Post-Effective
Amendment No. 49 on May 31, 1996, and is hereby
incorporated by reference.
- (e) Amendment No. 4, dated September 28, 1996, to the
Custodian Contract dated October 1, 1992, between
Registrant and State Street Bank and Trust Company was
filed electronically as an Exhibit to Post-Effective
Amendment No. 57 on March 24, 1999, and is hereby
incorporated by reference.
- (f) Amendment, dated September 9, 1998, to the Custodian
Contract, dated October 1, 1992, between Registrant and
State Street Bank and Trust Company was filed
electronically as an Exhibit to Post-Effective Amendment
No. 55 on December 11, 1998, and is hereby incorporated by
reference.
(2) - (a) Subcustodian Agreement, dated September 9, 1994,
between Registrant, Texas Commerce Bank National
Association, State Street Bank and Trust Company and A I M
Fund Services, Inc., was filed as an Exhibit to
Post-Effective Amendment No. 44 on February 24, 1995, and
is hereby incorporated by reference.
- (b) Amendment No. 1, dated October 2, 1998, to Subcustodian
Agreement between Registrant, Chase Bank of Texas, N.A.
(formerly Texas Commerce Bank), State Street and Trust
Company and A I M Fund Services, Inc. was filed as an
Exhibit to Post-Effective Amendment No. 62 on January 6,
2000, and is hereby incorporated by reference.
h (1) - Transfer Agency Agreement, dated May 15, 1989, between
Registrant and TAC Shareholder Services, Inc., was filed as
an Exhibit to Post-Effective Amendment No. 37 on February
28, 1990.
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(2) - Transfer Agency and Service Agreement, dated July 6, 1992,
between State Street Bank and Trust Company and Registrant,
with respect to the Institutional Classes, was filed as an
Exhibit to Post-Effective Amendment No. 41 on February 26,
1993.
(3) - (a) Transfer Agency and Registrar Agreement, dated May 15,
1992, as amended May 15, 1992, between The Shareholder
Services Group, Inc. and Registrant, with respect to the
Retail Classes, was filed as an Exhibit to Post-Effective
Amendment No. 41 on February 26, 1993.
- (b) Amendment No. 2, dated October 15, 1993, to the
Transfer Agency and Registrar Agreement, dated May 15,
1992, as amended, between Registrant and The Shareholder
Services Group, Inc., was filed as an Exhibit to
Post-Effective Amendment No. 44 on February 24, 1995.
- (c) Amendment No. 3, dated April 1, 1994, to the Transfer
Agency and Registrar Agreement, dated May 15, 1992, as
amended, between Registrant and The Shareholder Services
Group, Inc., was filed as an Exhibit to Post-Effective
Amendment No. 44 on February 24, 1995.
(4) - (a) Transfer Agency and Service Agreement, dated July 1,
1995, between Registrant and A I M Institutional Fund
Services, Inc., was filed electronically as an Exhibit to
Post-Effective Amendment No. 47 on December 29, 1995.
- (b) Amendment No. 1, dated July 1, 1996, to the Transfer
Agency and Service Agreement dated July 1, 1995, between
Registrant and A I M Institutional Fund Services, Inc. was
filed electronically as an Exhibit to Post-Effective
Amendment No. 53 on October 9, 1997.
- (c) Amendment No. 2, dated July 1, 1997, to the Transfer
Agency and Service Agreement dated July 1, 1995, between
Registrant and A I M Institutional Fund Services, Inc. was
filed electronically as an Exhibit to Post-Effective
Amendment No. 53 on October 9, 1997.
(5) - (a) Transfer Agency and Service Agreement, dated November
1, 1994, between Registrant and A I M Fund Services, Inc.,
was filed as an Exhibit to Post-Effective Amendment No. 44
on February 24, 1995.
- (b) Amendment No. 1, dated August 4, 1997, to the Transfer
Agency and Service Agreement dated November 1, 1994,
between Registrant and A I M Fund Services, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment
No. 53 on October 9, 1997.
(6) - (a) Amended and Restated Transfer Agency and Service
Agreement, dated as of December 29, 1997, between
Registrant and A I M Fund Services, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment
No. 54 on February 27, 1998, and is hereby incorporated by
reference.
- (b) Amendment No. 1, dated January 1, 1999, to the Amended
and Restated Transfer Agency and Services Agreement between
Registrant and A I M Fund Services, Inc. was filed as an
Exhibit to Post-Effective Amendment No. 62 on January 6,
2000, and is hereby incorporated by reference.
- (c) Amendment No. 2, dated July 1, 1999, to the Amended and
Restated Transfer Agency and Services Agreement between
Registrant and A I M Fund Services, Inc. was filed as an
Exhibit to Post-Effective Amendment No. 62 on January 6,
2000, and is hereby incorporated by reference.
(7) - Shareholder Sub-Accounting Services Agreement between
Registrant, First Data Investor Services Group (formerly
The Shareholder Services Group, Inc.), Financial Data
Services Inc.
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<PAGE> 464
and Merrill Lynch, Pierce, Fenner & Smith Inc., dated July
1, 1990, was filed as an Exhibit to Post-Effective
Amendment No. 40 on February 26, 1992, and is hereby
incorporated by reference.
(8) - (a) Remote Access and Related Services Agreement, dated
December 23, 1994, between Registrant and First Data
Investor Services Group, Inc. (formerly The Shareholder
Services Group, Inc.), was filed as an Exhibit to
Post-Effective Amendment No. 44 on February 24, 1995, and
was filed electronically as an Exhibit to Post-Effective
Amendment No. 47 on December 29, 1995, and is hereby
incorporated by reference.
- (b) Amendment No. 1, dated October 4, 1995, to the Remote
Access and Related Services Agreement dated December 23,
1994, between Registrant and First Data Investor Services
Group, Inc. was filed electronically as an Exhibit to
Post-Effective Amendment No. 47 on December 29, 1995, and
is hereby incorporated by reference.
- (c) Addendum No. 2, dated October 12, 1995, to the Remote
Access and Related Services Agreement, dated December 23,
1994, between Registrant and First Data Investor Services
Group, Inc. was filed electronically as an Exhibit to
Post-Effective Amendment No. 47 on December 29, 1995, and
is hereby incorporated by reference.
- (d) Amendment No. 3, dated February 1, 1997, to the Remote
Access and Related Services Agreement, dated December 23,
1994, between Registrant and First Data Investor Services
Group, Inc. was filed electronically as an Exhibit to
Post-Effective Amendment No. 53 on October 9, 1997, and is
hereby incorporated by reference.
- (e) Amendment No. 4, dated June 30, 1998, to the Remote
Access and Related Services Agreement, dated December 23,
1994, between Registrant and First Data Investor Services
Group, Inc. was filed electronically as an Exhibit to
Post-Effective Amendment No. 55 on December 11, 1998, and
is hereby incorporated by reference.
- (f) Amendment No. 5, dated July 1, 1998, to the Remote
Access and Related Services Agreement, dated December 23,
1994, between Registrant and First Data Investor Services
Group, Inc. was filed electronically as an Exhibit to
Post-Effective Amendment No. 55 on December 11, 1998, and
is hereby incorporated by reference.
- (g) Exhibit 1, effective as of August 4, 1997, to the
Remote Access and Related Services Agreement, dated
December 23, 1994, between the Registrant and First Data
Investor Services Group, Inc. was filed electronically as
an Exhibit to Post-Effective Amendment No. 54 on February
27, 1998, and is hereby incorporated by reference.
- (h) Amendment No. 6, dated August 30, 1999, to the Remote
Access and Related Services Agreement, dated December 23,
1994, between Registrant and First Data Investor Services
Group, Inc. was filed as an Exhibit to Post-Effective
Amendment No. 62 on January 6, 2000, and is hereby
incorporated by reference.
(9) - Preferred Registered Technology Escrow Agreement, dated
September 10, 1997, between Registrant and First Data
Investor Services Group, Inc. was filed electronically as
an Exhibit to Post-Effective Amendment No. 54 on February
27, 1998, and is hereby incorporated by reference.
(10) - Articles of Merger, dated September 30, 1988, was filed as
an Exhibit to Post-Effective Amendment No. 35 on September
30, 1988.
(11) - Agreement and Plan of Merger, dated September 30, 1988, was
filed as an Exhibit to Post-Effective Amendment No. 35 on
September 30, 1988.
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(12) - (a) Agreement and Plan of Reorganization between Registrant
and Baird Capital Development Fund, Inc., dated December
20, 1995, was filed electronically as an Appendix to Part A
of Registrant's AIM Capital Development Fund registration
statement on Form N-14 on December 29, 1995.
- (b) Amendment, dated May 23, 1996, to Agreement and Plan of
Reorganization between Registrant and Baird Capital
Development Fund, Inc., dated December 20, 1995, was filed
electronically as an Exhibit to Post-Effective Amendment
No. 49 on May 31, 1996.
(13) - Agreement and Plan of Reorganization between Registrant and
Baird Blue Chip Fund, Inc., dated December 20, 1995, was
filed electronically as an Appendix to Part A of
Registrant's AIM Blue Chip Fund registration statement on
Form N-14 on December 29, 1995.
(14) - Administrative Services Agreement, dated June 11, 1989,
between Registrant and A I M Advisors, Inc., was filed as
an Exhibit to Post-Effective Amendment No. 37 on February
28, 1990.
(15) - Administrative Services Agreement, dated August 6, 1993,
between Registrant's AIM Aggressive Growth Fund and A I M
Advisors, Inc., was filed as an Exhibit to Post-Effective
Amendment No. 43 on February 28, 1994.
(16) - Administrative Services Agreement, dated September 16,
1994, between A I M Advisors, Inc. and A I M Institutional
Fund Services, Inc., on behalf of the Institutional
Classes, was filed as an Exhibit to Post-Effective
Amendment No. 44 on February 24, 1995.
(17) - (a) Administrative Services Agreement, dated October 18,
1993, between A I M Advisors, Inc. and A I M Fund Services,
Inc., on behalf of the Retail Classes, was filed as an
Exhibit to Post-Effective Amendment No. 43 on February 28,
1994, and was filed electronically as an Exhibit to
Post-Effective Amendment No. 47 on December 29, 1995.
- (b) Amendment No. 1, dated May 11, 1994, to the
Administrative Services Agreement dated October 18, 1993,
between A I M Advisors, Inc. and A I M Fund Services, Inc.,
was filed as an Exhibit to Post-Effective Amendment No. 44
on February 24, 1995, and was filed electronically as an
Exhibit to Post-Effective Amendment No. 47 on December 29,
1995.
- (c) Amendment No. 2, dated July 1, 1994, to the
Administrative Services Agreement, dated October 18, 1993,
between A I M Advisors, Inc. and A I M Fund Services, Inc.,
was filed as an Exhibit to Post-Effective Amendment No. 44
on February 24, 1995 and was filed electronically as an
Exhibit to Post-Effective Amendment No. 47 on December 29,
1995.
- (d) Amendment No. 3, dated September 16, 1994, to the
Administrative Services Agreement, dated October 18, 1993,
between A I M Advisors, Inc. and A I M Fund Services, Inc.,
was filed as an Exhibit to Post-Effective Amendment No. 44
on February 24, 1995, and was filed electronically as an
Exhibit to Post-Effective Amendment No. 47 on December 29,
1995.
- (e) Amendment No. 4, dated November 1, 1994, to the
Administrative Services Agreement, dated October 18, 1993,
between A I M Advisors, Inc. and A I M Fund Services, Inc.,
was filed electronically as an Exhibit to Post-Effective
Amendment No. 47 on December 29, 1995.
(18) - (a) Master Administrative Services Agreement, dated October
18, 1993, between Registrant and A I M Advisors, Inc., was
filed as an Exhibit to Post-Effective Amendment No. 43 on
February 28, 1994, and was filed electronically as an
Exhibit to Post-Effective Amendment No. 47 on December 29,
1995.
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<PAGE> 466
- (b) Amendment No. 1, dated December 4, 1995, to the Master
Administrative Services Agreement, dated October 18, 1993,
between Registrant and A I M Advisors, Inc., was filed
electronically as an Exhibit to Post-Effective Amendment
No. 49 on May 31, 1996.
- (c) Amendment No. 2, dated June 11, 1996, to the Master
Administrative Services Agreement dated October 18, 1993,
between Registrant and A I M Advisors, Inc., was filed
electronically as an Exhibit to Post-Effective Amendment
No. 50 on July 24, 1996.
(19) - (a) Master Administrative Services Agreement, dated
February 28, 1997, between Registrant and A I M Advisors,
Inc. was filed electronically as an Exhibit to
Post-Effective Amendment No. 53 on October 9, 1997, and is
hereby incorporated by reference.
- (b) Amendment No. 1, dated as of March 1, 1999, to the
Master Administrative Services Agreement, dated February
28, 1997, between Registrant and A I M Advisors, Inc. was
filed electronically as an Exhibit to Post-Effective
Amendment No. 56 on February 23, 1999, and is hereby
incorporated by reference.
- (c) Amendment No. 2 , dated May 12, 1999, to the Master
Administrative Services Agreement, dated February 28, 1997,
between Registrant and A I M Advisors, Inc. was filed
electronically as an Exhibit to Post-Effective Amendment
No. 60 on July 15, 1999, and is hereby incorporated by
reference.
- (d) Amendment No. 3 to the Master Administrative Services
Agreement, dated February 28, 1997, between Registrant and
A I M Advisors, Inc. was filed as an Exhibit to
Post-Effective Amendment No. 62 on January 6, 2000, and is
hereby incorporated by reference.
- (e) Amendment No. 4, to the Master Administrative Services
Agreement, dated February 28, 1997, between Registrant and
A I M Advisors, Inc. was filed as an Exhibit to
Post-Effective Amendment No. 62 on January 6, 2000, and is
hereby incorporated by reference.
(20) - (a) Memorandum of Agreement, dated March 1, 1999, between
Registrant, on behalf of AIM Charter Fund, AIM
Constellation Fund and AIM Weingarten Fund, and A I M
Advisors, Inc. was filed electronically as an Exhibit to
Post-Effective Amendment No. 60 on July 15, 1999, and is
hereby incorporated by reference.
- (b) Memorandum of Agreement, dated June 7, 1999, between
Registrant, on behalf of AIM Large Cap Basic Value Fund,
and A I M Advisors, Inc. was filed as an Exhibit to
Post-Effective Amendment No. 62 on January 6, 2000, and is
hereby incorporated by reference.
- (c) Form of Memorandum of Agreement between Registrant, on
behalf of AIM Large Cap Growth Fund, and A I M Advisors,
Inc. was filed as an Exhibit to Post-Effective Amendment
No. 63 on January 7, 2000, and is hereby incorporated by
reference.
(21) - Agreement and Plan of Reorganization, dated December 30,
1999, between AIM Equity Funds, Inc., a Maryland
Corporation, and AIM Equity Funds, a Delaware business
trust is filed herewith electronically.
i (1) - Opinion of Ballard Spahr Andrews & Ingersoll was filed as
an Exhibit to Registrant's Rule 24f-2 Notice for the fiscal
year ending October 31, 1996 on December 20, 1996.
(2) - Opinion of Ballard Spahr Andrews & Ingersoll was filed as
an Exhibit to Registrant's Rule 24f-2 Notice for the fiscal
year ending September 30, 1996 on November 27, 1996 (for
AIM Blue Chip Fund).
(3) - Opinion and Consent of Ballard Spahr Andrews & Ingersoll,
LLP is filed herewith electronically.
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<PAGE> 467
j (1) - Consent of Ballard Spahr Andrews & Ingersoll, LLP included
as part of i(3).
(2) - Consent of KPMG LLP is filed herewith electronically.
k - Financial Statements - None.
l (1) - Agreement Concerning Initial Capitalization of Registrant's
AIM Large Cap Growth Fund, dated February 26, 1999, was
filed electronically as an Exhibit to Post-Effective
Amendment No. 56 on February 23, 1999, and is hereby
incorporated by reference.
(2) - Agreement Concerning Initial Capitalization of Registrant's
AIM Dent Demographic Trends Fund, dated June 4, 1999, was
filed electronically as an Exhibit to Post-Effective
Amendment No. 60 on July 15, 1999, and is hereby
incorporated by reference.
(3) - Agreement Concerning Initial Capitalization of Registrant's
AIM Large Cap Basic Value Fund, dated June 29, 1999, was
filed electronically as an Exhibit to Post-Effective
Amendment No. 60 on July 15, 1999, and is hereby
incorporated by reference.
(4) - Agreement Concerning Initial Capitalization of Registrant's
AIM Mid Cap Growth Fund, dated November 1, 1999, was filed
as an Exhibit to Post-Effective Amendment No. 62 on January
6, 2000, and is hereby incorporated by reference.
(5) - Form of Agreement Concerning Initial Capitalization of
Registrant's AIM Emerging Growth Fund was filed as an
Exhibit to Post-Effective Amendment No. 63 on January 7,
2000, and is hereby incorporated by reference.
m (1) - Registrant's Amended Distribution Plans for the Retail
Classes, dated September 5, 1991, were filed as an Exhibit
to Post-Effective Amendment No. 40 on February 26, 1992.
(2) - Registrant's Amended Distribution Plan for AIM Aggressive
Growth Fund, dated August 6, 1993, was filed as an Exhibit
to Post-Effective Amendment No. 43 on February 28, 1994.
(3) - Registrant's Master Distribution Plan for the Retail
Classes and AIM Aggressive Growth Fund, dated September 27,
1993, was filed as an Exhibit to Post-Effective Amendment
No. 43 on February 28, 1994.
(4) - Registrant's Amended Master Distribution Plan for the
Retail Classes and AIM Aggressive Growth Fund, dated
September 27, 1993, as amended March 8, 1994, was filed as
an Exhibit to Post-Effective Amendment No. 44 on February
24, 1995.
(5) - (a) Registrant's Amended Master Distribution Plan for the
Retail Classes, dated September 27, 1993, as amended March
8, 1994 and September 10, 1994, was filed as an Exhibit to
Post-Effective Amendment No. 44 on February 24, 1995, and
was filed electronically as an Exhibit to Post-Effective
Amendment No. 47 on December 29, 1995.
- (b) Amendment No. 1, dated December 4, 1995, to the Amended
Master Distribution Plan for the Retail Classes, dated
September 27, 1993, as amended, was filed electronically as
an Exhibit to Post-Effective Amendment No. 49 on May 31,
1996.
(6) - Registrant's Amended and Restated Master Distribution Plan
for the Class A shares, effective as of June 15, 1995
(effective as of December 4, 1995, with respect to the AIM
Blue Chip Fund and AIM Capital Development Fund), was filed
electronically as an Exhibit to Post-Effective Amendment
No. 49 on May 31, 1996.
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<PAGE> 468
(7) - Registrant's Second Amended and Restated Master
Distribution Plan, dated June 30, 1997, for the Class A
shares was filed electronically as an Exhibit to
Post-Effective Amendment No. 53 on October 9, 1997.
(8) - Registrant's Third Amended and Restated Master Distribution
Plan, dated August 4, 1997, for the Class A and Class C
shares was filed electronically as an Exhibit to
Post-Effective Amendment No. 53 on October 9, 1997.
(9) - (a) Registrant's Master Distribution Plan for the Class B
shares of AIM Charter Fund and AIM Weingarten Fund, dated
June 14, 1995, was filed electronically as an Exhibit to
Post-Effective Amendment No. 47 on December 29, 1995.
- (b) Amendment No. 1, dated June 11, 1996, to Registrant's
Master Distribution Plan for the Class B shares of AIM
Charter Fund, AIM Weingarten Fund, AIM Blue Chip Fund and
AIM Capital Development Fund, dated June 14, 1995, was
filed electronically as an Exhibit to Post-Effective
Amendment No. 50 on July 24, 1996.
(10) - (a) Registrant's Amended and Restated Master Distribution
Plan, dated June 30, 1997, for the Class B shares was filed
electronically as an Exhibit to Post-Effective Amendment
No. 53 on October 9, 1997, and is hereby incorporated by
reference.
- (b) Amendment No. 1 to Registrant's Amended and Restated
Master Distribution Plan for the Class B shares of AIM
Constellation Fund was filed electronically as an Exhibit
to Post-Effective Amendment No. 54 on February 27, 1998 and
is hereby incorporated by reference.
- (c) Amendment No. 2, dated as of March 1, 1999, to
Registrant's Amended and Restated Master Distribution Plan
for the Class B shares of AIM Large Cap Growth Fund was
filed electronically as an Exhibit to Post-Effective
Amendment No. 56 on February 23, 1999, and is hereby
incorporated by reference.
- (d) Amendment No. 3, dated as of March 1, 1999, to
Registrant's Amended and Restated Master Distribution Plan
for the Class B shares of AIM Aggressive Growth Fund was
filed electronically as an Exhibit to Post-Effective
Amendment No. 56 on February 23, 1999, and is hereby
incorporated by reference.
- (e) Amendment No. 4, dated May 12, 1999, to Registrant's
Amended and Restated Master Distribution Plan for the Class
B shares of AIM Dent Demographic Trends Fund and AIM Growth
and Income Fund was filed electronically as an Exhibit to
Post-Effective Amendment No. 60 on July 15, 1999, and is
hereby incorporated by reference.
- (f) Amendment No. 5, dated July 15, 1999, to Registrant's
Amended and Restated Master Distribution Plan for the Class
B shares of AIM Large Cap Basic Value Fund was filed as an
Exhibit to Post-Effective Amendment No. 62 on January 6,
2000, and is hereby incorporated by reference.
- (g) Amendment No. 6, dated September 28, 1999, to
Registrant's Amended and Restated Master Distribution Plan
for the Class B shares of AIM Mid Cap Growth Fund was filed
as an Exhibit to Post-Effective Amendment No. 62 on January
6, 2000, and is hereby incorporated by reference.
- (h) Form of Amendment No. 7 to Registrant's Amended and
Restated Master Distribution Plan for the Class B shares of
AIM Emerging Growth Fund was filed as an Exhibit to
Post-Effective Amendment No. 63 on January 7, 2000, and is
hereby incorporated by reference.
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<PAGE> 469
(11) - (a) Registrant's Fourth Amended and Restated Master
Distribution Plan, dated as of June 30, 1998, for the Class
A and Class C shares was filed electronically as an Exhibit
to Post-Effective Amendment No. 55 on December 11, 1998,
and is hereby incorporated by reference.
- (b) Amendment No. 1, dated as of March 1, 1999, to
Registrant's Fourth Amended and Restated Master
Distribution Plan for the Class A and Class C shares was
filed electronically as an Exhibit to Post-Effective
Amendment No. 56 on February 23, 1999, and is hereby
incorporated by reference.
- (c) Amendment No. 2, dated as of March 1, 1999, to
Registrant's Fourth Amended and Restated Master
Distribution Plan for the Class A and Class C shares was
filed electronically as an Exhibit to Post-Effective
Amendment No. 56 on February 23, 1999, and is hereby
incorporated by reference.
- (d) Amendment No. 3, dated May 12, 1999, to Registrant's
Fourth Amended and Restated Master Distribution Plan for
Class A and Class C shares was filed electronically as an
Exhibit to Post-Effective Amendment No. 60 on July 15,
1999, and is hereby incorporated by reference.
- (e) Amendment No. 4, dated July 15, 1999, to Registrant's
Fourth Amended and Restated Master Distribution Plan for
the Class A and Class C shares of AIM Large Cap Basic Value
Fund was filed as an Exhibit to Post-Effective Amendment
No. 62 on January 6, 2000, and is hereby incorporated by
reference.
- (f) Amendment No. 5, dated September 28, 1999, to
Registrant's Fourth Amended and Restated Master
Distribution Plan for Class A and Class C shares was filed
as an Exhibit to Post-Effective Amendment No. 62 on January
6, 2000, and is hereby incorporated by reference.
- (g) Form of Amendment No. 6 to Registrant's Fourth Amended
and Restated Master Distribution Plan for Class A and Class
C shares was filed as an Exhibit to Post-Effective
Amendment No. 63 on January 7, 2000, and is hereby
incorporated by reference.
(12) - Form of Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution Plan was
filed electronically as an Exhibit to Post-Effective
Amendment No. 60 on July 15, 1999, and is hereby
incorporated by reference.
(13) - Form of Bank Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution Plan was
filed electronically as an Exhibit to Post-Effective
Amendment No. 60 on July 15, 1999, and is hereby
incorporated by reference.
(14) - Form of Variable Group Annuity Contract Holder Service
Agreement to be used in connection with Registrant's Master
Distribution Plan was filed electronically as an Exhibit to
Post-Effective Amendment No. 60 on July 15, 1999, and is
hereby incorporated by reference.
(15) - Form of Agency Pricing Agreement to be used in connection
with Registrant's Master Distribution Plan was filed
electronically as an Exhibit to Post-Effective Amendment
No. 60 on July 15, 1999, and is hereby incorporated by
reference.
(16) - Forms of Service Agreement for Brokers for Bank Trust
Departments and for Bank Trust Departments was filed
electronically as an Exhibit to Post-Effective Amendment
No. 60 on July 15, 1999, and is hereby incorporated by
reference.
n (1) - Multiple Class Plan (Rule 18f-3) was filed electronically
as an Exhibit to Post-Effective Amendment No. 46 on June 6,
1995.
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<PAGE> 470
(2) - (a) Amended Multiple Class Plan (Rule 18f-3), as amended
December 4, 1995, was filed electronically as an Exhibit to
Post-Effective Amendment No. 47 on December 29, 1995.
- (b) Amendment No. 1, dated June 11, 1996, to the Multiple
Class Plan (Rule 18f-3), dated December 4, 1995 was filed
electronically as an Exhibit to Post-Effective Amendment
No. 50 on July 24, 1996.
(3) - Multiple Class Plan (Rule 18f-3) (effective September 27,
1996) was filed as an Exhibit to Post-Effective Amendment
No. 51 on January 15, 1997.
(4) - Amended and Restated Multiple Class Plan (Rule 18f-3)
(effective July 1, 1997) was filed electronically as an
Exhibit to Post-Effective Amendment No. 53 on October 9,
1997.
(5) - Second Amended and Restated Multiple Class Plan (Rule
18f-3) (effective September 1, 1997) was filed
electronically as an Exhibit to Post-Effective Amendment
No. 53 on October 9, 1997, and is hereby incorporated by
reference.
(6) - Third Amended and Restated Multiple Class Plan (Rule 18f-3)
(effective August 5, 1999) were filed as an Exhibit to
Post-Effective Amendment No. 62 on January 6, 2000, and are
hereby incorporated by reference.
o (1) - The AIM Management Group Code of Ethics, as amended August
17, 1999, relating to AIM Management Group Inc. and A I M
Advisors, Inc. were filed as an Exhibit to Post-Effective
Amendment No. 62 on January 6, 2000, and are hereby
incorporated by reference.
(2) - Code of Ethics of AIM Equity Funds, Inc., effective as of
January 1, 1989, was filed as an Exhibit to Post-Effective
Amendment No. 62 on January 6, 2000, and is hereby
incorporated by reference.
Item 24. Persons Controlled by or Under Common Control With Registrant
Provide a list or diagram of all persons directly or indirectly controlled
by or under common control with the Registrant. For any person controlled by
another person, disclose the percentage of voting securities owned by the
immediately controlling person or other basis of that person's control. For
each company, also provide the state or other sovereign power under the laws of
which the company is organized.
None.
Item 25. Indemnification
State the general effect of any contract, arrangement or statute
under which any director, officer, underwriter or affiliated person of the
Registrant is insured or indemnified against any liability incurred in their
official capacity, other than insurance provided by any director, officer,
affiliated person, or underwriter for their own protection.
The Registrant's Agreement and Declaration of Trust, dated December
6, 1999, provides, among other things (i) that trustees and officers
of the Registrant, when acting as such, shall not be personally
liable for any act, omission or obligation of the Registrant or any
trustee or officer (except for liabilities to the Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard to duty); (ii) for the
indemnification by the Registrant of the trustees, officers,
employees and agents of the Registrant to the fullest extent
permitted by the Delaware Business Trust Act and Bylaws and other
applicable law; (iii) that shareholders of the Registrant shall not
be personally liable for the debts, liabilities, obligations or
expenses of the Registrant or any portfolio or class; and (iv) for
the indemnification by the Registrant, out of the assets belonging
to the applicable
C-15
<PAGE> 471
portfolio, of shareholders and former shareholders of the Registrant
in case they are held personally liable solely by reason of being or
having been shareholders of the Registrant or any portfolio or class
and not because of their acts or omissions or for some other reason.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1940
Act and is, therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a trustee, officer
or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such trustee,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
1940 Act and will be governed by the final adjudication of such
issue. Insurance coverage is provided under a joint Mutual Fund &
Investment Advisory Professional and Directors & Officers Liability
Policy, issued by ICI Mutual Insurance Company, with a $35,000,000
limit of liability.
Item 26. Business and Other Connections of Investment Advisor
Describe any other business, profession, vocation or employment of a
substantial nature that each investment advisor and each director, officer or
partner of the advisor, is or has been, engaged within the last two fiscal
years, for his or her own account or in the capacity of director, officer,
employee, partner, or trustee.
The only employment of a substantial nature of the Advisor's
directors and officers is with the Advisor and its affiliated
companies. Reference is also made to the caption "Fund
Management-The Advisor" of the Prospectus which comprises Part A of
the Registration Statement, and to the caption "Management" of the
Statement of Additional Information which comprises Part B of the
Registration Statement, and to Item 27(b) of this Part C.
Item 27. Principal Underwriters
(a) State the name of each investment company (other than the Registrant) for
which each principal underwriter currently distributing the Registrant's
securities also acts as a principal underwriter, depositor, or investment
advisor.
A I M Distributors, Inc., the Registrant's principal underwriter
of its Retail Classes, also acts as a principal underwriter to the
following investment companies:
AIM Advisor Funds, Inc.
AIM Funds Group
AIM Growth Series
AIM International Mutual Funds
AIM Investment Funds
AIM Investment Securities Funds - Retail Classes
AIM Series Trust
AIM Special Opportunities Funds
AIM Summit Fund, Inc.
AIM Tax-Exempt Funds
AIM Variable Insurance Funds
AIM Floating Rate Fund
C-16
<PAGE> 472
Fund Management Company, the Registrant's principal underwriter of
its Institutional Classes, also acts as a principal underwriter to
the following investment companies:
AIM Investment Securities Funds - Institutional Class
Short-Term Investments Co.
Short-Term Investments Trust
Tax-Free Investments Co.
(b) Provide the information required by the following tables for each director,
officer or partner of each principal underwriter named in response to Item 20:
A I M Distributors, Inc.:
<TABLE>
<CAPTION>
Name and Principal Position and Offices with Positions and Offices
- ------------------ ------------------------- ---------------------
Business Address* Underwriter with Registrant
- ----------------- ----------- ---------------
<S> <C> <C>
Charles T. Bauer Chairman of the Board of Directors Chairman of the Board
of Directors
Michael J. Cemo President & Director None
Gary T. Crum Director Senior Vice President
Robert H. Graham Senior Vice President & Director President & Director
W. Gary Littlepage Senior Vice President & Director None
James L. Salners Executive Vice President None
John Caldwell Senior Vice President None
Marilyn M. Miller Senior Vice President None
Gene L. Needles Senior Vice President None
Gordon J. Sprague Senior Vice President None
Michael C. Vessels Senior Vice President None
B.J. Thompson First Vice President None
Ofelia M. Mayo Vice President, General Counsel Assistant Secretary
& Assistant Secretary
James R. Anderson Vice President None
Dawn M. Hawley Vice President & Treasurer None
Mary K. Coleman Vice President None
Mary A. Corcoran Vice President None
Melville B. Cox Vice President & Chief Compliance Vice President
Officer
Glenda A. Dayton Vice President None
Sidney M. Dilgren Vice President None
Tony D. Green Vice President None
Charles H. McLaughlin Vice President None
Ivy B. McLemore Vice President None
Terri L. Ransdell Vice President None
Carol F. Relihan Vice President Senior Vice President &
Secretary
Kamala C. Sachidanandan Vice President None
Frank V. Serebrin Vice President None
Christopher T. Simutis Vice President None
Gary K. Wendler Vice President None
Norman W. Woodson Vice President None
Kathleen J. Pflueger Secretary Assistant Secretary
Luke P. Beausoleil Assistant Vice President None
</TABLE>
- ----------------------------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-17
<PAGE> 473
<TABLE>
<CAPTION>
Name and Principal Position and Offices with Positions and Offices
- ------------------ ------------------------- ---------------------
Business Address* Underwriter with Registrant
- ----------------- ----------- ---------------
<S> <C> <C>
Sheila R. Brown Assistant Vice President None
Scott E. Burman Assistant Vice President None
Tisha B. Christopher Assistant Vice President None
Mary E. Gentempo Assistant Vice President None
David E. Hessel Assistant Vice President, Controller None
& Assistant Treasurer
Simon R. Hoyle Assistant Vice President None
Kathryn A. Jordan Assistant Vice President None
Kim T. McAuliffe Assistant Vice President None
David B. O'Neil Assistant Vice President None
Rebecca Starling-Klatt Assistant Vice President None
Nicholas D. White Assistant Vice President None
Nancy L. Martin Assistant General Counsel & Assistant Secretary
Assistant Secretary
Samuel D. Sirko Assistant General Counsel & Assistant Secretary
Assistant Secretary
P. Michelle Grace Assistant Secretary Assistant Secretary
Lisa A. Moss Assistant Secretary Assistant Secretary
Stephen I. Winer Assistant Secretary Assistant Secretary
</TABLE>
Fund Management Company:
<TABLE>
<CAPTION>
Name and Principal Position and Offices with Positions and Offices
- ------------------ ------------------------- ---------------------
Business Address* Underwriter with Registrant
- ---------------- ----------- ---------------
<S> <C> <C>
Charles T. Bauer Chairman of the Board of Directors Chairman of the Board
of Directors
J. Abbott Sprague President & Director None
Robert H. Graham Senior Vice President & Director President & Director
Mark D. Santero Senior Vice President None
William J. Wendel Senior Vice President None
Dawn M. Hawley Vice President & Treasurer None
Carol F. Relihan Vice President, General Senior Vice President &
Counsel & Director Secretary
James R. Anderson Vice President None
Lisa A. Moss Vice President, Assistant General Assistant Secretary
Counsel & Assistant Secretary
Melville B. Cox Vice President & Chief Compliance Vice President
Officer
Stephen I. Winer Vice President, Assistant Assistant Secretary
General Counsel & Assistant
Secretary
Kathleen J. Pflueger Secretary Assistant Secretary
Dana R. Sutton Assistant Vice President & Vice President &
Assistant Treasurer Treasurer
Robert W. Morris, Jr. Assistant Vice President None
Ann M. Srubar Assistant Vice President None
Rebecca Starling-Klatt Assistant Vice President None
Nicholas D. White Assistant Vice President None
</TABLE>
- ----------------------------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-18
<PAGE> 474
<TABLE>
<CAPTION>
Name and Principal Position and Offices with Positions and Offices
- ------------------ ------------------------- ---------------------
Business Address* Underwriter with Registrant
- ---------------- ----------- ---------------
<S> <C> <C>
David E. Hessel Assistant Vice President, Controller None
& Assistant Treasurer
Jeffrey L. Horne Assistant Vice President None
Nancy L. Martin Assistant General Counsel & Assistant Secretary
Assistant Secretary
Ofelia M. Mayo Assistant General Counsel & Assistant Secretary
Assistant Secretary
Samuel D. Sirko Assistant General Counsel & Assistant Secretary
Assistant Secretary
P. Michelle Grace Assistant Secretary Assistant Secretary
</TABLE>
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
(c) Provide the information required by the following table for all commissions
and other compensation received, directly or indirectly, from the Registrant
during the last fiscal year by each principal underwriter who is not an
affiliated person of the Registrant or any affiliated person of an affiliated
person:
None.
Item 28. Location of Accounts and Records
State the name and address of each person maintaining physical
possession of each account, book, or other document required to be maintained
by section 31(a) [15 U.S.C. 80a-30(a)] and the rules under that section.
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas
77046-1173, will maintain physical possession of each such account,
book or other document of the Registrant at its principal executive
offices, except for those maintained by the Registrant's Custodian,
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, and the Registrant's Transfer Agent and Dividend
Paying Agent, A I M Fund Services, Inc., P. O. Box 4739, Houston,
Texas 77210-4739.
Item 29. Management Services
Provide a summary of the substantive provisions of any
management-related service contract not discussed in Part A or B, disclosing
the parties to the contract and the total amount paid and by whom for the
Registrant's last three fiscal years.
None.
Item 30. Undertakings
In initial registration statements filed under the Securities Act,
provide an undertaking to file an amendment to the registration statement with
certified financial statements showing the initial capital received before
accepting subscriptions from more than 25 persons if the Registrant intends to
raise its initial capital under section 14(a)(3) [15 U.S.C. 80a-14(a)(3)].
Not applicable.
C-19
<PAGE> 475
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Houston, Texas on the 27th day of
March, 2000.
REGISTRANT: AIM EQUITY FUNDS
By: /s/ ROBERT H. GRAHAM
--------------------------------
Robert H. Graham, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
<TABLE>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ CHARLES T. BAUER Chairman & Trustee March 27, 2000
-------------------------------
(Charles T. Bauer)
/s/ ROBERT H. GRAHAM
------------------------------- Trustee & President March 27, 2000
(Robert H. Graham) (Principal Executive Officer)
/s/ BRUCE L. CROCKETT Trustee March 27, 2000
-------------------------------
(Bruce L. Crockett)
/s/ OWEN DALY II Trustee March 27, 2000
-------------------------------
(Owen Daly II)
/s/ EDWARD K. DUNN, JR. Trustee March 27, 2000
-------------------------------
(Edward K. Dunn, Jr.)
/s/ JACK FIELDS Trustee March 27, 2000
-------------------------------
(Jack Fields)
/s/ CARL FRISCHLING Trustee March 27, 2000
-------------------------------
(Carl Frischling)
/s/ PREMA MATHAI DAVIS Trustee March 27, 2000
-------------------------------
(Prema Mathai-Davis)
/s/ LEWIS F. PENNOCK Trustee March 27, 2000
-------------------------------
(Lewis F. Pennock)
/s/ LOUIS S. SKLAR Trustee March 27, 2000
-------------------------------
(Louis S. Sklar)
/s/ DANA R. SUTTON Vice President &
------------------------------- Treasurer (Principal Financial March 27, 2000
(Dana R. Sutton) and Accounting Officer)
</TABLE>
<PAGE> 476
INDEX TO EXHIBITS
AIM EQUITY FUNDS
Exhibit
Number Description
- ------- -----------
a(2) Agreement and Declaration of Trust of AIM Equity Funds,
dated December 6, 1999
b(4) By-Laws of Registrant, dated effective December 6, 1999
d(5) Form of Advisory Agreement between Registrant and
A I M Advisors, Inc.
h(21) Agreement and Plan of Reorganization, dated December 30, 1999,
between AIM Equity Funds, Inc., a Maryland Corporation, and
AIM Equity Funds, a Delaware business trust
i(7) Opinion and Consent of Ballard Spahr Andrews & Ingersoll, LLP
j(2) Consent of KPMG LLP
<PAGE> 1
EXHIBIT a(2)
AGREEMENT AND DECLARATION OF TRUST
OF
AIM EQUITY FUNDS
THIS AGREEMENT AND DECLARATION OF TRUST of AIM Equity Funds, dated December 6,
1999, is among Charles T. Bauer and Robert H. Graham as Trustees, and each
person who becomes a Shareholder in accordance with the terms hereinafter set
forth.
NOW, THEREFORE, the Trustees do hereby declare that all money and property
contributed to the trust hereunder shall be held and managed in trust under this
Agreement for the benefit of the Shareholders as herein set forth below.
ARTICLE I
NAME, DEFINITIONS, PURPOSE AND CERTIFICATE OF TRUST
SECTION 1.1. Name. The name of the business trust established hereby is AIM
Equity Funds, and the Trustees may transact the Trust's affairs in that name.
The Trust shall constitute a Delaware business trust in accordance with the
Delaware Act.
SECTION 1.2. Definitions. Whenever used herein, unless otherwise required by
the context or specifically provided:
(a) "Affiliated Person," "Company," "Person," and "Principal
Underwriter" shall have the meanings given them in the 1940 Act, as
modified by or interpreted by any applicable order or orders of the
Commission or any rules or regulations adopted or interpretive releases of
the Commission thereunder. The term "Commission" shall have the meaning
given it in the 1940 Act;
(b) "Agreement" means this Agreement and Declaration of Trust, as it may
be amended from time to time;
(c) "allocable" has the meaning specified in Section 2.5(d);
(d) "allocated" has the meaning specified in Section 2.5(d);
(e) "Bylaws" means the Bylaws referred to in Section 4.1(e), as from
time to time amended;
(f) "Class" means a portion of Shares of a Portfolio of the Trust
established in accordance with the provisions of Section 2.3(b);
(g) "Class Expenses" means expenses incurred by a particular Class in
connection with a shareholder services arrangement or a distribution plan
that is specific to such Class or any other differing share of expenses or
differing fees, in each case pursuant to or to the extent permitted by Rule
18f-3 under the 1940 Act.
(h) "Covered Persons" means a person who is or was a Trustee, officer,
employee or agent of the Trust, or is or was serving at the request of the
Trustees as a director, trustee, partner, officer, employee or agent of a
corporation, trust, partnership, joint venture or other enterprise.
(i) The "Delaware Act" refers to the Delaware Business Trust Act, 12
Del. C. sec. 3801 et seq., as such Act may be amended from time to time;
(j) "Governing Instrument" means collectively this Agreement, the
Bylaws, all amendments to this Agreement and the Bylaws and every
resolution of the Trustees or any committee of the Trustees that by its
terms is incorporated by reference into this Agreement or stated to
constitute part of the Trust's Governing Instrument or that is incorporated
herein by Section 2.3 of this Agreement;
(k) "Majority Shareholder Vote" means "the vote of a majority of the
outstanding voting securities" (as defined in the 1940 Act) of the Trust,
Portfolio, or Class, as applicable;
(l) "Majority Trustee Vote" means the vote of a majority of the
Trustees.
(m) "New Class A Shares" has the meaning specified in Section 2.6(c);
(n) "New Class B Shares" has the meaning specified in Section 2.6(c);
(o) The "1940 Act" means the Investment Company Act of 1940, as amended
from time to time;
(p) "Outstanding Shares" means Shares shown on the books of the Trust or
its transfer agent as then issued and outstanding, and includes Shares of
one Portfolio that the Trust has purchased on behalf of another Portfolio,
but excludes Shares of a Portfolio that the Trust has redeemed or
repurchased;
(q) "Portfolio" means a series of Shares of the Trust established in
accordance with the provisions of Section 2.3(a);
1
<PAGE> 2
(r) "Proportionate Interest" has the meaning specified in Section
2.5(d);
(s) "Purchasing Portfolio" has the meaning specified in Section 2.10;
(t) "Schedule A" has the meaning specified in Section 2.3(a);
(u) "Selling Portfolio" has the meaning specified in Section 2.10;
(v) "Shareholder" means a record owner of Outstanding Shares of the
Trust;
(w) "Shares" means, as to a Portfolio or any Class thereof, the equal
proportionate transferable units of beneficial interest into which the
beneficial interest of such Portfolio of the Trust or such Class thereof
shall be divided and may include fractions of Shares as well as whole
Shares;
(x) The "Trust" means AIM Equity Funds, the Delaware business trust
established hereby, and reference to the Trust, when applicable to one or
more Portfolios, shall refer to each such Portfolio;
(y) The "Trustees" means the Persons who have signed this Agreement as
trustees so long as they shall continue to serve as trustees of the Trust
in accordance with the terms hereof, and all other Persons who may from
time to time be duly appointed as Trustee in accordance with the provisions
of Section 3.4, or elected as Trustee by the Shareholders, and reference
herein to a Trustee or to the Trustees shall refer to such Persons in their
capacity as Trustees hereunder; and
(z) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or any Portfolio, or by the Trustees on behalf of the Trust.
SECTION 1.3. Purpose. The purpose of the Trust is to conduct, operate and
carry on the business of an open-end management investment company registered
under the 1940 Act through one or more Portfolios investing primarily in
securities and to carry on such other business as the Trustees may from time to
time determine pursuant to their authority under this Agreement.
SECTION 1.4. Certificate of Trust. Immediately upon the execution of this
Agreement, the Trustees shall file a Certificate of Trust with respect to the
Trust in the Office of the Secretary of State of the State of Delaware pursuant
to the Delaware Act.
ARTICLE II
BENEFICIAL INTEREST
SECTION 2.1. Shares of Beneficial Interest. The beneficial interest in the
Trust shall be divided into an unlimited number of Shares, with par value of
$0.001 per Share. The Trustees may, from time to time, (a) authorize the
division of the Shares into one or more series, each of which constitutes a
Portfolio, and (b) may further authorize the division of the Shares of any
Portfolio into one or more separate and distinct Classes. All Shares issued
hereunder, including without limitation, Shares issued in connection with a
dividend or other distribution in Shares or a split or reverse split of Shares,
shall be fully paid and nonassessable.
SECTION 2.2. Issuance of Shares. The Trustees in their discretion may, from
time to time, without vote of the Shareholders, issue Shares, in addition to the
then issued and Outstanding Shares, to such party or parties and for such amount
and type of consideration, subject to applicable law, including cash or
securities, at such time or times and on such terms as the Trustees may deem
appropriate, and may in such manner acquire other assets (including the
acquisition of assets subject to, and in connection with, the assumption of
liabilities) and businesses. In connection with any issuance of Shares, the
Trustees may issue fractional Shares. The Trustees may from time to time divide
or combine the Shares into a greater or lesser number without thereby changing
the proportionate beneficial interests in the Trust. Contributions to the Trust
may be accepted for, and Shares shall be redeemed as, whole Shares and/or
1/1,000th of a Share or integral multiples thereof.
SECTION 2.3. Establishment of Portfolios and Classes.
(a) The Trust shall consist of one or more separate and distinct
Portfolios, each with an unlimited number of Shares unless otherwise
specified. The Trustees hereby establish and designate the Portfolios
listed on Schedule A attached hereto and made a part hereof ("Schedule A").
Each additional Portfolio shall be established by the adoption of a
resolution by the Trustees. Each such resolution is hereby incorporated
herein by this reference and made a part of the Trust's Governing
Instrument whether or not expressly stated in such resolution, and shall be
effective upon the occurrence of both (i) the date stated therein (or, if
no such date is stated, upon the date of such adoption) and (ii) the
execution of an amendment either to this Agreement or to Schedule A hereto
establishing and designating such additional Portfolio or Portfolios. The
Shares of each Portfolio shall have the relative rights and preferences
provided for herein and such rights and preferences as may be designated by
the Trustees in any amendment or modification to the Trust's Governing
Instrument. The Trust shall maintain separate and distinct records of each
Portfolio and shall
2
<PAGE> 3
hold and account for the assets belonging thereto separately from the other
Trust Property and the assets belonging to any other Portfolio. Each Share
of a Portfolio shall represent an equal beneficial interest in the net
assets belonging to that Portfolio, except to the extent of Class Expenses
and other expenses separately allocated to Classes thereof (if any Classes
have been established) as permitted herein.
(b) The Trustees may establish one or more Classes of Shares of any
Portfolio, each with an unlimited number of Shares unless otherwise
specified. Each Class so established and designated shall represent a
Proportionate Interest (as defined in Section 2.5(d)) in the net assets
belonging to that Portfolio and shall have identical voting, dividend,
liquidation, and other rights and be subject to the same terms and
conditions, except that (1) Class Expenses allocated to a Class for which
such expenses were incurred shall be borne solely by that Class, (2) other
expenses, costs, charges, and reserves allocated to a Class in accordance
with Section 2.5(e) may be borne solely by that Class, (3) dividends
declared and payable to a Class pursuant to Section 7.1 shall reflect the
items separately allocated thereto pursuant to the preceding clauses, (4)
each Class may have separate rights to convert to another Class, exchange
rights, and similar rights, each as determined by the Trustees, and (5)
subject to Section 2.6(c), each Class may have exclusive voting rights with
respect to matters affecting only that Class. The Trustees hereby establish
for each Portfolio listed on Schedule A the Classes listed thereon. Each
additional Class for any or all Portfolios shall be established by the
adoption of a resolution by the Trustees, each of which is hereby
incorporated herein by this reference and made a Governing Instrument
whether or not expressly stated in such resolution, and shall be effective
upon the occurrence of both (i) the date stated therein (or, if no such
date is stated, upon the date of such adoption) and (ii) the execution of
an amendment to this Agreement establishing and designating such additional
Class or Classes.
SECTION 2.4. Actions Affecting Portfolios and Classes. Subject to the right of
Shareholders, if any, to vote pursuant to Section 6.1, the Trustees shall have
full power and authority, in their sole discretion without obtaining any prior
authorization or vote of the Shareholders of any Portfolio, or Class thereof, to
establish and designate and to change in any manner any Portfolio of Shares, or
any Class or Classes thereof; to fix or change such preferences, voting powers,
rights, and privileges of any Portfolio, or Classes thereof, as the Trustees may
from time to time determine, including any change that may adversely affect a
Shareholder; to divide or combine the Shares of any Portfolio, or Classes
thereof, into a greater or lesser number; to classify or reclassify or convert
any issued Shares of any Portfolio, or Classes thereof, into one or more
Portfolios or Classes of Shares of a Portfolio; and to take such other action
with respect to the Shares as the Trustees may deem desirable. A Portfolio and
any Class thereof may issue any number of Shares but need not issue any Shares.
At any time that there are no Outstanding Shares of any particular Portfolio or
Class previously established and designated, the Trustees may abolish that
Portfolio or Class and the establishment and designation thereof.
SECTION 2.5. Relative Rights and Preferences. Unless the establishing
resolution or any other resolution adopted pursuant to Section 2.3 otherwise
provides, Shares of each Portfolio or Class thereof established hereunder shall
have the following relative rights and preferences:
(a) Except as set forth in paragraph (e) of this Section 2.5, each Share
of a Portfolio, regardless of Class, shall represent an equal pro rata
interest in the assets belonging to such Portfolio and shall have identical
voting, dividend, liquidation and other rights, preferences, powers,
restrictions, limitations, qualifications and designations and terms and
conditions with each other Share of such Portfolio.
(b) Shareholders shall have no preemptive or other right to subscribe to
any additional Shares or other securities issued by the Trust or the
Trustees, whether of the same or other Portfolio (or Class).
(c) All consideration received by the Trust for the issue or sale of
Shares of a particular Portfolio, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange,
or liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
held and accounted for separately from the other assets of the Trust and of
every other Portfolio and may be referred to herein as "assets belonging
to" that Portfolio. The assets belonging to a particular Portfolio shall
belong to that Portfolio for all purposes, and to no other Portfolio,
subject only to the rights of creditors of that Portfolio. In addition, any
assets, income, earnings, profits or funds, or payments and proceeds with
respect thereto, which are not readily identifiable as belonging to any
particular Portfolio shall be allocated by the Trustees between and among
one or more of the Portfolios in such manner as the Trustees, in their sole
discretion, deem fair and equitable. Each such allocation shall be
conclusive and binding upon the Shareholders of all Portfolios thereof for
all purposes, and such assets, income, earnings, profits, or funds, or
payments and proceeds with respect thereto shall be assets belonging to
that Portfolio.
(d) Each Class of a Portfolio shall have a proportionate undivided
interest (as determined by or at the direction of, or pursuant to authority
granted by, the Trustees, consistent with industry practice)
("Proportionate Interest") in the net assets belonging to that Portfolio.
References herein to assets, expenses, charges, costs, and reserves
"allocable" or "allocated" to a particular Class of a Portfolio shall mean
the aggregate amount of such item(s) of the Portfolio multiplied by the
Class's Proportionate Interest.
3
<PAGE> 4
(e) A particular Portfolio shall be charged with the liabilities of that
Portfolio, and all expenses, costs, charges and reserves attributable to
any particular Portfolio shall be borne by such Portfolio; provided that
the Trustees may, in their sole discretion, allocate or authorize the
allocation of particular expenses, costs, charges, and/or reserves of a
Portfolio to fewer than all the Classes thereof. Class Expenses shall, in
all cases, be allocated to the Class for which such Class Expenses were
incurred. Any general liabilities, expenses, costs, charges or reserves of
the Trust (or any Portfolio) that are not readily identifiable as
chargeable to or bearable by any particular Portfolio (or any particular
Class) shall be allocated and charged by the Trustees between or among any
one or more of the Portfolios (or Classes) in such manner as the Trustees
in their sole discretion deem fair and equitable. Each such allocation
shall be conclusive and binding upon the Shareholders of all Portfolios (or
Classes) for all purposes. Without limitation of the foregoing provisions
of this Section 2.5(e), (i) the debts, liabilities, obligations and
expenses incurred, contracted for or otherwise existing with respect to a
particular Portfolio shall be enforceable against the assets of such
Portfolio only, and not against the assets of the Trust generally or assets
belonging to any other Portfolio, and (ii) none of the debts, liabilities,
obligations and expenses incurred, contracted for or otherwise existing
with respect to the Trust generally that have not been allocated to a
specified Portfolio, or with respect to any other Portfolio, shall be
enforceable against the assets of such specified Portfolio. Notice of this
contractual limitation on inter-Portfolio liabilities shall be set forth in
the Trust's Certificate of Trust described to Section 1.4, and upon the
giving of such notice in the Certificate of Trust, the statutory provisions
of Section 3804 of the Delaware Act relating to limitations on
inter-Portfolio liabilities (and the statutory effect under Section 3804 of
setting forth such notice in the Certificate of Trust) shall become
applicable to the Trust and each Portfolio.
All references to Shares in this Agreement shall be deemed to be shares of any
or all Portfolios, or Classes thereof, as the context may require. All
provisions herein relating to the Trust shall apply equally to each Portfolio of
the Trust, and each Class thereof, except as the context otherwise requires.
SECTION 2.6. Additional Rights and Preferences of Class B Shares. In addition
to the relative rights and preferences set forth in Section 2.5 and all other
provisions of this Agreement relating to Shares of the Trust generally, any
Class of any Portfolio designated as Class B Shares shall have the following
rights and preferences:
(a) Subject to the provisions of paragraph (c) below, all Class B Shares
other than those purchased through the reinvestment of dividends and
distributions shall automatically convert to Class A Shares eight (8) years
after the end of the calendar month in which a Shareholder's order to
purchase such shares was accepted.
(b) Subject to the provisions of paragraph (c) below, Class B Shares
purchased through the reinvestment of dividends and distributions paid in
respect of Class B Shares will be considered held in a separate
sub-account, and will automatically convert to Class A Shares in the same
proportion as any Class B Shares (other than those in the sub-account)
convert to Class A Shares. Other than this conversion feature, the Class B
Shares purchased through the reinvestment of dividends and distributions
paid in respect of Class B Shares shall have all the rights and
preferences, restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption of Class B Shares generally.
(c) If a Portfolio of the Trust implements any amendment to a Plan of
Distribution adopted under Rule 12b-1 promulgated under the 1940 Act (or
adopts or implements a non-Rule 12b-1 shareholder services plan that the
Trustees have caused to be submitted to the Shareholders for their
approval) that the Trustees determine would materially increase the charges
that may be borne by the Class A Shareholders under such plan, the Class B
Shares will stop converting to the Class A Shares unless the Class B
Shares, voting separately, approve the amendment or adoption. The Trustees
shall have sole discretion in determining whether such amendment or
adoption is submitted to a vote of the Class B Shareholders. Should such
amendment or adoption not be submitted to a vote of the Class B
Shareholders or, if submitted, should the Class B Shareholders fail to
approve such amendment or adoption, the Trustees shall take such action as
is necessary to: (1) create a new class (the "New Class A Shares") which
shall be identical in all material respects to the Class A Shares as they
existed prior to the implementation of the amendment or adoption; and (2)
ensure that the existing Class B Shares will be exchanged or converted into
New Class A Shares no later than the date such Class B Shares were
scheduled to convert to Class A Shares. If deemed advisable by the Trustees
to implement the foregoing, and at the sole discretion of the Trustees,
such action may include the exchange of all Class B Shares for a new class
(the "New Class B Shares"), identical in all material respects to the Class
B Shares except that the New Class B Shares will automatically convert into
the New Class A Shares. Such exchanges or conversions shall be effected in
a manner that the Trustees reasonably believe will not be subject to
federal taxation.
SECTION 2.7. Investment in the Trust. Investments may be accepted by the Trust
from such Persons, at such times, on such terms, and for such consideration,
which may consist of cash or tangible or intangible property or a combination
thereof, as the Trustees from time to time may authorize. At the Trustees' sole
discretion, such investments, subject to applicable law, may be in the form of
cash or securities in which the affected Portfolio is authorized to invest,
valued as provided in applicable law. Each such investment shall be
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credited to the individual Shareholder's account in the form of full and
fractional Shares of the Trust, in such Portfolio (or Class) as the Shareholder
shall select.
SECTION 2.8. Personal Liability of Shareholders. As provided by applicable
law, no Shareholder of the Trust shall be personally liable for the debts,
liabilities, obligations and expenses incurred by, contracted for, or otherwise
existing with respect to, the Trust or any Portfolio (or Class) thereof. Neither
the Trust nor the Trustees, nor any officer, employee, or agent of the Trust
shall have any power to bind personally any Shareholder or, except as provided
herein or by applicable law, to call upon any Shareholder for the payment of any
sum of money or assessment whatsoever other than such as the Shareholder may at
any time personally agree to pay by way of subscription for any Shares or
otherwise. The Shareholders shall be entitled, to the fullest extent permitted
by applicable law, to the same limitation of personal liability as is extended
under the Delaware General Corporation Law to stockholders of private
corporations for profit. Every note, bond, contract or other undertaking issued
by or on behalf of the Trust or the Trustees relating to the Trust or to any
Portfolio shall include a recitation limiting the obligation represented thereby
to the Trust and its assets or to one or more Portfolios and the assets
belonging thereto (but the omission of such a recitation shall not operate to
bind any Shareholder or Trustee of the Trust).
SECTION 2.9. Assent to Agreement. Every Shareholder, by virtue of having
purchased a Share, shall be held to have expressly assented to, and agreed to be
bound by, the terms hereof. The death of a Shareholder during the continuance of
the Trust shall not operate to terminate the same nor entitle the representative
of any deceased Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees, but only to rights of said decedent
under this Trust.
SECTION 2.10. Purchases of Shares Among Portfolios. The Trust may purchase, on
behalf of any Portfolio (the "Purchasing Portfolio"), Shares of another
Portfolio (the "Selling Portfolio") or any Class thereof. Shares of the Selling
Portfolio so purchased on behalf of the Purchasing Portfolio shall be
Outstanding Shares, and shall have all preferences, voting powers, rights and
privileges established for such Shares.
ARTICLE III
THE TRUSTEES
SECTION 3.1. Management of the Trust. The Trustees shall have exclusive and
absolute control over the Trust Property and over the business of the Trust to
the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Agreement. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the State of Delaware, in any and
all states of the United States of America, in the District of Columbia, in any
and all commonwealths, territories, dependencies, colonies, or possessions of
the United States of America, and in any and all foreign jurisdictions and to do
all such other things and execute all such instruments as they deem necessary,
proper or desirable in order to promote the interests of the Trust although such
things are not herein specifically mentioned. Any determination as to what is in
the interests of the Trust made by the Trustees in good faith shall be
conclusive. In construing the provisions of this Agreement, the presumption
shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power in this Agreement shall not be construed
as limiting the aforesaid power. The powers of the Trustees may be exercised
without order of or resort to any court or other authority.
SECTION 3.2. Trustees. The number of Trustees shall be such number as shall be
fixed from time to time by a majority of the Trustees; provided, however, that
the number of Trustees shall in no event be less than two (2) nor more than
fifteen (15). The initial Trustees are those first identified above.
SECTION 3.3. Terms of Office of Trustees. The Trustees shall hold office
during the lifetime of this Trust, and until its termination as herein provided;
except that (a) any Trustee may resign his trusteeship or may retire by written
instrument signed by him and delivered to the other Trustees, which shall take
effect upon such delivery or upon such later date as is specified therein; (b)
any Trustee may be removed at any time by written instrument, signed by at least
two-thirds of the number of Trustees prior to such removal, specifying the date
when such removal shall become effective; (c) any Trustee who has died, become
physically or mentally incapacitated by reason of disease or otherwise, or is
otherwise unable to serve, may be retired by written instrument signed by a
majority of the other Trustees, specifying the date of his retirement; and (d) a
Trustee may be removed at any meeting of the Shareholders by a vote of the
Shareholders owning at least two-thirds of the Outstanding Shares.
SECTION 3.4. Vacancies and Appointment of Trustees. In case of the declination
to serve, death, resignation, retirement or removal of a Trustee, or a Trustee
is otherwise unable to serve, or an increase in the number of Trustees, a
vacancy shall occur. Whenever a vacancy in the Board of Trustees shall occur,
until such vacancy is filled, the other Trustees shall have all the powers
hereunder and the certification of the other Trustees of such vacancy shall be
conclusive. In the case of an existing vacancy, the remaining Trustees may fill
such vacancy by appointing such other person as they in their discretion shall
see fit, or may leave such vacancy unfilled or may reduce
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the number of Trustees to not less than two (2) Trustees. Such appointment shall
be evidenced by a written instrument signed by a majority of the Trustees in
office or by resolution of the Trustees, duly adopted, which shall be recorded
in the minutes of a meeting of the Trustees, whereupon the appointment shall
take effect.
An appointment of a Trustee may be made by the Trustees then in office in
anticipation of a vacancy to occur by reason of retirement, resignation, or
removal of a Trustee, or an increase in number of Trustees effective at a later
date, provided that said appointment shall become effective only at the time or
after the expected vacancy occurs. As soon as any Trustee appointed pursuant to
this Section 3.4 or elected by the Shareholders shall have accepted the Trust
and agreed in writing to be bound by the terms of the Agreement, the Trust
estate shall vest in the new Trustee or Trustees, together with the continuing
Trustees, without any further act or conveyance, and he shall be deemed a
Trustee hereunder.
SECTION 3.5. Temporary Absence of Trustee. Any Trustee may, by power of
attorney, delegate his power for a period not exceeding six months at any one
time to any other Trustee or Trustees, provided that in no case shall less than
two Trustees personally exercise the other powers hereunder except as herein
otherwise expressly provided.
SECTION 3.6. Effect of Death, Resignation, etc. of a Trustee. The declination
to serve, death, resignation, retirement, removal, incapacity, or inability of
the Trustees, or any one of them, shall not operate to terminate the Trust or to
revoke any existing agency created pursuant to the terms of this Trust
Agreement.
SECTION 3.7. Ownership of Assets of the Trust. The assets of the Trust and of
each Portfolio thereof shall be held separate and apart from any assets now or
hereafter held in any capacity other than as Trustee hereunder by the Trustees
or any successor Trustees. Legal title in all of the assets of the Trust and the
right to conduct any business shall at all times be considered as vested in the
Trustees on behalf of the Trust, except that the Trustees may cause legal title
to any Trust Property to be held by, or in the name of the Trust, or in the name
of any Person as nominee. No Shareholder shall be deemed to have a severable
ownership in any individual asset of the Trust, or belonging to any Portfolio,
or allocable to any Class thereof, or any right of partition or possession
thereof, but each Shareholder shall have, except as otherwise provided for
herein, a proportionate undivided beneficial interest in the Trust or in assets
belonging to the Portfolio (or allocable to the Class) in which the Shareholder
holds Shares. The Shares shall be personal property giving only the rights
specifically set forth in this Agreement or the Delaware Act.
ARTICLE IV
POWERS OF THE TRUSTEES
SECTION 4.1. Powers. The Trustees in all instances shall act as principals,
and are and shall be free from the control of the Shareholders. The Trustees
shall have full power and authority to do any and all acts and to make and
execute any and all contracts and instruments that they may consider necessary
or appropriate in connection with the management of the Trust. Without limiting
the foregoing and subject to any applicable limitation in this Agreement or the
Bylaws of the Trust, the Trustees shall have power and authority:
(a) To invest and reinvest cash and other property, and to hold cash or
other property uninvested, without in any event being bound or limited by
any present or future law or custom in regard to investments by Trustees,
and to sell, exchange, lend, pledge, mortgage, hypothecate, write options
on and lease any or all of the assets of the Trust;
(b) To operate as, and to carry on the business of, an investment
company, and to exercise all the powers necessary and appropriate to the
conduct of such operations;
(c) To borrow money and in this connection issue notes or other evidence
of indebtedness; to secure borrowings by mortgaging, pledging or otherwise
subjecting as security the Trust Property; to endorse, guarantee, or
undertake the performance of an obligation or engagement of any other
Person and to lend Trust Property;
(d) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereafter provided for or by
the Trust itself, or both, or otherwise pursuant to a plan of distribution
of any kind;
(e) To adopt Bylaws not inconsistent with this Trust Agreement providing
for the conduct of the business of the Trust and to amend and repeal them
to the extent that they do not reserve such right to the Shareholders; such
Bylaws shall be deemed incorporated and included in this Trust Agreement;
(f) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate;
(g) To employ one or more banks, trust companies or companies that are
members of a national securities exchange or such other domestic or foreign
entities as custodians of any assets of the Trust subject to any conditions
set forth in this Agreement or in the Bylaws;
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(h) To retain one or more transfer agents and shareholder servicing
agents;
(i) To set record dates in the manner provided herein or in the Bylaws;
(j) To delegate such authority as they consider desirable to any
officers of the Trust and to any investment adviser, manager,
administrator, custodian, underwriter or other agent or independent
contractor;
(k) To sell or exchange any or all of the assets of the Trust, subject
to the right of Shareholders, if any, to vote on such transaction pursuant
to Section 6.1;
(l) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver proxies and powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such power
and discretion with relation to securities or property as the Trustee shall
deem proper;
(m) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(n) To hold any security or property in a form not indicating any trust,
whether in bearer, book entry, unregistered or other negotiable form; or
either in the name of the Trust or of a Portfolio or a custodian or a
nominee or nominees, subject in either case to proper safeguards according
to the usual practice of Delaware business trusts or investment companies;
(o) To establish separate and distinct Portfolios with separately
defined investment objectives and policies and distinct investment purposes
in accordance with the provisions of Article II hereof and to establish
Classes of such Portfolios having relative rights, powers and duties as
they may provide consistent with applicable law;
(p) Subject to the provisions of Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Trust to a particular
Portfolio or to apportion the same between or among two or more Portfolios,
provided that any liabilities or expenses incurred by a particular
Portfolio shall be payable solely out of the assets belonging to that
Portfolio as provided for in Article II hereof;
(q) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of
which is held in the Trust; to consent to any contract, lease, mortgage,
purchase, or sale of property by such corporation or concern, and to pay
calls or subscriptions with respect to any security held in the Trust;
(r) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited
to, claims for taxes;
(s) To declare and pay dividends and make distributions of income and of
capital gains and capital to Shareholders in the manner hereinafter
provided;
(t) To establish, from time to time, a minimum investment for
Shareholders in the Trust or in one or more Portfolios or Classes, and to
require the redemption of the Shares of any Shareholder whose investment is
less than such minimum upon giving notice to such Shareholder;
(u) To establish one or more committees, to delegate any of the powers
of the Trustees to said committees and to adopt a committee charter
providing for such responsibilities, membership (including Trustees,
officers or other agents of the Trust therein) and any other
characteristics of said committees as the Trustees may deem proper, each of
which committees may consist of less than the whole number of Trustees then
in office, and may be empowered to act for and bind the Trustees and the
Trust, as if the acts of such committee were the acts of all the Trustees
then in office;
(v) To interpret the investment policies, practices or limitations of
any Portfolios;
(w) To establish a registered office and have a registered agent in the
State of Delaware; and
(x) In general, to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything necessary,
suitable or proper for the accomplishment of any purpose or the attainment
of any object or the furtherance of any power hereinbefore set forth,
either alone or in association with others, and to do every other act or
thing incidental or appurtenant to or growing out of or connected with the
aforesaid business or purposes, objects or powers.
The foregoing clauses shall be construed both as objects and powers, and the
foregoing enumeration of specific powers shall not be held to limit or restrict
in any manner the general powers of the Trustees. Any action by one or more of
the Trustees in their capacity as such hereunder shall be deemed an action on
behalf of the Trust or the applicable Portfolio, and not an action in an
individual capacity.
The Trustees shall not be limited to investing in obligations maturing before
the possible termination of the Trust.
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No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to see to the application
of any payments made or property transferred to the Trustees or upon their
order.
SECTION 4.2. Issuance and Repurchase of Shares. The Trustees shall have the
power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell,
reissue, dispose of, and otherwise deal in Shares and, subject to the provisions
set forth in Articles II and VII hereof, to apply to any such repurchase,
redemption, retirement, cancellation or acquisition of Shares any funds or
property of the Trust, or any assets belonging to the particular Portfolio or
any assets allocable to the particular Class, with respect to which such Shares
are issued.
SECTION 4.3. Action by the Trustees. The Board of Trustees or any committee
thereof shall act by majority vote of those present at a meeting duly called
(including a meeting by telephonic or other electronic means, unless the 1940
Act requires that a particular action be taken only at a meeting of the Trustees
in person) at which a quorum required by the Bylaws is present or by unanimous
written consent of the Trustees or committee, as the case may be, without a
meeting, provided that the writing or writings are filed with the minutes of
proceedings of the Board or committee. Written consents or waivers of the
Trustees may be executed in one or more counterparts. Any written consent or
waiver may be provided and delivered to the Trust by any means by which notice
may be given to a Trustee. Subject to the requirements of the 1940 Act, the
Trustees by Majority Trustee Vote may delegate to any Trustee or Trustees
authority to approve particular matters or take particular actions on behalf of
the Trust.
SECTION 4.4. Principal Transactions. The Trustees may, on behalf of the Trust,
buy any securities from or sell any securities to, or lend any assets of the
Trust to, any Trustee or officer of the Trust or any firm of which any such
Trustee or officer is a member acting as principal, or have any such dealings
with any investment adviser, distributor, or transfer agent for the Trust or
with any Affiliated Person of such Person; and the Trust may employ any such
Person, or firm or Company in which such Person is an Affiliated Person, as
broker, legal counsel, registrar, investment adviser, distributor,
administrator, transfer agent, dividend disbursing agent, custodian, or in any
capacity upon customary terms, subject in all cases to applicable laws, rules,
and regulations and orders of regulatory authorities.
SECTION 4.5. Payment of Expenses by the Trust. The Trustees are authorized to
pay or cause to be paid out of the principal or income of the Trust or any
Portfolio, or partly out of the principal and partly out of income, and to
charge or allocate to, between or among such one or more of the Portfolios (or
Classes), as they deem fair, all expenses, fees, charges, taxes and liabilities
incurred or arising in connection with the Trust or Portfolio (or Class), or in
connection with the management thereof, including, but not limited to, the
Trustees' compensation and such expenses and charges for the services of the
Trust's officers, employees, investment adviser and manager, administrator,
principal underwriter, auditors, counsel, custodian, transfer agent, Shareholder
servicing agent, and such other agents or independent contractors and such other
expenses and charges as the Trustees may deem necessary or proper to incur.
SECTION 4.6. Trustee Compensation. The Trustees as such shall be entitled to
reasonable compensation from the Trust. They may fix the amount of their
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, administrative, legal, accounting, investment
banking, underwriting, brokerage, or investment dealer or other services and the
payment for the same by the Trust.
ARTICLE V
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER AND TRANSFER AGENT
SECTION 5.1. Investment Adviser. The Trustees may in their discretion, from
time to time, enter into an investment advisory or management contract or
contracts with respect to the Trust or any Portfolio whereby the other party or
parties to such contract or contracts shall undertake to furnish the Trustees
with such management, investment advisory, statistical and research facilities
and services and such other facilities and services, if any, and all upon such
terms and conditions, as the Trustees may in their discretion determine.
The Trustees may authorize the investment adviser to employ, from time to
time, one or more sub-advisers to perform such of the acts and services of the
investment adviser, and upon such terms and conditions, as may be agreed upon
among the Trustees, the investment adviser and sub-adviser. Any references in
this Agreement to the investment adviser shall be deemed to include such
sub-advisers, unless the context otherwise requires.
SECTION 5.2. Other Service Contracts. The Trustees may authorize the
engagement of a principal underwriter, transfer agent, administrator, custodian,
and similar service providers.
SECTION 5.3. Parties to Contract. Any contract of the character described in
Sections 5.1 and 5.2 may be entered into with any corporation, firm,
partnership, trust or association, although one or more of the Trustees or
officers of the Trust may be an officer, director, trustee, shareholder, or
member of such other party to the contract.
SECTION 5.4. Miscellaneous. The fact that (i) any of the Shareholders,
Trustees or officers of the Trust is a shareholder, director, officer, partner,
trustee, employee, manager, adviser, principal underwriter or distributor or
agent of or for any Company or of or for any parent or affiliate of any Company,
with which an advisory or administration contract, or principal underwriter's or
distributor's contract,
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or transfer, shareholder servicing, custodian or other agency contract may have
been or may hereafter be made, or that any such Company, or any parent or
affiliate thereof, is a Shareholder or has an interest in the Trust, or that
(ii) any Company with which an advisory or administration contract or principal
underwriter's or distributor's contract, or transfer, shareholder servicing,
custodian, or other agency contract may have been or may hereafter be made also
has an advisory or administration contract, or principal underwriter's or
distributor's contract, or transfer, shareholder servicing, custodian or other
agency contract with one or more other companies, or has other business or
interests shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same or create any liability or accountability to the Trust or its Shareholders.
ARTICLE VI
SHAREHOLDERS' VOTING POWERS AND MEETING
SECTION 6.1. Voting Powers. The Shareholders shall have power to vote only to:
(i) elect Trustees, provided that a meeting of Shareholders has been called for
that purpose; (ii) remove Trustees, provided that a meeting of Shareholders has
been called for that purpose; (iii) approve the termination of the Trust or any
Portfolio or Class, provided that the Trustees have called a meeting of the
Shareholders for the purpose of approving any such termination, unless, as of
the date on which the Trustees have determined to so terminate the Trust or such
Portfolio or Class, there are fewer than 100 holders of record of the Trust or
of such terminating Portfolio or Class; (iv) approve the sale of all or
substantially all the assets of the Trust or any Portfolio or Class, unless the
primary purpose of such sale is to change the Trust's domicile or form of
organization or form of business trust; (v) approve the merger or consolidation
of the Trust or any Portfolio or Class with and into another Company or with and
into any Portfolio or Class of the Trust, unless (A) the primary purpose of such
merger or consolidation is to change the Trust's domicile or form of
organization or form of business trust, or (B) after giving effect to such
merger or consolidation, based on the number of Shares outstanding as of a date
selected by the Trustees, the Shareholders of the Trust or such Portfolio or
Class will have a majority of the outstanding shares of the surviving Company or
Portfolio or Class thereof, as the case may be; (vi) approve any amendment to
this Article VI, Section 6.1; and (vii) approve such additional matters as may
be required by law or as the Trustees, in their sole discretion, shall
determine.
Until Shares are issued, the Trustees may exercise all rights of Shareholders
and may take any action required or permitted by law, this Trust Agreement or
any of the Bylaws of the Trust to be taken by Shareholders.
On any matter submitted to a vote of the Shareholders, all Shares shall be
voted together, except when required by applicable law or when the Trustees have
determined that the matter affects the interests of one or more Portfolios (or
Classes), then only the Shareholders of all such affected Portfolios (or
Classes) shall be entitled to vote thereon. Each whole Share shall be entitled
to one vote as to any matter on which it is entitled to vote, and each
fractional Share shall be entitled to a proportionate fractional vote. The vote
necessary to approve any such matter shall be set forth in the Bylaws.
ARTICLE VII
DISTRIBUTIONS AND REDEMPTIONS
SECTION 7.1. Distributions. The Trustees may from time to time declare and pay
dividends and make other distributions with respect to any Portfolio, or Class
thereof, which may be from income, capital gains or capital. The amount of such
dividends or distributions and the payment of them and whether they are in cash
or any other Trust Property shall be wholly in the discretion of the Trustees.
Dividends and other distributions may be paid pursuant to a standing resolution
adopted once or more often as the Trustees determine. All dividends and other
distributions on Shares of a particular Portfolio or Class shall be distributed
pro rata to the Shareholders of that Portfolio or Class, as the case may be, in
proportion to the number of Shares of that Portfolio or Class they held on the
record date established for such payment, provided that such dividends and other
distributions on Shares of a Class shall appropriately reflect Class Expenses
and other expenses allocated to that Class. The Trustees may adopt and offer to
Shareholders such dividend reinvestment plans, cash distribution payment plans,
or similar plans as the Trustees deem appropriate.
SECTION 7.2. Redemptions. Any holder of record of Shares of a particular
Portfolio, or Class thereof, shall have the right to require the Trust to redeem
his Shares, or any portion thereof, subject to such terms and conditions as are
set forth in the registration statement of the Trust in effect from time to
time. The redemption price may in any case or cases be paid wholly or partly in
kind if the Trustees determine that such payment is advisable in the interest of
the remaining Shareholders of the Portfolio or Class thereof for which the
Shares are being redeemed. Subject to the foregoing, the fair value, selection
and quantity of securities or other property so paid or delivered as all or part
of the redemption price may be determined by or under authority of the Trustees.
In no case shall the Trust be liable for any delay of any Person in transferring
securities selected for delivery as all or part of any payment in kind.
SECTION 7.3. Redemption of Shares by Trustees. The Trustees may, at their
option, call for the redemption of the Shares of any Person or may refuse to
transfer or issue Shares to any Person to the extent that the same is necessary
to comply with applicable law or advisable
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to further the purposes for which the Trust is formed. To the extent permitted
by law, the Trustees may retain the proceeds of any redemption of Shares
required by them for payments of amounts due and owing by a Shareholder to the
Trust or any Portfolio.
SECTION 7.4. Redemption of De Minimis Accounts. If, at any time when a request
for transfer or redemption of Shares of any Portfolio is received by the Trust
or its agent, the value of the Shares of such Portfolio in a Shareholder's
account is less than Five Hundred Dollars ($500.00), or such greater amount as
the Trustees in their discretion shall have determined in accordance with
Section 4.1(t), after giving effect to such transfer or redemption and upon
giving thirty (30) days' notice to the Shareholder, the Trust may cause the
remaining Shares of such Portfolio in such Shareholder's account to be redeemed,
subject to such terms and conditions as are set forth in the registration
statement of the Trust in effect from time to time.
ARTICLE VIII
LIMITATION OF LIABILITY AND INDEMNIFICATION
SECTION 8.1. Limitation of Liability. A Trustee or officer, when acting in
such capacity, shall not be personally liable to any person for any act,
omission or obligation of the Trust or any Trustee or officer; provided,
however, that nothing contained herein or in the Delaware Act shall protect any
Trustee or officer against any liability to the Trust or to Shareholders to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office with the Trust.
SECTION 8.2. Indemnification of Covered Persons. Every Covered Person shall be
indemnified by the Trust to the fullest extent permitted by the Delaware Act,
the Bylaws and other applicable law.
SECTION 8.3. Indemnification of Shareholders. In case any Shareholder or
former Shareholder of the Trust shall be held to be personally liable solely by
reason of his being or having been a Shareholder of the Trust or any Portfolio
or Class and not because of his acts or omissions or for some other reason, the
Shareholder or former Shareholder (or his heirs, executors, administrators or
other legal representatives, or, in the case of a corporation or other entity,
its corporate or general successor) shall be entitled, out of the assets
belonging to the applicable Portfolio, to be held harmless from and indemnified
against all loss and expense arising from such liability in accordance with the
Bylaws and applicable law. The Trust, on behalf of the affected Portfolio, shall
upon request by the Shareholder, assume the defense of any such claim made
against the Shareholder for any act or obligation of that Portfolio.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Trust Not a Partnership; Taxation. It is hereby expressly
declared that a trust and not a partnership is created hereby. No Trustee
hereunder shall have any power to bind personally either the Trust's officers or
any Shareholder. All persons extending credit to, contracting with or having any
claim against the Trust or the Trustees shall look only to the assets of the
appropriate Portfolio or, until the Trustees shall have established any separate
Portfolio, of the Trust for payment under such credit, contract or claim; and
neither the Shareholders, the Trustees, nor the Trust's officers nor any of the
agents of the Trustees whether past, present or future, shall be personally
liable therefor.
It is intended that the Trust, or each Portfolio if there is more than one
Portfolio, be classified for income tax purposes as an association taxable as a
corporation, and the Trustees shall do all things that they, in their sole
discretion, determine are necessary to achieve that objective, including (if
they so determine), electing such classifications on Internal Revenue Form 8832.
The Trustees, in their sole discretion and without the vote or consent of the
Shareholders, may amend this Agreement to ensure that this objective is
achieved.
SECTION 9.2. Trustee's Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees of their powers and discretion hereunder in
good faith and with reasonable care under the circumstances then prevailing
shall be binding upon everyone interested. Subject to the provisions of Article
VIII and to Section 9.1, the Trustees shall not be liable for errors of judgment
or mistakes of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Agreement, and subject
to the provisions of Article VIII and Section 9.1, shall be under no liability
for any act or omission in accordance with such advice or for failing to follow
such advice. The Trustees shall not be required to give any bond as such, nor
any surety if a bond is obtained.
SECTION 9.3. Termination of Trust or Portfolio or Class.
(a) Unless terminated as provided herein, the Trust shall continue
without limitation of time. The Trust may be terminated at any time by the
Trustees by written notice to the Shareholders, subject to the right of
Shareholders, if any, to vote pursuant to Section 6.1. Any Portfolio or
Class may be terminated at any time by the Trustees by written notice to
the Shareholders of that Portfolio or Class, subject to the right of
Shareholders, if any, to vote pursuant to Section 6.1.
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(b) On termination of the Trust or any Portfolio pursuant to paragraph
(a) above,
(1) the Trust or that Portfolio thereafter shall carry on no business
except for the purpose of winding up its affairs,
(2) the Trustees shall (i) proceed to wind up the affairs of the
Trust or that Portfolio, and all powers of the Trustees under this
Agreement with respect thereto shall continue until such affairs have
been wound up, including the powers to fulfill or discharge the
contracts of the Trust or that Portfolio, (ii) collect its assets or the
assets belonging thereto, (iii) sell, convey, assign, exchange, or
otherwise dispose of all or any part of those assets to one or more
persons at public or private sale for consideration that may consist in
whole or in part of cash, securities, or other property of any kind,
(iv) discharge or pay its liabilities, and (v) do all other acts
appropriate to liquidate its business, and
(3) after paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities, and
refunding agreements as they deem necessary for their protection, the
Trustees shall distribute the remaining assets ratably among the
Shareholders of the Trust or that Portfolio.
(c) On termination of any Class pursuant to paragraph (a) above,
(1) the Trust thereafter shall no longer issue Shares of that Class,
(2) the Trustees shall do all other acts appropriate to terminate the
Class, and
(3) the Trustees shall distribute ratably among the Shareholders of
that Class, in cash or in kind, an amount equal to the Proportionate
Interest of that Class in the net assets of the Portfolio (after taking
into account any Class Expenses or other fees, expenses, or charges
allocable thereto), and in connection with any such distribution in cash
the Trustees are authorized to sell, convey, assign, exchange or
otherwise dispose of such assets of the Portfolio of which that Class is
a part as they deem necessary.
(d) On completion of distribution of the remaining assets pursuant to
paragraph (b)(3) above, the Trust or the affected Portfolio shall terminate
and the Trustees and the Trust shall be discharged from all further
liabilities and duties hereunder with respect thereto and the rights and
interests of all parties therein shall be cancelled and discharged. On
termination of the Trust, following completion of winding up of its
business, the Trustees shall cause a Certificate of Cancellation of the
Trust's Certificate of Trust to be filed in accordance with the Delaware
Act, which Certificate may be signed by any one Trustee.
SECTION 9.4. Sale of Assets; Merger and Consolidation. Subject to right of
Shareholders, if any, to vote pursuant to Section 6.1, the Trustees may cause
(i) the Trust or one or more of its Portfolios to the extent consistent with
applicable law to sell all or substantially all of its assets to, or be merged
into or consolidated with, another Portfolio, business trust (or series thereof)
or Company (or series thereof), (ii) the Shares of the Trust or any Portfolio
(or Class) to be converted into beneficial interests in another business trust
(or series thereof) created pursuant to this Section 9.4, (iii) the Shares of
any Class to be converted into another Class of the same Portfolio, or (iv) the
Shares to be exchanged under or pursuant to any state or federal statute to the
extent permitted by law. In all respects not governed by statute or applicable
law, the Trustees shall have power to prescribe the procedure necessary or
appropriate to accomplish a sale of assets, merger or consolidation including
the power to create one or more separate business trusts to which all or any
part of the assets, liabilities, profits or losses of the Trust may be
transferred and to provide for the conversion of Shares of the Trust or any
Portfolio (or Class) into beneficial interests in such separate business trust
or trusts (or series or class thereof).
SECTION 9.5. Filing of Copies, References, Headings. The original or a copy of
this Agreement or any amendment hereto or any supplemental agreement shall be
kept at the office of the Trust where it may be inspected by any Shareholder. In
this Agreement or in any such amendment or supplemental agreement, references to
this Agreement, and all expressions like "herein," "hereof," and "hereunder,"
shall be deemed to refer to this Agreement as amended or affected by any such
supplemental agreement. All expressions like "his," "he," and "him," shall be
deemed to include the feminine and neuter, as well as masculine, genders.
Headings are placed herein for convenience of reference only and in case of any
conflict, the text of this Agreement, rather than the headings, shall control.
This Agreement may be executed in any number of counterparts each of which shall
be deemed an original.
SECTION 9.6. Governing Law. The Trust and this Agreement, and the rights,
obligations and remedies of the Trustees and Shareholders hereunder, are to be
governed by and construed and administered according to the Delaware Act and the
other laws of the State of Delaware; provided, however, that there shall not be
applicable to the Trust, the Trustees, the Shareholders or this Trust Agreement
(a) the provisions of Section 3540 of Title 12 of the Delaware Code or (b) any
provisions of the laws (statutory or common) of the State of Delaware (other
than the Delaware Act) pertaining to trusts which relate to or regulate (i) the
filing with any court or governmental body or agency of trustee accounts or
schedules of trustee fees and charges, (ii) affirmative requirements to post
bonds for trustees, officers, agents or employees of a trust, (iii) the
necessity for obtaining court or other governmental approval concerning the
acquisition, holding or disposition of real or personal property, (iv) fees or
other sums payable to trustees, officers, agents or employees of a trust, (v)
the allocation of receipts and expenditures to income or principal, (vi)
restrictions or limitations on the permissible nature, amount or
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<PAGE> 12
concentration of trust investments or requirements relating to the titling,
storage or other manner of holding of trust assets, or (vii) the establishment
of fiduciary or other standards or responsibilities or limitations on the
indemnification, acts or powers of trustees or other Persons, which are
inconsistent with the limitations or liabilities or authorities and powers of
the Trustees or officers of the Trust set forth or referenced in this Agreement.
The Trust shall be of the type commonly called a "business trust," and without
limiting the provisions hereof, the Trust may exercise all powers which are
ordinarily exercised by such a trust under Delaware law. The Trust specifically
reserves the right to exercise any of the powers or privileges afforded to
trusts or actions that may be engaged in by trusts under the Delaware Act, and
the absence of a specific reference herein to any such power, privilege or
action shall not imply that the Trust may not exercise such power or privilege
or take such actions; provided, however, that the exercise of any such power,
privilege or action shall not otherwise violate applicable law.
SECTION 9.7. Amendments. Except as specifically provided in Section 6.1, the
Trustees may, without any Shareholder vote, amend this Agreement by making an
amendment to this Agreement or to Schedule A, an agreement supplemental hereto,
or an amended and restated trust instrument. Any such amendment, having been
approved by a Majority Trustee Vote, shall become effective, unless otherwise
provided by such Trustees, upon being executed by a duly authorized officer of
the Trust. Any amendment submitted to Shareholders that the Trustees determine
would affect the Shareholders of fewer than all Portfolios (or fewer than all
Classes thereof) shall be authorized by a vote of only the Shareholders of the
affected Portfolio(s) (or Class(es)), and no vote shall be required of
Shareholders of any Portfolio (or Class) that is not affected. Notwithstanding
anything else herein to the contrary, any amendment to Article VIII that would
have the effect of reducing the indemnification provided thereby to Covered
Persons or to Shareholders or former Shareholders, and any repeal or amendment
of this sentence shall each require the affirmative vote of Shareholders owning
at least two-thirds of the Outstanding Shares entitled to vote thereon. A
certification signed by a duly authorized officer of the Trust setting forth an
amendment to this Agreement and reciting that it was duly adopted by the
Shareholders or by the Trustees as aforesaid, or a copy of this Agreement, as
amended, executed by a majority of the Trustees, or a duly authorized officer of
the Trust, shall be conclusive evidence of such amendment when lodged among the
records of the Trust.
SECTION 9.8. Provisions in Conflict with Law. The provisions of this Agreement
are severable, and if the Trustees shall determine, with the advice of counsel,
that any of such provisions is in conflict with applicable law the conflicting
provision shall be deemed never to have constituted a part of this Agreement;
provided, however, that such determination shall not affect any of the remaining
provisions of this Agreement or render invalid or improper any action taken or
omitted prior to such determination. If any provision of this Agreement shall be
held invalid or enforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provisions in any other jurisdiction or any
other provision of this Agreement in any jurisdiction.
SECTION 9.9. Shareholders' Right to Inspect Shareholder List. One or more
Persons who together and for at least six months have been Shareholders of at
least five percent (5%) of the Outstanding Shares of any Class may present to
any officer or resident agent of the Trust a written request for a list of its
Shareholders. Within twenty (20) days after such request is made, the Trust
shall prepare and have available on file at its principal office a list verified
under oath by one of its officers or its transfer agent or registrar which sets
forth the name and address of each Shareholder and the number of Shares of each
Portfolio and Class which the Shareholder holds. The rights provided for herein
shall not extend to any Person who is a beneficial owner but not also a record
owner of Shares of the Trust.
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the Trust,
have executed this instrument this 6th day of December, 1999.
/s/ CHARLES T. BAUER
---------------------------------------
Charles T. Bauer
/s/ ROBERT H. GRAHAM
---------------------------------------
Robert H. Graham
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<PAGE> 13
SCHEDULE A
AIM EQUITY FUNDS
PORTFOLIOS AND CLASSES THEREOF
<TABLE>
<CAPTION>
PORTFOLIO CLASSES OF EACH PORTFOLIO
- --------- --------------------------
<S> <C>
AIM Aggressive Growth Fund.................................. Class A Shares
Class B Shares
Class C Shares
AIM Blue Chip Fund.......................................... Class A Shares
Class B Shares
Class C Shares
AIM Capital Development Fund................................ Class A Shares
Class B Shares
Class C Shares
AIM Charter Fund............................................ Class A Shares
Class B Shares
Class C Shares
Institutional Class Shares
AIM Constellation Fund...................................... Class A Shares
Class B Shares
Class C Shares
Institutional Class Shares
AIM Dent Demographic Trends Fund............................ Class A Shares
Class B Shares
Class C Shares
AIM Emerging Growth Fund.................................... Class A Shares
Class B Shares
Class C Shares
AIM Large Cap Basic Value Fund.............................. Class A Shares
Class B Shares
Class C Shares
AIM Large Cap Growth Fund................................... Class A Shares
Class B Shares
Class C Shares
AIM Mid Cap Growth Fund..................................... Class A Shares
Class B Shares
Class C Shares
AIM Weingarten Fund......................................... Class A Shares
Class B Shares
Class C Shares
Institutional Class Shares
</TABLE>
S-1
<PAGE> 1
EXHIBIT b(4)
BYLAWS OF AIM EQUITY FUNDS,
A DELAWARE BUSINESS TRUST
Adopted effective December 6, 1999.
Capitalized terms not specifically defined herein
shall have the meanings ascribed to them in the Trust's
Agreement and Declaration of Trust (the "Agreement").
ARTICLE I
OFFICES
SECTION 1. Registered Office. The registered office of AIM Equity Funds (the
"Trust") shall be at the offices of The Corporation Trust Company in the County
of New Castle, State of Delaware.
SECTION 2. Other Offices. The Trust may also have offices at such other places
both within and without the State of Delaware as the Trustees may from time to
time determine or the business of the Trust may require.
ARTICLE II
TRUSTEES
SECTION 1. Meetings of the Trustees. The Trustees of the Trust may hold
meetings, both regular and special, either within or without the State of
Delaware. Meetings of the Trustees may be called orally or in writing by the
President of the Trust or by any two Trustees.
SECTION 2. Regular Meetings. Regular meetings of the Board of Trustees shall
be held each year, at such time and place as the Board of Trustees may
determine.
SECTION 3. Notice of Meetings. Notice of the time, date, and place of all
meetings of the Trustees shall be given to each Trustee (i) by telephone, telex,
telegram, facsimile, electronic-mail, or other electronic mechanism sent to his
or her home or business address at least twenty-four hours in advance of the
meeting or (ii) in person at another meeting of the Trustees or (iii) by written
notice mailed or sent via overnight courier to his or her home or business
address at least seventy-two hours in advance of the meeting. Notice need not be
given to any Trustee who attends the meeting without objecting to the lack of
notice or who signs a waiver of notice either before or after the meeting.
SECTION 4. Quorum. At all meetings of the Trustees, one-third of the Trustees
then in office (but in no event less than two Trustees) shall constitute a
quorum for the transaction of business and the act of a majority of the Trustees
present at any meeting at which there is a quorum shall be the act of the Board
of Trustees, except as may be otherwise specifically provided by applicable law
or by the Agreement or these Bylaws. If a quorum shall not be present at any
meeting of the Board of Trustees, the Trustees present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 5. Designation, Powers, and Names of Committees.
(a) The Board of Trustees shall initially have the following three
committees: (1) an Audit Committee; (2) a Nominating and Compensation
Committee; and (3) an Investments Committee. Each such Committee shall
consist of two or more of the Trustees of the Trust and the Board may
designate one or more Trustees as alternate members of any Committee, who
may replace any absent or disqualified member at any meeting of such
Committee; provided, however, that under no circumstances shall a member of
the Audit Committee or the Nominating and Compensation Committee be an
"interested person," as such term is defined in the 1940 Act, of the Trust.
The Board shall designate the powers and duties of each such Committee and
may terminate any such Committee by an amendment to these Bylaws.
(b) The Board of Trustees may, by resolution passed by a majority of the
whole Board, designate one or more additional committees, each committee to
consist of two or more of the Trustees of the Trust. The Board may
designate one or more Trustees as alternate members of any committee, who
may replace any absent or disqualified member at any meeting of such
committee. Each committee, to the extent provided in the resolution, shall
have and may exercise the powers of the Board of Trustees in the management
of the business and affairs of the Trust; provided, however, that in the
absence or disqualification of any member of such committee or committees,
the member or members thereof present at any meeting and not disqualified
from voting, whether or not such members constitute a quorum, may
unanimously appoint another member of the Board of Trustees to act at the
meeting in the place of any such absent or disqualified member. Such
committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the Board of Trustees.
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Section 6. Minutes of Committee. Each committee shall keep regular minutes of
its meetings and report the same to the Board of Trustees when required.
ARTICLE III
OFFICERS
Section 1. Executive Officers. The initial executive officers of the Trust
shall be elected by the Board of Trustees as soon as practicable after the
organization of the Trust. The executive officers may include a Chairman of the
Board, and shall include a President, one or more Vice Presidents (the number
thereof to be determined by the Board of Trustees), a Secretary and a Treasurer.
The Chairman of the Board, if any, shall be selected from among the Trustees.
The Board of Trustees may also in its discretion appoint Assistant Vice
Presidents, Assistant Secretaries, Assistant Treasurers, and other officers,
agents and employees, who shall have such authority and perform such duties as
the Board may determine. The Board of Trustees may fill any vacancy which may
occur in any office. Any two offices, except for those of President and Vice
President, may be held by the same person, but no officer shall execute,
acknowledge or verify any instrument on behalf of the Trust in more than one
capacity, if such instrument is required by law or by these Bylaws to be
executed, acknowledged or verified by two or more officers.
Section 2. Term of Office. Unless otherwise specifically determined by the
Board of Trustees, the officers shall serve at the pleasure of the Board of
Trustees. If the Board of Trustees in its judgment finds that the best interests
of the Trust will be served, the Board of Trustees may remove any officer of the
Trust at any time with or without cause. The Trustees may delegate this power to
the President (without supervision by the Trustees) with respect to any other
officer. Such removal shall be without prejudice to the contract rights, if any,
of the person so removed. Any officer may resign from office at any time by
delivering a written resignation to the Trustees or the President. Unless
otherwise specified therein, such resignation shall take effect upon delivery.
Section 3. President. The President shall be the chief executive officer of
the Trust and, subject to the Board of Trustees, shall generally manage the
business and affairs of the Trust. If there is no Chairman of the Board, or if
the Chairman of the Board has been appointed but is absent, the President shall,
if present, preside at all meetings of the Shareholders and the Board of
Trustees.
Section 4. Chairman of the Board. The Chairman of the Board, if any, shall
preside at all meetings of the Shareholders and the Board of Trustees, if the
Chairman of the Board is present. The Chairman of the Board shall have such
other powers and duties as shall be determined by the Board of Trustees, and
shall undertake such other assignments as may be requested by the President.
Section 5. Chairman, Vice Presidents. The Chairman of the Board or one or more
Vice Presidents shall have and exercise such powers and duties of the President
in the absence or inability to act of the President, as may be assigned to them,
respectively, by the Board of Trustees or, to the extent not so assigned, by the
President. In the absence or inability to act of the President, the powers and
duties of the President not otherwise assigned by the Board of Trustees or the
President shall devolve upon the Chairman of the Board, or in the Chairman's
absence, the Vice Presidents in the order of their election.
Section 6. Secretary. The Secretary shall (a) have custody of the seal of the
Trust; (b) attend meetings of the Shareholders, the Board of Trustees, and any
committees of Trustees and keep the minutes of such meetings of Shareholders,
the Board of Trustees and any committees thereof, and (c) issue all notices of
the Trust. The Secretary shall have charge of the Shareholder records and such
other books and papers as the Board may direct, and shall perform such other
duties as may be incidental to the office or which are assigned by the Board of
Trustees. The Secretary shall also keep or cause to be kept a Shareholder book,
which may be maintained by means of computer systems, containing the names,
alphabetically arranged, of all persons who are Shareholders of the Trust,
showing their places of residence, the number and series and class of any Shares
held by them, respectively, and the dates when they became the record owners
thereof.
Section 7. Treasurer. The Treasurer shall have the care and custody of the
funds and securities of the Trust and shall deposit the same in the name of the
Trust in such bank or banks or other depositories, subject to withdrawal in such
manner as these Bylaws or the Board of Trustees may determine. The Treasurer
shall, if required by the Board of Trustees, give such bond for the faithful
discharge of duties in such form as the Board of Trustees may require.
Section 8. Assistant Officers. Assistant officers, which may include one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers,
shall perform such functions and have such responsibilities as the Board of
Trustees may determine.
Section 9. Surety Bond. The Trustees may require any officer or agent of the
Trust to execute a bond (including, without limitation, any bond required by the
1940 Act and the rules and regulations of the Securities and Exchange Commission
(the "Commission") to the Trust in such sum and with such surety or sureties as
the Trustees may determine, conditioned upon the faithful performance of his or
her duties to the Trust, including responsibility for negligence and for the
accounting of any of the Trust's property, funds, or securities that may come
into his or her hands.
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<PAGE> 3
Section 10. Authorized Signatories. Unless a specific officer is otherwise
designated in a resolution adopted by the Board of Trustees, the proper officers
of the Trust for executing agreements, documents and instruments other than
Internal Revenue Service forms shall be the President, any Vice President, the
Secretary or any Assistant Secretary. Unless a specific officer is otherwise
designated in a resolution adopted by the Board of Trustees, the proper officers
of the Trust for executing any and all Internal Revenue Service forms shall be
the President, any Vice President, the Secretary, any Assistant Secretary, or
the Treasurer.
ARTICLE IV
MEETINGS OF SHAREHOLDERS
Section 1. Purpose. All meetings of the Shareholders for the election of
Trustees shall be held at such place as may be fixed from time to time by the
Trustees, or at such other place either within or without the State of Delaware
as shall be designated from time to time by the Trustees and stated in the
notice indicating that a meeting has been called for such purpose. Meetings of
Shareholders may be held for any purpose determined by the Trustees and may be
held at such time and place, within or without the State of Delaware as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof. At all meetings of the Shareholders, every shareholder of record
entitled to vote thereat shall be entitled to vote at such meeting either in
person or by written proxy signed by the Shareholder or by his duly authorized
attorney in fact. A Shareholder may duly authorize such attorney in fact through
written, electronic, telephonic, computerized, facsimile, telecommunication,
telex or oral communication or by any other form of communication. Unless a
proxy provides otherwise, such proxy is not valid more than eleven months after
its date. A proxy with respect to shares held in the name of two or more persons
shall be valid if executed by any one of them unless at or prior to exercise of
the proxy the Trust receives a specific written notice to the contrary from any
one of them. A proxy purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its exercise and the
burden of proving invalidity shall rest on the challenger.
Section 2. Nomination of Trustees. So long as the Trust has adopted and
maintains a distribution plan pursuant to Rule 12b-1 under the 1940 Act (a "Rule
12b-1 Plan"), the nomination of Trustees who are not "interested persons," as
defined in the 1940 Act, of the Trust shall be made by the Nominating and
Compensation Committee. In addition, so long as the Trust maintains a Nominating
and Compensation Committee, the nomination of all other Trustees shall also be
made by the Nominating and Compensation Committee. If the Trust no longer
maintains a Rule 12b-1 Plan and no longer maintains a Nominating and
Compensation Committee, the nomination of all Trustees shall be made by the
Board of Trustees. Any Shareholder may submit names of individuals to be
considered by the Nominating and Compensation Committee or the Board of
Trustees, as applicable, provided, however, (i) that such person was a
shareholder of record at the time of submission of such names and is entitled to
vote at the meeting, and (ii) that the Nominating and Compensation Committee or
the Board of Trustees, as applicable, shall make the final determination of
persons to be nominated.
Section 3. Election of Trustees. All meetings of Shareholders for the purpose
of electing Trustees shall be held on such date and at such time as shall be
designated from time to time by the Trustees and stated in the notice of the
meeting, at which the Shareholders shall elect by a plurality vote any number of
Trustees as the notice for such meeting shall state are to be elected, and
transact such other business as may properly be brought before the meeting in
accordance with Section 1 of this Article IV.
Section 4. Notice of Meetings. Written notice of any meeting stating the
place, date, and hour of the meeting shall be given to each Shareholder entitled
to vote at such meeting not less than ten days before the date of the meeting in
accordance with Article V hereof.
Section 5. Special Meetings. Special meetings of the Shareholders, for any
purpose or purposes, unless otherwise prescribed by applicable law or by the
Agreement, may be called by any Trustee; provided, however, that the Trustees
shall promptly call a meeting of the Shareholders solely for the purpose of
removing one or more Trustees, when requested in writing to do so by the record
holders of not less than ten percent of the Outstanding Shares of the Trust.
Section 6. Notice of Special Meeting. Written notice of a special meeting
stating the place, date, and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be given not less than ten days before the
date of the meeting, to each Shareholder entitled to vote at such meeting.
SECTION 7. Conduct of Special Meeting. Business transacted at any special
meeting of Shareholders shall be limited to the purpose stated in the notice.
SECTION 8. Quorum. The holders of one-third of the Outstanding Shares entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the Shareholders for the transaction of business
except as otherwise provided by applicable law or by the Agreement. If, however,
such quorum shall not be present or represented at any meeting of the
Shareholders, the vote of the holders of a majority of Shares cast shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting, at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified.
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SECTION 9. Organization of Meetings.
(a) The meetings of the Shareholders shall be presided over by the
Chairman of the Board, or if the Chairman shall not be present or if there
is no Chairman, by the President, or if the President shall not be present,
by a Vice President, or if no Vice President is present, by a chairman
appointed for such purpose by the Board of Trustees or, if not so
appointed, by a chairman appointed for such purpose by the officers and
Trustees present at the meeting. The Secretary of the Trust, if present,
shall act as Secretary of such meetings, or if the Secretary is not
present, an Assistant Secretary of the Trust shall so act, and if no
Assistant Secretary is present, then a person designated by the Secretary
of the Trust shall so act, and if the Secretary has not designated a
person, then the meeting shall elect a secretary for the meeting.
(b) The Board of Trustees of the Trust shall be entitled to make such
rules and regulations for the conduct of meetings of Shareholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Trustees, if any, the chairman of the meeting
shall have the right and authority to prescribe such rules, regulations and
procedures and to do all such acts as, in the judgment of such chairman,
are necessary, appropriate or convenient for the proper conduct of the
meeting, including, without limitation, establishing: an agenda or order of
business for the meeting; rules and procedures for maintaining order at the
meeting and the safety of those present; limitations on participation in
such meeting to shareholders of record of the Trust and their duly
authorized and constituted proxies, and such other persons as the chairman
shall permit; restrictions on entry to the meeting after the time fixed for
the commencement thereof, limitations on the time allotted to questions or
comments by participants; and regulation of the opening and closing of the
polls for balloting on matters which are to be voted on by ballot, unless
and to the extent the Board of Trustees or the chairman of the meeting
determines that meetings of Shareholders shall not be required to be held
in accordance with the rules of parliamentary procedure.
SECTION 10. Voting Standard. When a quorum is present at any meeting, the vote
of the holders of a majority of the Shares cast shall decide any question
brought before such meeting, unless the question is one on which, by express
provision of applicable law, the Agreement, these Bylaws, or applicable
contract, a different vote is required, in which case such express provision
shall govern and control the decision of such question.
SECTION 11. Voting Procedure. Each whole Share shall be entitled to one vote,
and each fractional Share shall be entitled to a proportionate fractional vote.
On any matter submitted to a vote of the Shareholders, all Shares shall be voted
together, except when required by applicable law or when the Trustees have
determined that the matter affects the interests of one or more Portfolios (or
Classes), then only the Shareholders of such Portfolios (or Classes) shall be
entitled to vote thereon.
SECTION 12. Action Without Meeting. Unless otherwise provided in the Agreement
or applicable law, any action required to be taken at any meeting of the
Shareholders, or any action which may be taken at any meeting of the
Shareholders, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of Outstanding Shares having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all Shares entitled to vote thereon were present and voted.
Prompt notice of the taking of any such action without a meeting by less than
unanimous written consent shall be given to those Shareholders who have not
consented in writing.
SECTION 13. Broker Non-Votes. At any meeting of Shareholders the Trust will
consider broker non-votes as present for purposes of determining whether a
quorum is present at the meeting. Broker non-votes will not count as votes cast.
ARTICLE V
NOTICES
SECTION 1. Methods of Giving Notice. Whenever, under the provisions of
applicable law or of the Agreement or of these Bylaws, notice is required to be
given to any Trustee or Shareholder, it shall not, unless otherwise provided
herein, be construed to mean personal notice, but such notice may be given
orally in person, or by telephone (promptly confirmed in writing) or in writing,
by mail addressed to such Trustee at his or her last given address or to such
Shareholder at his address as it appears on the records of the Trust, with
postage thereon prepaid, and such notice shall be deemed to be given at the time
when the same shall be deposited in the United States mail. Notice to Trustees
or members of a committee may also be given by telex, telegram, facsimile,
electronic-mail or via overnight courier. If sent by telex or facsimile, notice
to a Trustee or member of a committee shall be deemed to be given upon
transmittal; if sent by telegram, notice to a Trustee or member of a committee
shall be deemed to be given when the telegram, so addressed, is delivered to the
telegraph company; if sent by electronic-mail, notice to a Trustee or member of
a committee shall be deemed to be given and shall be presumed valid when the
Trust's electronic-mail server reflects the electronic-mail message as having
been sent; and if sent via overnight courier, notice to a Trustee or member of a
committee shall be deemed to be given when delivered against a receipt therefor.
4
<PAGE> 5
SECTION 2. Written Waiver. Whenever any notice is required to be given under
the provisions of applicable law or of the Agreement or of these Bylaws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE VI
CERTIFICATES OF SHARES
SECTION 1. Issuance. The Trust may, in its sole discretion, issue a
certificate to any Shareholder, signed by, or in the name of the Trust by, the
President, certifying the number of Shares owned by him, her or it in a Class or
Portfolio of the Trust. No Shareholder shall have the right to demand or require
that a certificate be issued to him, her or it.
SECTION 2. Countersignature. Where a certificate is countersigned (1) by a
transfer agent other than the Trust or its employee, or (2) by a registrar other
than the Trust or its employee, the signature of the President may be a
facsimile.
SECTION 3. Lost Certificates. The Board of Trustees may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Trust alleged to have been lost, stolen
or destroyed, upon the making of an affidavit of the fact by the person claiming
the certificate to be lost, stolen or destroyed. When authorizing such issue of
a new certificate or certificates, the Board of Trustees may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the Trust a bond in such sum as it may direct as indemnity against any
claim that may be made against the Trust with respect to the certificate alleged
to have been lost, stolen or destroyed.
SECTION 4. Transfer of Shares. The Trustees shall make such rules as they
consider appropriate for the transfer of Shares and similar matters. To the
extent certificates are issued in accordance with Section 1 of this Article VI,
upon surrender to the Trust or the transfer agent of the Trust of such
certificate for Shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Trust to issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
SECTION 5. Fixing Record Date. In order that the Trustees may determine the
Shareholders entitled to notice of or to vote at any meeting of Shareholders or
any adjournment thereof, or to express consent to action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution of
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of beneficial interests or for the purpose of any
other lawful action, the Board of Trustees may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Trustees, and which record date shall not be more
than ninety nor less than ten days before the date of such meeting, nor more
than ten days after the date upon which the resolution fixing the record date is
adopted by the Board of Trustees for action by Shareholder consent in writing
without a meeting, nor more than ninety days prior to any other action. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of Shareholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Trustees may fix a new record date for the adjourned
meeting.
SECTION 6. Registered Shareholders. The Trust shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of Shares
to receive dividends, and to vote as such owner, and shall not be bound to
recognize any equitable or other claim of interest in such Share or Shares on
the part of any other person, whether or not it shall have express or other
notice hereof.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. Seal. The business seal shall have inscribed thereon the name of
the business trust, the year of its organization and the word "Business Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced. Any officer or Trustee of the
Trust shall have authority to affix the seal of the Trust to any document
requiring the same.
SECTION 2. Severability. The provisions of these Bylaws are severable. If any
provision hereof shall be held invalid or unenforceable in any jurisdiction,
such invalidity or unenforceability shall attach only to such provision only in
such jurisdiction and shall not affect any other provision of these Bylaws.
SECTION 3. Headings. Headings are placed in these Bylaws for convenience of
reference only and in case of any conflict, the text of these Bylaws rather than
the headings shall control.
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<PAGE> 6
ARTICLE VIII
INDEMNIFICATION
SECTION 1. Indemnification. For the purpose of this Section 1, "Trust"
includes any domestic or foreign predecessor entity of this Trust in a merger,
consolidation, or other transaction in which the predecessor's existence ceased
upon consummation of the transaction; "proceeding" means any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative; and "expenses" includes without limitation
attorney's fees and any expenses of establishing a right to indemnification
under this Section 1.
(a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any proceeding (other than an action by or
in the right of the Trust) by reason of the fact that such person is or was
a Covered Person, against expenses, judgments, fines and amounts paid in
settlements actually and reasonably incurred by such person in connection
with such proceeding, if it is determined that person acted in good faith
and reasonably believed: (a) in the case of conduct in his official
capacity as a Covered Person, that his conduct was in the Trust's best
interests and (b) in all other cases, that his conduct was at least not
opposed to the Trust's best interests and (c) in the case of a criminal
proceeding, that he had no reasonable cause to believe that his conduct was
unlawful. The termination of any proceeding by judgment, order or
settlement shall not, of itself, create a presumption that the person did
not meet the requisite standard of conduct set forth in this Section 1. The
termination of any proceeding by conviction, or a plea of nolo contendere
or its equivalent, or an entry of an order of probation prior to judgment,
creates a rebuttable presumption that the person did not meet the requisite
standard of conduct set forth in this Section 1.
(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any proceeding by or in the right of the
Trust to procure a judgment in its favor by reason of the fact that person
is or was a Covered Person, against expenses actually and reasonably
incurred by that person in connection with the defense or settlement of
such action or suit if that person acted in good faith, in a manner that
person believed to be in the best interests of the Trust and with such
care, including reasonable inquiry, as an ordinarily prudent person in a
like position would use under similar circumstances.
(c) Notwithstanding any provision to the contrary contained herein,
there shall be no right to indemnification for any liability arising by
reason of willful misfeasance, bad faith, gross negligence, or the reckless
disregard of the duties involved in the conduct of the Covered Person's
office with the Trust.
SECTION 2. Advance Payments of Indemnifiable Expenses. To the maximum extent
permitted by law, the Trust or applicable Portfolio may advance to a Covered
Person, in connection with the preparation and presentation of a defense to any
claim, action, suit, or proceeding, expenses for which the Covered Person would
ultimately be entitled to indemnification; provided that the Trust or applicable
Portfolio has received an undertaking by or on behalf of such Covered Person
that such amount will be paid over by him to the Trust or applicable Portfolio
if it is ultimately determined that he is not entitled to indemnification for
such expenses, and further provided that (i) such Covered Person shall have
provided appropriate security for such undertaking, (ii) the Trust is insured
against losses arising out of any such advance payments, or (iii) either a
majority of the Trustees who are not interested persons (as defined in the 1940
Act) of the Trust nor parties to the matter, or independent legal counsel in a
written opinion shall have determined, based upon a review of readily available
facts (as opposed to a full trial-type inquiry) that there is reason to believe
that such Covered Person will not be disqualified from indemnification for such
expenses.
ARTICLE IX
AMENDMENTS
SECTION 1. Amendments. These Bylaws may be altered or repealed at any regular
or special meeting of the Board of Trustees without prior notice. These Bylaws
may also be altered or repealed at any special meeting of the Shareholders, but
only if the Board of Trustees resolves to put a proposed alteration or repealer
to the vote of the Shareholders and notice of such alteration or repealer is
contained in a notice of the special meeting being held for such purpose.
6
<PAGE> 1
EXHIBIT d(5)
AIM EQUITY FUNDS
MASTER INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this day of , , by and
between AIM Equity Funds, a Delaware business trust (the "Trust") with respect
to its series of shares shown on the Appendix A attached hereto, as the same
may be amended from time to time, and A I M Advisors, Inc., a Delaware
corporation (the "Advisor").
RECITALS
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "l940 Act"), as an open-end, diversified management
investment company;
WHEREAS, the Advisor is registered under the Investment Advisers Act of
1940, as amended (the "Advisers Act"), as an investment advisor and engages in
the business of acting as an investment advisor;
WHEREAS, the Trust's Agreement and Declaration of Trust (the "Declaration
of Trust") authorizes the Board of Trustees of the Trust (the "Board of
Trustees") to create separate series of shares of beneficial interest of the
Trust, and as of the date of this Agreement, the Board of Trustees has
created eleven separate series portfolios (such portfolios and any other
portfolios hereafter added to the Trust being referred to collectively herein
as the "Funds"); and
WHEREAS, the Trust and the Advisor desire to enter into an agreement to
provide for investment advisory services to the Funds upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
1. Advisory Services. The Advisor shall act as investment advisor for the
Funds and shall, in such capacity, supervise all aspects of the Funds'
operations, including the investment and reinvestment of cash, securities or
other properties comprising the Funds' assets, subject at all times to the
policies and control of the Board of Trustees. The Advisor shall give the
Trust and the Funds the benefit of its best judgment, efforts and facilities
in rendering its services as investment advisor.
1
<PAGE> 2
2. Investment Analysis and Implementation. In carrying out its obligations
under Section 1 hereof, the Advisor shall:
(a) supervise all aspects of the operations of the Funds;
(b) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Funds,
and whether concerning the individual issuers whose securities are included
in the assets of the Funds or the activities in which such issuers engage,
or with respect to securities which the Advisor considers desirable for
inclusion in the Funds' assets;
(c) determine which issuers and securities shall be represented in the
Funds' investment portfolios and regularly report thereon to the Board of
Trustees;
(d) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Board of Trustees; and
(e) take, on behalf of the Trust and the Funds, all actions which
appear to the Trust and the Funds necessary to carry into effect such
purchase and sale programs and supervisory functions as aforesaid,
including but not limited to the placing of orders for the purchase and
sale of securities for the Funds.
3. Securities Lending Duties and Fees. The Advisor agrees to provide the
following services in connection with the securities lending activities of each
Fund: (a) oversee participation in the securities lending program to ensure
compliance with all applicable regulatory and investment guidelines; (b) assist
the securities lending agent or principal (the "Agent") in determining which
specific securities are available for loan; (c) monitor the Agent to ensure that
securities loans are effected in accordance with the Advisor's instructions and
with procedures adopted by the Board of Trustees; (d) prepare appropriate
periodic reports for, and seek appropriate approvals from, the Board of
Trustees with respect to securities lending activities; (e) respond to Agent
inquiries; and (f) perform such other duties as necessary.
As compensation for such services provided by the Advisor in connection
with securities lending activities of each Fund, a lending Fund shall pay the
Advisor a fee equal to 25% of the net monthly interest or fee income retained or
paid to the Fund from such activities.
4. Delegation of Responsibilities. The Advisor is authorized to delegate
any or all of its rights, duties and obligations under this Agreement to one or
more sub-advisors, and may enter into agreements with sub-advisors, and may
replace any such sub-advisors from time to time in its discretion, in accordance
2
<PAGE> 3
with the 1940 Act, the Advisers Act, and rules and regulations thereunder, as
such statutes, rules and regulations are amended from time to time or are
interpreted from time to time by the staff of the Securities and Exchange
Commission ("SEC"), and if applicable, exemptive orders or similar relief
granted by the SEC and upon receipt of approval of such sub-advisors by the
Board of Trustees and by shareholders (unless any such approval is not required
by such statutes, rules, regulations, interpretations, orders or similar
relief).
5. Independent Contractors. The Advisor and any sub-advisors shall for all
purposes herein be deemed to be independent contractors and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Trust in any way or otherwise be deemed to be an agent of the
Trust.
6. Control by Board of Trustees. Any investment program undertaken by the
Advisor pursuant to this Agreement, as well as any other activities undertaken
by the Advisor on behalf of the Funds, shall at all times be subject to any
directives of the Board of Trustees.
7. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and the Advisers Act and
any rules and regulations adopted thereunder;
(b) the provisions of the registration statement of the Trust, as
the same may be amended from time to time under the Securities Act of 1933
and the 1940 Act;
(c) the provisions of the Declaration of Trust, as the same may be
amended from time to time;
(d) the provisions of the by-laws of the Trust, as the same may be
amended from time to time; and
(e) any other applicable provisions of state, federal or foreign law.
8. Broker-Dealer Relationships. The Advisor is responsible for decisions to
buy and sell securities for the Funds, broker-dealer selection, and negotiation
of brokerage commission rates.
(a) The Advisor's primary consideration in effecting a security
transaction will be to obtain the best execution.
(b) In selecting a broker-dealer to execute each particular
transaction, the Advisor will take the following into consideration: the
best net price available; the reliability, integrity and financial
condition of the broker-dealer; the size of and the difficulty in executing
the order; and the value of the expected contribution of the broker-dealer
to the investment performance of the Funds on a continuing basis.
Accordingly, the price to the Funds
3
<PAGE> 4
in any transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified by other aspects of
the fund execution services offered.
(c) Subject to such policies as the Board of Trustees may from time
to time determine, the Advisor shall not be deemed to have acted unlawfully
or to have breached any duty created by this Agreement or otherwise solely
by reason of its having caused the Funds to pay a broker or dealer that
provides brokerage and research services to the Advisor an amount of
commission for effecting a fund investment transaction in excess of the
amount of commission another broker or dealer would have charged for
effecting that transaction, if the Advisor determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed
in terms of either that particular transaction or the Advisor's overall
responsibilities with respect to a particular Fund, other Funds of the
Trust, and to other clients of the Advisor as to which the Advisor
exercises investment discretion. The Advisor is further authorized to
allocate the orders placed by it on behalf of the Funds to such brokers and
dealers who also provide research or statistical material, or other
services to the Funds, to the Advisor, or to any sub-advisor. Such
allocation shall be in such amounts and proportions as the Advisor shall
determine and the Advisor will report on said allocations regularly to the
Board of Trustees indicating the brokers to whom such allocations have
been made and the basis therefor.
(d) With respect to one or more Funds, to the extent the Advisor does
not delegate trading responsibility to one or more sub-advisors, in making
decisions regarding broker-dealer relationships, the Advisor may take into
consideration the recommendations of any sub-advisor appointed to provide
investment research or advisory services in connection with the Funds, and
may take into consideration any research services provided to such sub-
advisor by broker-dealers.
(e) Subject to the other provisions of this Section 8, the 1940 Act,
the Securities Exchange Act of 1934, and rules and regulations thereunder,
as such statutes, rules and regulations are amended from time to time or
are interpreted from time to time by the staff of the SEC, any exemptive
orders issued by the SEC, and any other applicable provisions of law, the
Advisor may select brokers or dealers with which it or the Funds are
affiliated.
9. Compensation. The compensation that each Fund shall pay the Advisor is
set forth in Appendix B attached hereto.
10. Expenses of the Funds. All of the ordinary business expenses incurred
in the operations of the Funds and the offering of their shares shall be borne
by the Funds unless specifically provided otherwise in this Agreement. These
expenses borne by the Funds include but are not limited to brokerage commis-
4
<PAGE> 5
sions, 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 Funds in connection with membership in investment company organizations
and the cost of printing copies of prospectuses and statements of additional
information distributed to the Funds' shareholders.
11. Services to Other Companies or Accounts. The Trust understands that
the Advisor now acts, will continue to act and may act in the future as
investment manager or advisor to fiduciary and other managed accounts, and as
investment manager or advisor to other investment companies, including any
offshore entities, or accounts, and the Trust has no objection to the Advisor
so acting, provided that whenever the Trust and one or more other investment
companies or accounts managed or advised by the Advisor have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with a formula believed to be equitable to each company and account.
The Trust recognizes that in some cases this procedure may adversely affect
the size of the positions obtainable and the prices realized for the Funds.
12. Non-Exclusivity. The Trust understands that the persons employed by
the Advisor to assist in the performance of the Advisor's duties under this
Agreement will not devote their full time to such service and nothing contained
in this Agreement shall be deemed to limit or restrict the right of the Advisor
or any affiliate of the Advisor to engage in and devote time and attention to
other businesses or to render services of whatever kind or nature. The Trust
further understands and agrees that officers or directors of the Advisor may
serve as officers or trustees of the Trust, and that officers or trustees of
the Trust may serve as officers or directors of the Advisor to the extent
permitted by law; and that the officers and directors of the Advisor are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers, directors
or trustees of any other firm or trust, including other investment advisory
companies.
13. Effective Date, Term and Approval. This Agreement shall become
effective with respect to a Fund, if approved by the shareholders of such Fund,
on the Effective Date for such Fund, as set forth in Appendix A attached hereto.
If so approved, this Agreement shall thereafter continue in force and effect
until June 30, 2001, and may be continued from year to year thereafter, provided
that the continuation of the Agreement is specifically approved at least
annually:
(a) (i) by the Board of Trustees or (ii) by the vote of "a majority
of the outstanding voting securities" of such Fund (as defined in Section
2(a)(42) of the 1940 Act); and
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<PAGE> 6
(b) by the affirmative vote of a majority of the trustees who are not
parties to this Agreement or "interested persons" (as defined in the 1940
Act) of a party to this Agreement (other than as trustees of the Trust), by
votes cast in person at a meeting specifically called for such purpose.
14. Termination. This Agreement may be terminated as to the Trust or as
to any one or more of the Funds at any time, without the payment of any penalty,
by vote of the Board of Trustees or by vote of a majority of the outstanding
voting securities of the applicable Fund, or by the Advisor, on sixty (60) days'
written notice to the other party. The notice provided for herein may be waived
by the party entitled to receipt thereof. This Agreement shall automatically
terminate in the event of its assignment, the term "assignment" for purposes of
this paragraph having the meaning defined in Section 2(a)(4) of the 1940 Act.
15. Amendment. No amendment of this Agreement shall be effective unless it
is in writing and signed by the party against which enforcement of the amendment
is sought.
16. Liability of Advisor and Fund. In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Advisor or any of its officers, directors or
employees, the Advisor shall not be subject to liability to the Trust or to
the Funds or to any shareholder of the Funds for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security. Any
liability of the Advisor to one Fund shall not automatically impart liability on
the part of the Advisor to any other Fund. No Fund shall be liable for the
obligations of any other Fund.
17. Liability of Shareholders. Notice is hereby given that, as provided by
applicable law, the obligations of or arising out of this Agreement are not
binding upon any of the shareholders of the Trust individually but are binding
only upon the assets and property of the Trust and that the shareholders shall
be entitled, to the fullest extent permitted by applicable law, to the same
limitation on personal liability as shareholders of private corporations for
profit.
18. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered, telecopied or mailed postage paid, to the other party
entitled to receipt thereof at such address as such party may designate for the
receipt of such notice. Until further notice to the other party, it is agreed
that the address of the Trust and that of the Advisor shall be 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173.
19. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act or the Advisers Act shall be resolved by
reference to such term or provision of the 1940 Act or the Advisers Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of
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<PAGE> 7
any controlling decision of any such court, by rules, regulations or orders of
the SEC issued pursuant to said Acts. In addition, where the effect of a
requirement of the 1940 Act or the Advisers Act reflected in any provision of
the Agreement is revised by rule, regulation or order of the SEC, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
Subject to the foregoing, this Agreement shall be governed by and construed in
accordance with the laws (without reference to conflicts of law provisions) of
the State of Texas.
20. License Agreement. The Trust shall have the non-exclusive right to
use the name "AIM" to designate any current or future series of shares only so
long as A I M Advisors, Inc. serves as investment manager or advisor to the
Trust with respect to such series of shares.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
written above.
<TABLE>
<S> <C>
AIM Equity Funds
(a Delaware business trust)
Attest:
By:
- ---------------------------------------
Assistant Secretary --------------------------------------
President
(SEAL)
Attest: A I M Advisors, Inc.
- --------------------------------------- By:
Assistant Secretary
--------------------------------------
(SEAL) President
</TABLE>
7
<PAGE> 8
Appendix A
FUNDS AND EFFECTIVE DATES
<TABLE>
<CAPTION>
EFFECTIVE DATE OF
NAME OF FUND ADVISORY AGREEMENT
- ------------ ------------------
<S> <C>
AIM Aggressive Growth Fund........................ May 26, 2000
AIM Blue Chip Fund................................ May 26, 2000
AIM Capital Development Fund...................... May 26, 2000
AIM Charter Fund.................................. May 26, 2000
AIM Constellation Fund............................ May 26, 2000
AIM Dent Demographic Trends Fund.................. May 26, 2000
AIM Emerging Growth Fund.......................... March 30, 2000
AIM Large Cap Basic Value Fund.................... May 26, 2000
AIM Large Cap Growth Fund......................... May 26, 2000
AIM Mid Cap Growth Fund........................... May 26, 2000
AIM Weingarten Fund............................... May 26, 2000
</TABLE>
8
<PAGE> 9
Appendix B
COMPENSATION TO THE ADVISOR
The Trust shall pay the Advisor, out of the assets of a Fund, as full
compensation for all services rendered, an advisory fee for such Fund set forth
below. Such fee shall be calculated by applying the following annual rates to
the average daily net assets of such Fund for the calendar year computed in the
manner used for the determination of the net asset value of shares of such Fund.
AIM AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $150 million.............. 0.80%
Over $150 million............... 0.625%
</TABLE>
AIM BLUE CHIP FUND
AIM CAPITAL DEVELOPMENT FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $350 million.............. 0.75%
Over $350 million............... 0.625%
</TABLE>
AIM CHARTER FUND
AIM CONSTELLATION FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $30 million............... 1.00%
Over $30 million to and
including $150 million........ 0.75%
Over $150 million............... 0.625%
</TABLE>
AIM DENT DEMOGRAPHIC TRENDS FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $2 billion................ 0.85%
Over $2 billion................. 0.80%
</TABLE>
AIM EMERGING GROWTH FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $1 billion................ 0.85%
Over $1 billion................. 0.80%
</TABLE>
AIM LARGE CAP BASIC VALUE FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $1 billion................ 0.60%
Over $1 billion to and including
$2 billion.................... 0.575%
Over $2 billion................. 0.55%
</TABLE>
9
<PAGE> 10
AIM LARGE CAP GROWTH FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $1 billion................ 0.75%
Over $1 billion to and including
$2 billion.................... 0.70%
Over $2 billion................. 0.625%
</TABLE>
AIM MID CAP GROWTH FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $1 billion................ 0.80%
Over $1 billion................. 0.75%
</TABLE>
AIM WEINGARTEN FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $30 million............... 1.00%
Over $30 million to and
including $350 million........ 0.75%
Over $350 million............... 0.625%
</TABLE>
10
<PAGE> 1
EXHIBIT h(21)
AIM EQUITY FUNDS, INC.
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), dated as of
December 30, 1999, is entered into by and between AIM Equity Funds, Inc., a
Maryland corporation (the "Company"), acting on its own behalf and on behalf of
each of its series portfolios, all of which are identified on Schedule A to this
Agreement, and AIM Equity Funds, a Delaware business trust (the "Trust"), acting
on its own behalf and on behalf of each of its series portfolios, all of which
are identified on Schedule A to this Agreement.
BACKGROUND
The Company is organized as a series management investment company and is
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940. The Company currently publicly offers shares of common
stock representing interests in eleven separate series portfolios. Each of these
series portfolios is listed on Schedule A and is referred to in this Agreement
as a "Current Fund."
The Board of Directors of the Company has designated multiple classes of
common stock that represent interests in each Current Fund. Each of these
classes is listed on Schedule B and is referred to in this Agreement as a
"Current Fund Class."
The Company desires to change its form and place of organization by
reorganizing as the Trust. In anticipation of such reorganization (the
"Reorganization"), the Board of Trustees of the Trust has established eleven
series portfolios corresponding to the Current Funds (each a "New Fund"), and
has designated multiple classes of shares of beneficial interest in each New
Fund corresponding to the Current Fund Classes (each a "New Fund Class").
Schedule A lists the New Funds and Schedule B lists the New Fund Classes.
The Reorganization will occur through the transfer of all of the assets of
each Current Fund to the corresponding New Fund. In consideration of its receipt
of these assets, each New Fund will assume all of the liabilities of the
corresponding Current Fund, and will issue to the Current Fund shares of
beneficial interest in the New Fund ("New Fund Shares"). New Fund Shares
received by the Current Fund will have an aggregate net asset value equal to the
aggregate net asset value of the shares of the Current Fund immediately prior to
the Reorganization (the "Current Fund Shares"). The Current Fund will then
distribute the New Fund Shares it has received to its shareholders.
The Reorganization is subject to, and shall be effected in accordance with,
the terms of this Agreement. This Agreement is intended to be and is adopted by
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the Company, on its own behalf and on behalf of the Current Funds, and by the
Trust, on its own behalf and on behalf of the New Funds, as a Plan of
Reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. DEFINITIONS.
Any capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the preamble or background to this Agreement. In addition,
the following terms shall have the following meanings:
1.1 "Assets" shall mean all assets including, without limitation, all
cash, cash equivalents, securities, receivables (including interest and
dividends receivable), claims and rights of action, rights to register shares
under applicable securities laws, books and records, deferred and prepaid
expenses shown as assets on a Current Fund's books, and other property owned by
a Current Fund at the Effective Time.
1.2 "Closing" shall mean the consummation of the transfer of assets,
assumption of liabilities and issuance of shares described in Sections 2.1 and
2.2 of this Agreement, together with the related acts necessary to consummate
the Reorganization, to occur on the date set forth in Section 3.1.
1.3 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.4 "Current Fund" shall mean each of the Company's eleven series
portfolios.
1.5 "Current Fund Class" shall mean each class of common stock of the
Company representing an interest in a Current Fund.
1.6 "Current Fund Shares" shall mean the shares of the Current Funds
outstanding immediately prior to the Reorganization.
1.7 "Effective Time" shall have the meaning set forth in Section 3.1.
1.8 "Liabilities" shall mean all liabilities of a Current Fund including,
without limitation, all debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
determinable at the Effective Time, and whether or not specifically referred to
herein.
1.9 "New Fund" shall mean each of the series portfolios of the Trust, one
of which shall correspond to one of the Current Funds as shown on Schedule A.
1.10 "New Fund Class" shall mean each class representing an interest in a
New Fund, one of which shall correspond to one of the Current Fund Classes as
shown on Schedule B.
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1.11 "New Fund Shares" shall mean those shares of beneficial interest in a
New Fund, issued to a Current Fund in consideration of the New Fund's receipt of
the Current Fund's Assets.
1.12 "Registration Statement" shall have the meaning set forth in Section
5.4
1.13 "RIC" shall mean a regulated investment company under Subchapter M of
the Code.
1.14 "SEC" shall mean the Securities and Exchange Commission.
1.15 "Shareholder(s)" shall mean a Current Fund's shareholder(s) of
record, determined as of the Effective Time.
1.16 "Shareholders' Meeting" shall have the meaning set forth in Section
5.1.
1.17 "Transfer Agent" shall have the meaning set forth in Section 2.2
1.18 "1940 Act" shall mean the Investment Company Act of 1940, as amended.
2. PLAN OF REORGANIZATION.
2.1 The Company agrees, on behalf of each Current Fund, to assign, sell
convey, transfer and deliver all of the Assets of each Current Fund to its
corresponding New Fund. The Trust, on behalf of the each New Fund agrees in
exchange therefor:
(a) to issue and deliver to the Current Fund the number of full and
fractional (rounded to the third decimal place) New Fund Shares for each
New Fund Class designated in Schedule B equal to the number of full and
fractional Current Fund Shares for each corresponding Current Fund Class
designated in Schedule B; and
(b) to assume all of the Current Fund's Liabilities.
Such transactions shall take place at the Closing.
2.2 At the Effective Time (or as soon thereafter as is reasonably
practicable), (a) the New Fund Shares issued pursuant to Section 5.2 shall be
redeemed by each New Fund for $1.00 and (b) each Current Fund shall distribute
the New Fund Shares received by it pursuant to Section 2.1 to the Current Fund's
Shareholders in exchange for such Shareholders' Current Fund Shares. Such
distribution shall be accomplished through opening accounts, by the transfer
agent for the Trust (the "Transfer Agent"), on each New Fund's share transfer
books in the Shareholders' names and transferring New Fund Shares to such
accounts. Each Shareholder's account shall be credited with the respective pro
rata number of full and fractional (rounded to the third decimal place) New
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Fund Shares of each New Fund Class due that Shareholder. All outstanding Current
Fund Shares, including those represented by certificates, shall simultaneously
be canceled on each Current Fund's share transfer books. The Trust shall not
issue certificates representing the New Fund Shares in connection with the
Reorganization. However, certificates representing Current Fund Shares shall
represent New Fund Shares after the Reorganization.
2.3 As soon as reasonably practicable after distribution of the New Fund
Shares pursuant to Section 2.2, the Company shall dissolve its existence as
corporation under Maryland law.
2.4 Any transfer taxes payable on issuance of New Fund Shares in a name
other than that of the registered holder of the Current Fund Shares exchanged
therefor shall be paid by the person to whom such New Fund Shares are to be
issued, as a condition of such transfer.
2.5 Any reporting responsibility of the Company or each Current Fund to a
public authority is, and shall remain its responsibility up to and including the
date on which it is terminated.
3. CLOSING.
3.1 The Closing shall occur at the principal office of the Company on May
26, 2000, or on such other date and at such other place upon which the parties
may agree. All acts taking place at the Closing shall be deemed to take place
simultaneously as of the Company's and the Trust's close of business on the date
of the Closing or at such other time as the parties may agree (the "Effective
Time").
3.2 The Company or its fund accounting agent shall deliver to the Trust at
the Closing, a certificate of an authorized officer verifying that the
information (including adjusted basis and holding period, by lot) concerning the
Assets, including all portfolio securities, transferred by the Current Funds to
the New Funds, as reflected on the New Funds' books immediately following the
Closing, does or will conform to such information on the Current Funds' books
immediately before the Closing. The Company shall cause the custodian for each
Current Fund to deliver at the Closing a certificate of an authorized officer of
the custodian stating that (a) the Assets held by the custodian will be
transferred to each corresponding New Fund at the Effective Time and (b) all
necessary taxes in conjunction with the delivery of the Assets, including all
applicable federal and state stock transfer stamps, if any, have been paid or
provision for payment has been made.
3.3 The Company shall deliver to the Trust at the Closing a list of the
names and addresses of each Shareholder of each Current Fund and the number of
outstanding Current Fund Shares of the Current Fund Class owned by each
Shareholder, all as of the Effective Time, certified by the Company's Secretary
or Assistant Secretary. The Trust shall cause the Transfer Agent to deliver at
the
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Closing a certificate as to the opening on each New Fund's share transfer books
of accounts in the Shareholders' names. The Trust shall issue and deliver a
confirmation to the Company evidencing the New Fund Shares to be credited to
each corresponding Current Fund at the Effective Time or provide evidence
satisfactory to the Company that such shares have been credited to each Current
Fund's account on such books. At the Closing, each party shall deliver to the
other such bills of sale, checks, assignments, stock certificates, receipts, or
other documents as the other party or its counsel may reasonably request.
3.4 The Company and the Trust shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Company represents and warrants on its own behalf and on behalf of
each Current Fund as follows:
(a) The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Maryland, and its Charter
is on file with the Maryland Department of Assessments and Taxation;
(b) The Company is duly registered as an open-end series management
investment company under the 1940 Act, and such registration is in full
force and effect;
(c) Each Current Fund is a duly established and designated series of
the Company;
(d) At the Closing, each Current Fund will have good and marketable
title to its Assets and full right, power, and authority to sell, assign,
transfer, and deliver its Assets free of any liens or other encumbrances;
and upon delivery and payment for the Assets, the corresponding New Fund
will acquire good and marketable title to the Assets;
(e) The New Fund Shares are not being acquired for the purpose of
making any distribution thereof, other than in accordance with the terms
hereof;
(f) Each Current Fund is a "fund" as defined in Section 851(g)(2) of
the Code; each Current Fund qualified for treatment as a RIC for each past
taxable year since it commenced operations and will continue to meet all
the requirements for such qualification for its current taxable year (and
the Assets will be invested at all times through the Effective Time in a
manner that ensures compliance with the foregoing); each Current Fund has
no earnings and profits accumulated in any taxable year in which the
provisions
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of Subchapter M did not apply to it; and each Current Fund has made all
distributions for each such past taxable year that are necessary to avoid
the imposition of federal excise tax or has paid or provided for the
payment of any excise tax imposed for any such year;
(g) There is no plan or intention of the Shareholders who individually
own 5% or more of any Current Fund Shares and, to the best of the Company's
knowledge, there is no plan or intention of the remaining Shareholders to
redeem or otherwise dispose of any New Fund Shares to be received by them
in the Reorganization. The Company does not anticipate dispositions of
those shares at the time of or soon after the Reorganization to exceed the
usual rate and frequency of redemptions of shares of the Current Fund as a
series of an open-end investment company. Consequently, the Company is not
aware of any plan that would cause percentage of Shareholder interests, if
any, that will be disposed of as a result of or at the time of the
Reorganization will be one percent (1%) or more of the shares of the
Current Fund outstanding as of the Effective Time;
(h) The Liabilities were incurred by the Current Funds in the ordinary
course of their business and are associated with the Assets;
(i) The Company is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case within
the meaning of Section 368(a)(3)(A) of the Code;
(j) As of the Effective Time, no Current Fund will have outstanding
any warrants, options, convertible securities, or any other type of rights
pursuant to which any person could acquire Current Fund Shares except for
the right of investors to acquire its shares at net asset value in the
normal course of its business as an open-end diversified management
investment company operating under the 1940 Act;
(k) At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by the Company's
shareholders; and
(l) Throughout the five-year period ending on the date of the Closing,
each Current Fund will have conducted its historic business within the
meaning of Section 1.368-1(d) of the Income Tax Regulations under the Code
in a substantially unchanged manner;
(m) The fair market value of the Assets of each Current Fund
transferred to the corresponding New Fund will equal or exceed the sum of
the Liabilities assumed by the New Fund plus the amount of Liabilities, if
any, to which the transferred Assets are subject.
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4.2 The Trust represents and warrants on its own behalf, and on behalf of
each New Fund as follows:
(a) The Trust is a business trust duly organized, validly existing,
and in good standing under the laws of the State of Delaware, and its
Certificate of Trust has been duly filed in the office of the Secretary of
State of Delaware;
(b) At the Effective Time, the Trust will succeed to the Company's
registration statement filed under the 1940 Act with the SEC and thus will
become duly registered as an open-end management investment company under
the 1940 Act;
(c) At the Effective Time, each New Fund will be a duly established
and designated series of the Trust;
(d) No New Fund has commenced operations nor will it commence
operations until after the Closing;
(e) Prior to the Effective Time, there will be no issued and
outstanding shares in any New Fund or any other securities issued by the
Trust on behalf of any New Fund, except as provided in Section 5.2;
(f) No consideration other than New Fund Shares (and the New Fund's
assumption of the Liabilities) will be issued in exchange for the Assets in
the Reorganization;
(g) The New Fund Shares to be issued and delivered to the
corresponding Current Fund hereunder will, at the Effective Time, have been
duly authorized and, when issued and delivered as provided herein, will be
duly and validly issued and outstanding shares of the New Fund, fully paid
and non-assessable;
(h) Each New Fund will be a "fund" as defined in Section 851(g)(2) of
the Code and will meet all the requirements to qualify for treatment as a
RIC for its taxable year in which the Reorganization occurs;
(i) The Trust, on behalf of the New Funds, has no plan or intention to
issue additional New Fund Shares following the Reorganization except for
shares issued in the ordinary course of its business as a series of an
open-end investment company; nor does the Trust, on behalf of the New
Funds, have any plan or intention to redeem or otherwise reacquire any New
Fund Shares issued pursuant to the Reorganization, other than in the
ordinary course of its business or to the extent necessary to comply with
its legal obligation under Section 22(e) of the 1940 Act;
(j) Each New Fund will actively continue the corresponding Current
Fund's business in substantially the same manner that the Current Fund
conducted that business immediately before the Reorganization; and no New
Fund has any plan or intention to sell or otherwise dispose of any of the
Assets, except for dispositions made in the ordinary course of its business
or
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dispositions necessary to maintain its qualification as a RIC, although in
the ordinary course of its business the New Fund will continuously review
its investment portfolio (as each Current Fund did before the
Reorganization) to determine whether to retain or dispose of particular
stocks or securities, including those included in the Assets;
(k) There is no plan or intention for any of the New Funds to be
dissolved or merged into another corporation or business trust or "fund"
thereof (within the meaning of section 851(g)(2) of the Code) following the
Reorganization; and
4.3 Each of the Company and the Trust, on its own behalf and on behalf of
each Current Fund or each New Fund, as appropriate, represents and warrants as
follows:
(a) The fair market value of the New Fund Shares of each New Fund
received by each Shareholder will be equal to the fair market value of the
Current Fund Shares of the corresponding Current Fund surrendered in
exchange therefor;
(b) Immediately following consummation of the Reorganization, the
Shareholders will own all the New Fund Shares of each New Fund and will own
such shares solely by reason of their ownership of the Current Fund Shares
of the corresponding Current Fund immediately before the Reorganization;
(c) The Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization;
(d) There is no intercompany indebtedness between a Current Fund and a
New Fund that was issued or acquired, or will be settled, at a discount;
and
(e) Immediately following consummation of the Reorganization, each New
Fund will hold the same assets, except for assets distributed to
shareholders in the course of its business as a RIC and assets used to pay
expenses incurred in connection with the Reorganization, and be subject to
the same liabilities that the corresponding Current Fund held or was
subject to immediately prior to the Reorganization. Assets used to pay (i)
expenses, (ii) all redemptions (other than redemptions at the usual rate
and frequency of the Current Fund as a series of an open-end investment
company), and (iii) distributions (other than regular, normal
distributions), made by a Current Fund after the date of this Agreement
will, in the aggregate, constitute less than one percent (1%) of its net
assets.
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5. COVENANTS
5.1 As soon as practicable after the date of this Agreement, the Company
shall call a meeting of its Shareholders (the "Shareholders Meeting") to
consider and act on this Agreement. The Board of Directors of the Company shall
recommend that Shareholders approve this Agreement and the transactions
contemplated by this Agreement. Approval by Shareholders of this Agreement will
authorize the Company, and the Company hereby agrees, to vote on the matters
referred to in Sections 5.2 and 5.3.
5.2 The Trust's trustees shall authorize the issuance of, and each New
Fund shall issue, prior to the Closing, one New Fund Share in each New Fund
Class of each New Fund to the Company in consideration of the payment of $1.00
per share for the purpose of enabling the Company to elect the Company's
directors as the Trust's trustees (to serve without limit in time, except as
they may resign or be removed by action of the Trust's trustees or
shareholders), to ratify the selection of the Trust's independent accountants,
and to vote on the matters referred to in Section 5.3;
5.3 Immediately prior to the Closing, the Trust (on its own behalf of and
with respect to each New Fund or each New Fund Class, as appropriate) shall
enter into a Master Investment Advisory Agreement, a Master Sub-Advisory
Agreement, a Master Administrative Services Agreement, Master Distribution
Agreements, a Custodian Agreement and a Transfer Agency and Servicing Agreement;
shall adopt plans of distribution pursuant to Rule 12b-1 of the 1940 Act, a
multiple class plan pursuant to Rule 18f-3 of the 1940 Act and shall enter into
or adopt, as appropriate, such other agreements and plans as are necessary for
each New Fund's operation as a series of an open-end investment company. Each
such agreement and plan shall have been approved by the Trust's trustees and, to
the extent required by law, by such of those trustees who are not "interested
persons" of the Trust (as defined in the 1940 Act) and by the Company as the
sole shareholder of each New Fund.
5.4 The Company or the Trust, as appropriate, shall file with the SEC one
or more post-effective amendments to the Company's Registration Statement on
Form N-1A under the Securities Act of 1933, as amended, and the 1940 Act, as
amended (the "Registration Statement"), (i) which contain such amendments to
such Registration Statement as are determined by the Company to be necessary and
appropriate to effect the Reorganization and (ii) pursuant to which the Trust
adopts such Registration Statement, as so amended, as its own, and shall use its
best efforts to have such post-effective amendment or amendments to the
Registration Statement become effective as of the Closing.
6. CONDITIONS PRECEDENT.
The obligations of the Company, on its own behalf and on behalf of each
Current Fund, and the Trust, on its own behalf and on behalf of each New Fund,
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will be subject to (a) performance by the other party of all its obligations to
be performed hereunder at or before the Effective Time, (b) all representations
and warranties of the other party contained herein being true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated hereby, as of the Effective Time, with the same
force and effect as if made on and as of the Effective Time, and (c) the further
conditions that, at or before the Effective Time:
6.1 The Shareholders of the Company shall have approved this Agreement and
the transactions contemplated by this Agreement in accordance with applicable
law.
6.2 All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. All consents, orders, and permits of federal,
state, and local regulatory authorities (including the SEC and state securities
authorities) deemed necessary by either the Company or the Trust to permit
consummation, in all material respects, of the transactions contemplated hereby
shall have been obtained, except where failure to obtain such consults, orders,
and permits would not involve a risk of a material adverse effect on the assets
or properties of either a Current Fund or a New Fund, provided that either the
Company or the Trust may for itself waive any of such conditions.
6.3 Each of the Company and the Trust shall have received an opinion from
Ballard Spahr Andrews & Ingersoll, LLP as to the federal income tax consequences
mentioned below. In rendering such opinion, such counsel may rely as to factual
matters, exclusively and without independent verification, on the
representations made in this Agreement (or in separate letters of representation
that the Company and the Trust shall use their best efforts to deliver to such
counsel) and the certificates delivered pursuant to Section 3.4. Such opinion
shall be substantially to the effect that, based on the facts and assumptions
stated therein and conditioned on consummation of the Reorganization in
accordance with this Agreement, for federal income tax purposes:
(a) The Reorganization will constitute a reorganization within the
meaning of section 368(a) of the Code, and each Current Fund and each New
Fund will be "a party to a reorganization" within the meaning of section
368(b) of the Code;
(b) No gain or loss will be recognized to a Current Fund on the
transfer of the Assets to the corresponding New Fund in exchange solely for
New Fund Shares and the New Fund's assumption of the Liabilities or on the
subsequent distribution of New Fund Shares to the Shareholders, in
constructive exchange for their Current Fund Shares, in liquidation of the
Current Fund;
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(c) No gain or loss will be recognized to a New Fund on its receipt of
the Assets in exchange for New Fund Shares and its assumption of the
Liabilities;
(d) Each New Fund's basis for the Assets will be the same as the basis
thereof in the corresponding Current Fund's hands immediately before the
Reorganization, and the New Fund's holding period for the Assets will
include the Current Fund's holding period therefor;
(e) A Shareholder will recognize no gain or loss on the constructive
exchange of Current Fund Shares solely for New Fund Shares pursuant to the
Reorganization; and
(f) A Shareholder's basis for the New Fund Shares of each New Fund to
be received in the Reorganization will be the same as the basis for the
Current Fund Shares of the corresponding Current Fund to be constructively
surrendered in exchange for such New Fund Shares, and a Shareholder's
holding period for such New Fund Shares will include its holding period for
the Current Fund Shares constructively surrendered, provided that the New
Fund Shares are held as capital assets by the Shareholder at the Effective
Time.
6.4 No stop-order suspending the effectiveness of the Registration
Statement shall have been issued, and no proceeding for that purpose shall have
been initiated or threatened by the SEC (and not withdrawn or terminated).
At any time prior to the Closing, any of the foregoing conditions (except
those set forth in Section 6.1) may be waived by the directors/trustees of
either the Company or the Trust if, in their judgment, such waiver will not have
a material adverse effect on the interests of the Current Fund's shareholders.
7. EXPENSES.
Except as otherwise provided in Section 4.3(c), all expenses incurred in
connection with the transactions contemplated by this Agreement (regardless of
whether they are consummated) will be borne by the parties as they mutually
agree.
8. ENTIRE AGREEMENT.
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties.
9. AMENDMENT.
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding its approval by the Company's Shareholders, in such manner as
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may be mutually agreed upon in writing by the parties; provided that following
such approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
10. TERMINATION.
This Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by the Company's Shareholders:
10.1 By either the Company or the Trust (a) in the event of the other
party's material breach of any representation, warranty, or covenant contained
herein to be performed at or prior to the Effective Time, (b) if a condition to
its obligations has not been met and it reasonably appears that such condition
will not or cannot be met, or (c) if the Closing has not occurred on or before
July 31, 2000; or
10.2 By the parties' mutual agreement.
Except as otherwise provided in Section 7, in the event of termination
under Sections 10.1(c) or 10.2, there shall be no liability for damages on the
part of either the Company or the Trust or any Current Fund or corresponding New
Fund, to the other.
11. MISCELLANEOUS.
11.1 This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware; provided that, in the case of any
conflict between such laws and the federal securities laws, the latter shall
govern.
11.2 Nothing expressed or implied herein is intended or shall be construed
to confer upon or give any person, firm, trust, or corporation other than the
parties and their respective successors and assigns any rights or remedies under
or by reason of this Agreement.
11.3 The execution and delivery of this Agreement have been authorized by
the Trust's trustees, and this Agreement has been executed and delivered by
authorized officers of the Trust acting as such; neither such authorization by
such trustees nor such execution and delivery by such officers shall be deemed
to have been made by any of them individually or to impose any liability on any
of them or any shareholder of the Trust personally, but shall bind only the
assets and property of the New Funds, as provided in the Trust's Agreement and
Declaration of Trust.
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IN WITNESS WHEREOF, each party has caused this Agreement to be executed and
delivered by its duly authorized officers as of the day and year first written
above.
<TABLE>
<S> <C>
Attest: AIM EQUITY FUNDS, INC.,
/s/ NANCY L. MARTIN on behalf of each of its series
- --------------------------------------- listed in Schedule A to this
Agreement
By: /s/ ROBERT H. GRAHAM
-----------------------------------
Title: President
-----------------------------------
Attest: AIM EQUITY FUNDS
/s/ NANCY L. MARTIN on behalf of each of its series
- --------------------------------------- listed in Schedule A to this
Agreement
By: /s/ ROBERT H. GRAHAM
-----------------------------------
Title: President
-----------------------------------
</TABLE>
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SCHEDULE A
<TABLE>
<CAPTION>
SERIES OF AIM EQUITY FUNDS, INC. CORRESPONDING SERIES OF AIM EQUITY FUNDS
(EACH A "CURRENT FUND") (EACH A "NEW FUND")
- -------------------------------- ----------------------------------------
<S> <C>
AIM Aggressive Growth Fund AIM Aggressive Growth Fund
AIM Blue Chip Fund AIM Blue Chip Fund
AIM Capital Development Fund AIM Capital Development Fund
AIM Charter Fund AIM Charter Fund
AIM Constellation Fund AIM Constellation Fund
AIM Dent Demographic Trends Fund AIM Dent Demographic Trends Fund
AIM Emerging Growth Fund AIM Emerging Growth Fund
AIM Large Cap Basic Value Fund AIM Large Cap Basic Value Fund
AIM Large Cap Growth Fund AIM Large Cap Growth Fund
AIM Mid Cap Growth Fund AIM Mid Cap Growth Fund
AIM Weingarten Fund AIM Weingarten Fund
</TABLE>
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SCHEDULE B
<TABLE>
<CAPTION>
CLASSES OF EACH CURRENT FUND CORRESPONDING CLASSES OF EACH NEW FUND
- ---------------------------- --------------------------------------
<S> <C>
AIM Aggressive Growth Fund AIM Aggressive Growth Fund
Class A Shares Class A Shares
Class B Shares Class B Shares
Class C Shares Class C Shares
AIM Blue Chip Fund AIM Blue Chip Fund
Class A Shares Class A Shares
Class B Shares Class B Shares
Class C Shares Class C Shares
AIM Capital Development Fund AIM Capital Development Fund
Class A Shares Class A Shares
Class B Shares Class B Shares
Class C Shares Class C Shares
AIM Charter Fund AIM Charter Fund
Class A Shares Class A Shares
Class B Shares Class B Shares
Class C Shares Class C Shares
Institutional Class Shares Institutional Class Shares
AIM Constellation Fund AIM Constellation Fund
Class A Shares Class A Shares
Class B Shares Class B Shares
Class C Shares Class C Shares
Institutional Class Shares Institutional Class Shares
AIM Dent Demographic Trends Fund AIM Dent Demographic Trends Fund
Class A Shares Class A Shares
Class B Shares Class B Shares
Class C Shares Class C Shares
AIM Emerging Growth Fund AIM Emerging Growth Fund
Class A Shares Class A Shares
Class B Shares Class B Shares
Class C Shares Class C Shares
AIM Large Cap Basic Value Fund AIM Large Cap Basic Value Fund
Class A Shares Class A Shares
Class B Shares Class B Shares
Class C Shares Class C Shares
AIM Large Cap Growth Fund AIM Large Cap Growth Fund
Class A Shares Class A Shares
Class B Shares Class B Shares
Class C Shares Class C Shares
AIM Mid Cap Growth Fund AIM Mid Cap Growth Fund
Class A Shares Class A Shares
Class B Shares Class B Shares
Class C Shares Class C Shares
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
CLASSES OF EACH CURRENT FUND CORRESPONDING CLASSES OF EACH NEW FUND
- ---------------------------- --------------------------------------
<S> <C>
AIM Weingarten Fund AIM Weingarten Fund
Class A Shares Class A Shares
Class B Shares Class B Shares
Class C Shares Class C Shares
Institutional Class Shares Institutional Class Shares
</TABLE>
16
<PAGE> 1
EXHIBIT i(7)
[LETTERHEAD OF BALLARD SPAHR ANDREWS & INGERSOLL, LLP]
March 24, 2000
AIM Equity Funds
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
Re: AIM Equity Funds
Registration Statement on Form N-1A
Gentlemen:
We have acted as counsel to AIM Equity Funds, a business
trust organized under the laws of the State of Delaware (the "Trust") and
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end, series management investment company.
The Board of Trustees of the Trust has deemed it advisable
for the Trust to acquire all of the assets and assume all of the liabilities of
each of the eleven series portfolios (each, a "Predecessor Fund") of AIM Equity
Funds, Inc., a Maryland corporation (the "Company"), pursuant to an Agreement
and Plan of Reorganization (the "Reorganization").
Upon consummation of the Reorganization, the Trust will
be the successor issuer to the Company. Pursuant to Rule 414 under the
Securities Act of 1933, as amended (the "1933 Act"), the Trust is adopting the
Registration Statement of the Company as its own for all purposes of the 1933
Act and the Securities Exchange Act of 1934, as amended, and is filing
Post-Effective Amendment No. 64 under the 1933 Act and Amendment No. 64 under
the 1940 Act to the Company's currently effective Registration Statement on
Form N-1A (collectively, the "Registration Statement"). The Registration
Statement registers an indefinite number of Class A, Class B and Class C
shares, and with respect to AIM Charter Fund, AIM Constellation Fund and AIM
Weingarten Fund, Institutional Class shares, of beneficial interest, par value
$0.001 per share (the "Shares"), representing interests in each of the eleven
series portfolios of the Trust (each, a "New Fund").
In connection with our giving this opinion, we have
examined copies of the Trust's Certificate of Trust, Agreement and Declaration
of Trust (the "Trust Agreement") and resolutions of the Board of Trustees
adopted December 8, 1999, and originals or copies, certified or otherwise
identified to our satisfaction, of such other documents, records and other
instruments as we have deemed necessary or advisable for purposes of this
opinion. We have also examined the prospectuses for the New Funds, which are
included in the Registration Statement, substantially in the form in which they
are to become effective (the "Prospectuses"). As to various questions of fact
material to our opinion, we have relied upon information provided by officers
of the Trust.
<PAGE> 2
AIM Equity Funds
March 24, 2000
Page 2
Based on the foregoing and provided that the shareholders
of the Company approve the Reorganization and that the Registration Statement
becomes effective, we are of the opinion that the Shares of each New Fund to be
issued to shareholders of the corresponding Predecessor Fund in the
Reorganization, upon receipt of the consideration set forth in the Agreement
and Plan of Reorganization, will be legally issued, fully paid and
nonassessable. In addition, based on the foregoing and provided that the
Registration Statement becomes effective, we are of the opinion that the Shares
of each New Fund to be offered for sale from time to time pursuant to the
Prospectuses are duly authorized and, when sold, issued and paid for as
described in the Prospectuses, will be legally issued, fully paid and
nonassessable.
We express no opinion concerning the laws of any
jurisdiction other than the federal law of the United States of America and the
Delaware Business Trust Act.
Both the Delaware Business Trust Act and the Trust
Agreement provide that shareholders of the Trust shall be entitled to the same
limitation on personal liability as is extended under the Delaware General
Corporation Law to stockholders of private corporations for profit. There is a
remote possibility, however, that, under certain circumstances, shareholders of
a Delaware business trust may be held personally liable for that trust's
obligations to the extent that the courts of another state which does not
recognize such limited liability were to apply the laws of such state to a
controversy involving such obligations. The Trust Agreement also provides for
indemnification out of property of a New Fund for all loss and expense of any
shareholder held personally liable for the obligations of the New Fund.
Therefore, the risk of any shareholder incurring financial loss beyond his
investment due to shareholder liability is limited to circumstances in which a
New Fund is unable to meet its obligations and the express limitation of
shareholder liabilities is determined not to be effective.
We consent to the filing of this opinion as an exhibit to
the Registration Statement and to the use of our name and to the references to
our firm under the caption "Miscellaneous Information - Legal Matters" in the
Statements of Additional Information for the Retail Classes of the Funds and
the Institutional Classes of AIM Charter Fund, AIM Constellation Fund and AIM
Weingarten Fund, which are included in the Registration Statement.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll, LLP
<PAGE> 1
EXHIBIT j(2)
INDEPENDENT AUDITORS' CONSENT
To the Shareholders and Board of Trustees
AIM Equity Funds:
We consent to the use of our reports on AIM Aggressive Growth Fund, AIM Blue
Chip Fund, AIM Capital Development Fund, AIM Charter Fund, AIM Constellation
Fund, AIM Dent Demographic Trends Fund, AIM Large Cap Basic Value Fund, AIM
Large Cap Growth Fund and AIM Weingarten Fund (portfolios of AIM Equity Funds)
dated December 3, 1999 included herein and the references to our firm under the
heading "Financial Highlights" in the Prospectuses and "Audit Reports" in the
Statements of Additional Information.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
March 27, 2000
