<PAGE> 1
As filed with the Securities and Exchange Commission on September 27, 1999
1933 Act Registration No. 333-47949
1940 Act Registration No. 811-08697
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 4 X
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and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
---
Amendment No. 5 X
---
(Check appropriate box or boxes.)
AIM SPECIAL OPPORTUNITIES FUNDS
--------------------------------------------------
(Exact name of Registrant as Specified in Charter)
11 Greenway Plaza, Suite 100, Houston, TX 77046
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(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:
Renee A. Friedli, 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 Philadelphia, Pennsylvania 19103-7599
<TABLE>
<CAPTION>
<S> <C>
Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this
Registration Statement
</TABLE>
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
---
X on September 27, 1999, pursuant to paragraph (b)
---
60 days after filing pursuant to paragraph (a)(1)
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on (date) pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a)(2) of rule 485.
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(Continued on Next Page)
<PAGE> 2
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: Shares of Beneficial Interest.
<PAGE> 3
AIM LARGE CAP
OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
AIM Large Cap Opportunities Fund seeks long-term growth of capital.
PROSPECTUS --Registered Trademark--
SEPTEMBER 27, 1999
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.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 4
--------------------------------
AIM LARGE CAP OPPORTUNITIES 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 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
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-5
Pricing of Shares A-6
Taxes A-6
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 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> 5
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AIM LARGE CAP OPPORTUNITIES FUND
--------------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital. The fund's
investment objective may be changed by the fund's Board of Trustees without
shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 65% of
its total assets in securities of companies involving a special opportunity,
i.e., an unusual development in a company or group of companies. A special
opportunity may involve:
o a technological advance or discovery, the offering of a new or unique product
or service, or changes in consumer demand or consumption forecasts;
o changes in the competitive outlook or growth potential of an industry or a
company within an industry, including changes in scope or nature of foreign
competition or development of an emerging industry;
o new or changed management, or material changes in management policies or
corporate structure;
o significant economic or political occurrences,
including changes in foreign or domestic import and tax laws or other
regulations; or
o other events, including a major change in demographic
patterns, favorable litigation settlements, or natural disasters.
The fund will invest at least 65% of its total assets in equity securities, or
securities convertible into equity securities, of companies with market
capitalizations, at the time of purchase, within the range of market
capitalizations of companies included in the Russell 1000--Registered
Trademark-- Growth Index. The Russell 1000--Registered Trademark-- Growth Index
measures the performance of those securities in the Russell 1000--Registered
Trademark-- Index with a greater than average growth orientation (524 securities
as of August 31, 1999). The Russell 1000--Registered Trademark-- Index 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. The fund may also invest up to
25% of its total assets in foreign securities.
The fund may sell put and covered call options, and purchase put and call
options, on securities, securities indices and foreign currencies. An option is
a contract that gives the holder the right to buy (call) or sell (put) a certain
number of shares of a specific security at a specified price (exercise price)
for a limited amount of time. A call option is covered if the fund owns the
shares it would have to deliver if the holder of the call option exercised the
option. The fund may invest in options in order to increase its return i.e.,
invest for speculative purposes and/or to protect the value of its portfolio.
The fund may sell securities short, which means selling a security it does not
yet own in anticipation of purchasing the same security at a later date at a
lower price. The fund may also borrow money to purchase securities, a practice
known as "leveraging."
The portfolio managers purchase securities of companies involving a special
opportunity that they believe have the potential for above-average growth in
revenues and 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.
The fund is non-diversified. 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.
The portfolio may engage in active or frequent trading of portfolio securities
to achieve its investment objective. If the portfolio 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 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.
If the fund purchases a put or call option that expires without value, the
fund will have incurred an expense in the amount of the cost of the option. If
the fund sells a put option that is exercised, the fund will have to purchase
the security at a price greater than its market value. If the fund sells a call
option that is exercised, the fund will have to sell the security at a price
lower than its market value.
If the fund borrows money to buy securities (leverages) and the prices of
those securities decrease, or if the cost of borrowing exceeds any increases in
the prices of those securities, the net asset value of the fund's shares will
decrease faster than if the fund had not used leverage. To repay borrowings, the
fund may have to sell securities at a time and at a price that is unfavorable to
the fund. Interest on borrowings is an expense the fund would not otherwise
incur.
If the fund sells a security short, and the security increases in value, the
fund will have to pay the higher price to purchase the security. Since there is
no limit on how much the price of the security can increase, the fund's exposure
is unlimited. The more the fund pays to purchase the security, the more it will
lose on the transaction, and the more the price of your shares will be affected.
The fund will also incur transaction costs to engage in this practice.
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
1
<PAGE> 6
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AIM LARGE CAP OPPORTUNITIES FUND
--------------------------------
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 it is non-diversified, the fund may invest in fewer issuers than if it
were a diversified fund. Thus, the value of the fund's shares may vary more
widely, and the fund may be subject to greater market and credit risk, than if
the fund invested more broadly.
The fund may participate in the Initial Public Offering (IPO) market, and a
significant portion of the fund's returns consequently may be attributable to
its investment in IPOs, which 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.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
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.
2
<PAGE> 7
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AIM LARGE CAP OPPORTUNITIES 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 1.00% 1.00% 1.00%
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 1.83% 2.52% 2.52%
- -------------------------------------------------------
</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 period.
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 $726 $1,094
Class B 755 1,085
Class C 355 785
- -------------------------
</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 $726 $1,094
Class B 255 785
Class C 255 785
- -------------------------
</TABLE>
3
<PAGE> 8
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AIM LARGE CAP OPPORTUNITIES 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 125
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
1.00% of the first $1 billion of average daily net assets and 0.95% 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
- - Brant H. DeMuth, 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 for Van Wagoner
Capital Management. From 1995 to 1997, he was Associate Portfolio Manager at
Van Kampen American Capital Asset Management, Inc. From 1993 to 1995, he was
Assistant Portfolio Manager with Hellman, Jordan Management Company.
- - 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 Large Cap Opportunities Fund are subject to
the maximum 5.50% initial sales charge as listed under the heading "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
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 (including
any net gains from foreign currency transactions), if any, annually.
4
<PAGE> 9
AIM SPECIAL OPPORTUNITIES 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 AIM
Large Cap Opportunities Fund, AIM Mid Cap Opportunities Fund and AIM Small Cap
Opportunities Fund (the Special Opportunities Funds).
CHOOSING A SHARE CLASS
The Special Opportunities 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(1) charge on redemptions within charge on redemptions within
six years one year(1)
- - 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
- - 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 Small Cap Opportunities Fund will not accept any single purchase
order in excess of $250,000.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12b-1) FEES
The Special Opportunities Funds have adopted 12b-1 plans that allow them to pay
distribution fees to A I M Distributors, Inc. (the distributor) for the sale and
distribution of their shares and fees for services provided to shareholders, all
or a substantial portion of which are paid to the dealer of record. Because the
Special Opportunities Funds pay these fees out of their 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.
A- 1 SOF--09/99
<PAGE> 10
AIM SPECIAL OPPORTUNITIES FUNDS
SALES CHARGES
Sales charges on the Special Opportunities Funds are detailed below. As used
below, the term "offering price" with respect to Class A shares includes the
initial sales charge.
INITIAL SALES CHARGES
The Special Opportunities Funds are subject to the following initial sales
charges:
<TABLE>
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION(1) 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>
(1) AIM Small Cap Opportunities Fund will not accept any single purchase order
in excess of $250,000.
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, 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 the 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.
SOF--09/99 A- 2
<PAGE> 11
AIM SPECIAL OPPORTUNITIES FUNDS
PURCHASING SHARES
MINIMUM INVESTMENTS PER SPECIAL OPPORTUNITIES FUND ACCOUNT
The minimum initial investment for Special Opportunities Fund accounts is
$10,000. The minimum subsequent investment is $1,000. The maximum amount for a
single purchase order of AIM Small Cap Opportunities Fund is $250,000.
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
<TABLE>
<CAPTION>
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 transfer slip from your confirmation statement
agent, to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application to Call the transfer agent to receive a
the transfer agent. Call the transfer reference number. Then, use the wire
agent at (800) 959-4246 to receive a instructions at left.
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
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the transfer
agent to place your purchase order.
- -----------------------------------------------------------------------------------------------------------
</TABLE>
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the Special Opportunities
Funds by authorizing the 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
$1,000. 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 your Special Opportunities 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 Special Opportunities Fund is $1,000. The minimum
amount you can exchange to any other 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
A- 3 SOF--09/99
<PAGE> 12
AIM SPECIAL OPPORTUNITIES FUNDS
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
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (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.
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 redeem by telephone. The transfer agent must
receive your call during the hours the New York Stock
Exchange (NYSE) is open for business 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.
SOF--09/99 A- 4
<PAGE> 13
AIM SPECIAL OPPORTUNITIES FUNDS
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.
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, 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. 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 provided incorrect information in
opening an account or in the course of conducting subsequent transactions, 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 from 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
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 WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares of the Special Opportunities Funds for Class A shares of
another AIM Fund or AIM Cash Reserve Shares of AIM Money Market Fund; or
(2) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(3) 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 and maximum 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
A- 5 SOF--09/99
<PAGE> 14
AIM SPECIAL OPPORTUNITIES FUNDS
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 the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
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.
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.
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
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' shares may change on days when you will not be able to purchase
or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. 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.
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.
SOF--09/99 A- 6
<PAGE> 15
--------------------------------
AIM LARGE CAP OPPORTUNITIES 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 Opportunities Fund
SEC 1940 Act file number: 811-08697
- ------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com LCO-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 16
AIM MID CAP
OPPORTUNITIES FUND
--------------------------------------------------------------------------
AIM Mid Cap Opportunities Fund seeks long-term growth of capital.
PROSPECTUS --Registered Trademark--
SEPTEMBER 27, 1999
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.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 17
------------------------------
AIM MID CAP OPPORTUNITIES 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 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-5
Pricing of Shares A-6
Taxes A-6
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 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> 18
------------------------------
AIM MID CAP OPPORTUNITIES FUND
------------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet its objective by investing, normally, at least 80% of
its total assets in securities of companies involving a special opportunity,
i.e., an unusual development in a company or group of companies. A special
opportunity may involve:
o a technological advance or discovery, the offering of a new or unique
product or service, or changes in consumer demand or consumption forecasts;
o changes in the competitive outlook or growth potential of an industry or a
company within an industry, including changes in scope or nature of foreign
competition or development of an emerging industry;
o new or changed management, or material changes in management policies or
corporate structure;
o significant economic or political occurrences, including changes in foreign
or domestic import and tax laws or other regulations; or
o other events, including a major change in demographic patterns, favorable
litigation settlements, or natural disasters.
The fund will invest at least 80% of its total assets in equity securities, or
securities convertible into equity securities, of companies with market
capitalizations, at the time of purchase, within the range of market
capitalizations of companies included in the Russell MidCap(TM) Growth Index.
The Russell MidCap(TM) Growth Index measures the performance of those Russell
MidCap securities with a greater than average growth orientation. These
securities are a subset of Russell MidCap companies, which represent the 800
smallest companies in the Russell 1000--Registered Trademark-- Index based on
total market capitalization. The fund may also invest up to 25% of its total
assets in foreign securities.
The fund may sell put and covered call options, and purchase put and call
options, on securities, securities indices and foreign currencies. An option is
a contract that gives the holder the right to buy (call) or sell (put) a certain
number of shares of a specific security at a specified price (exercise price)
for a limited amount of time. A call option is covered if the fund owns the
shares it would have to deliver if the holder of the call option exercised the
option. The fund may invest in options in order to increase its return, i.e.,
invest for speculative purposes, and/or to protect the value of its portfolio.
The fund may sell securities short, which means selling a security it does not
yet own in anticipation of purchasing the same security at a later date at a
lower price. The fund may also borrow money to purchase securities, a practice
known as "leveraging."
The portfolio managers purchase securities of companies involving a special
opportunity that they believe have the potential for above-average growth in
revenues and 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.
The fund is non-diversified. 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.
The portfolio may engage in active or frequent trading of portfolio securities
to achieve its investment objective. If the portfolio 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 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.
If the fund purchases a put or call option that expires without value, the
fund will have incurred an expense in the amount of the cost of the option. If
the fund sells a put option that is exercised, the fund will have to purchase
the security at a price greater than its market value. If the fund sells a call
option that is exercised, the fund will have to sell the security at a price
lower than its market value.
If the fund borrows money to buy securities (leverages) and the prices of
those securities decrease, or if the cost of borrowing exceeds any increases in
the prices of those securities, the net asset value of the fund's shares will
decrease faster than if the fund had not used leverage. To repay borrowings, the
fund may have to sell securities at a time and at a price that is unfavorable to
the fund. Interest on borrowings is an expense the fund would not otherwise
incur.
If the fund sells a security short, and the security increases in value, the
fund will have to pay the higher price to purchase the security. Since there is
no limit on how much the price of the security can increase, the fund's exposure
is unlimited. The more the fund pays to purchase the security, the more it will
lose on the transaction, and the more the price of your shares will be affected.
The fund will also incur transaction costs to engage in this practice.
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
1
<PAGE> 19
------------------------------
AIM MID CAP OPPORTUNITIES FUND
------------------------------
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 it is non-diversified, the fund may invest in fewer issuers than if it
were a diversified fund. Thus, the value of the fund's shares may vary more
widely, and the fund may be subject to greater market and credit risk, than if
the fund invested more broadly.
The fund currently participates in the Initial Public Offering (IPO) market,
and a significant portion of the fund's returns currently are attributable to
its investment in IPOs, which 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.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
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.
2
<PAGE> 20
------------------------------
AIM MID CAP OPPORTUNITIES 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 1.00% 1.00% 1.00%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses 6.12 6.14 6.14
Interest .03 .03 .03
Total Other Expenses 6.15 6.17 6.17
Total Annual Fund
Operating Expenses 7.50 8.17 8.17
Expense Waivers and
Expense
Reimbursements(3) 5.27 5.27 5.27
Net Expenses 2.23% 2.90% 2.90%
- -------------------------------------------------------
</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.
(2) Class of shares is not currently offered for sale. Expenses are based
on those of Class A Shares.
(3) The investment advisor has contractually agreed to limit Total Other
Expenses excluding interest expense, taxes, dividends on short sales and
extraordinary expenses to 0.50%.
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, your 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 $1,250 $2,598 $3,879 $6,812
Class B 1,304 2,636 3,973 6,893
Class C 904 2,336 3,773 6,985
- ----------------------------------------------
</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 $1,250 $2,598 $3,879 $6,812
Class B 804 2,336 3,773 6,893
Class C 804 2,336 3,773 6,985
- ----------------------------------------------
</TABLE>
3
<PAGE> 21
------------------------------
AIM MID CAP OPPORTUNITIES 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 125
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
1.00% of the first $1 billion of average daily net assets and 0.95% 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
- - Brant H. DeMuth, Portfolio Manager, who has been responsible for the fund
since 1998 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 1998 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 for Van Wagoner
Capital Management. From 1995 to 1997, he was Associate Portfolio Manager at
Van Kampen American Capital Asset Management, Inc. From 1993 to 1995, he was
Assistant Portfolio Manager with Hellman, Jordan Management Company.
- - Charles D. Scavone, Senior Portfolio Manager, who has been responsible for the
fund since 1998 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 1998 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 Opportunities Fund are subject to the
maximum 5.50% initial sales charge as listed under the heading "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
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 (including
any net gains from foreign currency transactions), if any, annually.
4
<PAGE> 22
------------------------------
AIM MID CAP OPPORTUNITIES 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 may be affected by special market
factors, including the fund's investments in initial public offerings (IPOs),
which may have 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 C
-----------------
For the Period
December 30, 1998
through
July 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) 5.82
Total from investment operations 5.78
Net asset value, end of period $15.78
Total return (a) 57.80%
- --------------------------------------------------------------------------------
Ratios/supplemental data:
- --------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $4,790
Ratio of expenses to average net assets excluding
interest expense:
Including waivers and reimbursements 2.25%(b)
Excluding waivers and reimbursements 7.52%(b)
Ratio of net investment income (loss) to average
net assets(c) (0.79)%(b)
Ratio of interest expense to average net assets 0.03%(b)
Portfolio turnover rate 135%
- --------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct sales charges and is not annualized for periods less
than one year.
(b) Ratios are annualized and based on average net assets of $2,735,067.
(c) 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 (6.06)% (annualized).
5
<PAGE> 23
AIM SPECIAL OPPORTUNITIES 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 AIM
Large Cap Opportunities Fund, AIM Mid Cap Opportunities Fund and AIM Small Cap
Opportunities Fund (the Special Opportunities Funds).
CHOOSING A SHARE CLASS
The Special Opportunities 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(1) charge on redemptions within charge on redemptions within
six years one year(1)
- - 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
- - 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 Small Cap Opportunities Fund will not accept any single purchase
order in excess of $250,000.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12b-1) FEES
The Special Opportunities Funds have adopted 12b-1 plans that allow them to pay
distribution fees to A I M Distributors, Inc. (the distributor) for the sale and
distribution of their shares and fees for services provided to shareholders, all
or a substantial portion of which are paid to the dealer of record. Because the
Special Opportunities Funds pay these fees out of their 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.
A- 1 SOF--09/99
<PAGE> 24
AIM SPECIAL OPPORTUNITIES FUNDS
SALES CHARGES
Sales charges on the Special Opportunities Funds are detailed below. As used
below, the term "offering price" with respect to Class A shares includes the
initial sales charge.
INITIAL SALES CHARGES
The Special Opportunities Funds are subject to the following initial sales
charges:
<TABLE>
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION(1) 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>
(1) AIM Small Cap Opportunities Fund will not accept any single purchase order
in excess of $250,000.
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, 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 the 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.
SOF--09/99 A- 2
<PAGE> 25
AIM SPECIAL OPPORTUNITIES FUNDS
PURCHASING SHARES
MINIMUM INVESTMENTS PER SPECIAL OPPORTUNITIES FUND ACCOUNT
The minimum initial investment for Special Opportunities Fund accounts is
$10,000. The minimum subsequent investment is $1,000. The maximum amount for a
single purchase order of AIM Small Cap Opportunities Fund is $250,000.
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
<TABLE>
<CAPTION>
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 transfer slip from your confirmation statement
agent, to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application to Call the transfer agent to receive a
the transfer agent. Call the transfer reference number. Then, use the wire
agent at (800) 959-4246 to receive a instructions at left.
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
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the transfer
agent to place your purchase order.
- -----------------------------------------------------------------------------------------------------------
</TABLE>
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the Special Opportunities
Funds by authorizing the 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
$1,000. 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 your Special Opportunities 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 Special Opportunities Fund is $1,000. The minimum
amount you can exchange to any other 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
A- 3 SOF--09/99
<PAGE> 26
AIM SPECIAL OPPORTUNITIES FUNDS
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
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (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.
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 redeem by telephone. The transfer agent must
receive your call during the hours the New York Stock
Exchange (NYSE) is open for business 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.
SOF--09/99 A- 4
<PAGE> 27
AIM SPECIAL OPPORTUNITIES FUNDS
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.
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, 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. 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 provided incorrect information in
opening an account or in the course of conducting subsequent transactions, 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 from 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
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 WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares of the Special Opportunities Funds for Class A shares of
another AIM Fund or AIM Cash Reserve Shares of AIM Money Market Fund; or
(2) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(3) 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 and maximum 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
A- 5 SOF--09/99
<PAGE> 28
AIM SPECIAL OPPORTUNITIES FUNDS
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 the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
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.
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.
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
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' shares may change on days when you will not be able to purchase
or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. 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.
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.
SOF--09/99 A- 6
<PAGE> 29
------------------------------
AIM MID CAP OPPORTUNITIES 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 Opportunities Fund
SEC 1940 Act file number: 811-08697
- ------------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com MCO-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 30
AIM SMALL CAP
OPPORTUNITIES FUND
-------------------------------------------------------------------------
AIM Small Cap Opportunities Fund seeks long-term growth of capital.
--Registered Trademark--
PROSPECTUS
SEPTEMBER 27, 1999
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.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 31
--------------------------------
AIM SMALL CAP OPPORTUNITIES 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 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-5
Pricing of Shares A-6
Taxes A-6
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 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> 32
--------------------------------
AIM SMALL CAP OPPORTUNITIES FUND
--------------------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet its objective by investing, normally, at least 80% of
its total assets in securities of companies involving a special opportunity,
i.e., an unusual development in a company or group of companies. A special
opportunity may involve:
o a technological advance or discovery, the offering of a new or unique
product or service, or changes in consumer demand or consumption forecasts;
o changes in the competitive outlook or growth potential of an industry or a
company within an industry, including changes in scope or nature of foreign
competition or development of an emerging industry;
o new or changed management, or material changes in management policies or
corporate structure;
o significant economic or political occurrences, including changes in foreign
or domestic import and tax laws or other regulations; or
o other events, including a major change in demographic patterns, favorable
litigation settlements, or natural disasters.
The fund will invest at least 80% of its total assets in equity securities, or
securities convertible into equity securities, of companies with market
capitalizations, at the time of purchase, within the range of market
capitalizations of companies included in the Russell 2000--Registered
Trademark-- Growth Index. The Russell 2000--Registered Trademark--Index measures
the performance of the smallest 2000 companies in the Russell
3000--Registered Trademark-- Index, which measures the performance of the 3000
largest U.S. companies based on the total market capitalization. The fund may
also invest up to 25% of its total assets in foreign securities.
The fund may sell put and covered call options, and purchase put and call
options, on securities, securities indices and foreign currencies. An option is
a contract that gives the holder the right to buy (call) or sell (put) a certain
number of shares of a specific security at a specified price (exercise price)
for a limited amount of time. A call option is covered if the fund owns the
shares it would have to deliver if the holder of the call option exercised the
option. The fund may invest in options in order to increase its return, i.e.,
invest for speculative purposes, and/or to protect the value of its portfolio.
The fund may sell securities short, which means selling a security it does not
yet own in anticipation of purchasing the same security at a later date at a
lower price. The fund may also borrow money to purchase securities, a practice
known as "leveraging."
The portfolio managers purchase securities of companies involving a special
opportunity that they believe have the potential for above-average growth in
revenues and 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.
The fund is non-diversified. 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.
The portfolio may engage in active or frequent trading of portfolio securities
to achieve its investment objective. If the portfolio 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 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.
If the fund purchases a put or call option that expires without value, the
fund will have incurred an expense in the amount of the cost of the option. If
the fund sells a put option that is exercised, the fund will have to purchase
the security at a price greater than its market value. If the fund sells a call
option that is exercised, the fund will have to sell the security at a price
lower than its market value.
If the fund borrows money to buy securities (leverages) and the prices of
those securities decrease, or if the cost of borrowing exceeds any increases in
the prices of those securities, the net asset value of the fund's shares will
decrease faster than if the fund had not used leverage. To repay borrowings, the
fund may have to sell securities at a time and at a price that is unfavorable to
the fund. Interest on borrowings is an expense the fund would not otherwise
incur.
If the fund sells a security short, and the security increases in value, the
fund will have to pay the higher price to purchase the security. Since there is
no limit on how much the price of the security can increase, the fund's exposure
is unlimited. The more the fund pays to purchase the security, the more it will
lose on the transaction, and the more the price of your shares will be affected.
The fund will also incur transaction costs to engage in this practice.
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
1
<PAGE> 33
--------------------------------
AIM SMALL CAP OPPORTUNITIES FUND
--------------------------------
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 it is non-diversified, the fund may invest in fewer issuers than if it
were a diversified fund. Thus, the value of the fund's shares may vary more
widely, and the fund may be subject to greater market and credit risk, than if
the fund invested more broadly.
The fund currently participates in the Initial Public Offering (IPO) market,
and a significant portion of the fund's returns currently are attributable to
its investment in IPOs, which 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.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invest.
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.
2
<PAGE> 34
--------------------------------
AIM SMALL CAP OPPORTUNITIES 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 1.00% 1.00% 1.00%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses .40 .42 .42
Interest 0.56 0.56 0.56
Total Other Expenses 0.96 0.98 0.98
Total Annual Fund
Operating Expenses 2.31% 2.98% 2.98%
- -------------------------------------------------------
</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.
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 $771 $1,232 $1,717 $3,050
Class B 801 1,221 1,767 3,142
Class C 401 921 1,567 3,299
- ----------------------------------------------
</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 $771 $1,232 $1,717 $3,050
Class B 301 921 1,567 3,142
Class C 301 921 1,567 3,299
- ----------------------------------------------
</TABLE>
3
<PAGE> 35
--------------------------------
AIM SMALL CAP OPPORTUNITIES 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 125
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended July 31, 1999, the advisor received compensation of
1.00% 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
- - Brant H. DeMuth, Portfolio Manager, who has been responsible for the fund
since 1998 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 1998 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 for Van Wagoner
Capital Management. From 1995 to 1997, he was Associate Portfolio Manager at
Van Kampen American Capital Asset Management, Inc. From 1993 to 1995, he was
Assistant Portfolio Manager with Hellman, Jordan Management Company.
- - Charles D. Scavone, Senior Portfolio Manager, who has been responsible for the
fund since 1998 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 1998 and has been associated with the advisor and/or its
affiliates since 1990.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Small Cap Opportunities Fund are subject to
the maximum 5.50% initial sales charge as listed under the heading "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
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
(including any net gains from foreign currency transactions), 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 will discontinue public
sales of its shares to new investors, as soon as reasonably possible, when its
assets reach $500 million.
During closed periods, the fund may impose different standards for additional
investments. Also, during those periods the fund will continue to pay Rule 12-1
fees.
4
<PAGE> 36
AIM SMALL CAP OPPORTUNITIES 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 may be affected by special market
factors, including the fund's investments in initial public offerings (IPOs),
which may have 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
-------------------------------------------
For the Period
June 29, 1998
Year Ended through
July 31, 1999 July 31,1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.76 $ 10.00
Income from investment operations:
Net investment income (loss) (0.09)(a) 0.02(a)
Net gains (losses) on securities (both
realized and unrealized) 5.20 (0.26)
Total from investment operations 5.11 (0.24)
Dividends from net investment income (0.01) --
Net asset value, end of period $ 14.86 $ 9.76
Total return(b) 52.36% (2.40)%
- ---------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ---------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $205,721 $107,540
Ratio of expenses to average net assets,
excluding interest 1.79%(c) 1.59%(d)
Ratio of interest expense to average net assets 0.56%(c) --
Ratio of net investment income (loss) to average
net assets (1.44)%(c) 2.00%(d)
Portfolio turnover rate 220% 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) Ratios are annualized and based on average net assets of $147,599,614 for
Class A shares.
(d) Annualized.
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------
For the Period
July 13, 1998
Year Ended through
July 31, 1999 July 31, 1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.76 $ 10.07
Income from investment operations:
Net investment income (loss) (0.17)(a) 0.01(a)
Net gains (losses) on securities (both
realized and unrealized) 5.17 (0.32)
Total from investment operations 5.00 (0.31)
Dividends from net investment income (0.01) --
Net asset value, end of period $ 14.75 $ 9.76
Total return(b) 51.30% (3.08)%
- ---------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ---------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $153,793 $84,285
Ratio of expenses to average net assets,
excluding interest 2.47%(c) 2.30%(d)
Ratio of interest expense to average net assets 0.56%(c) --
Ratio of net investment income (loss) to average
net assets (2.12)%(c) 1.29%(d)
Portfolio turnover rate 220% 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) Ratios are annualized and based on average net assets of $110,618,591 for
Class B shares.
(d) Annualized.
5
<PAGE> 37
AIM SMALL CAP OPPORTUNITIES FUND
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------
For the Period
December 30, 1998
through
July 31, 1999
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $11.70
Income from investment operations:
Net investment income (loss) (0.11)(a)
Net gains (losses) on securities (both
realized and unrealized) 3.19
Total from investment operations 3.08
Dividends from net investment income --
Net asset value, end of period $14.78
Total return(b) 29.31%
- ---------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ---------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $5,977
Ratio of expenses to average net assets,
excluding interest 2.47%(c)
Ratio of interest expense to average net assets 0.56%(c)
Ratio of net investment income (loss) to average
net assets (2.12)%(c)
Portfolio turnover rate 220%
- ---------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and is not annualized for periods less than
one year.
(c) Ratios are annualized and based on average net assets of $2,094,655 for
Class C shares.
(d) Annualized.
6
<PAGE> 38
AIM SPECIAL OPPORTUNITIES 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 AIM
Large Cap Opportunities Fund, AIM Mid Cap Opportunities Fund and AIM Small Cap
Opportunities Fund (the Special Opportunities Funds).
CHOOSING A SHARE CLASS
The Special Opportunities 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(1) charge on redemptions within charge on redemptions within
six years one year(1)
- - 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
- - 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 Small Cap Opportunities Fund will not accept any single purchase
order in excess of $250,000.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12b-1) FEES
The Special Opportunities Funds have adopted 12b-1 plans that allow them to pay
distribution fees to A I M Distributors, Inc. (the distributor) for the sale and
distribution of their shares and fees for services provided to shareholders, all
or a substantial portion of which are paid to the dealer of record. Because the
Special Opportunities Funds pay these fees out of their 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.
A- 1 SOF--09/99
<PAGE> 39
AIM SPECIAL OPPORTUNITIES FUNDS
SALES CHARGES
Sales charges on the Special Opportunities Funds are detailed below. As used
below, the term "offering price" with respect to Class A shares includes the
initial sales charge.
INITIAL SALES CHARGES
The Special Opportunities Funds are subject to the following initial sales
charges:
<TABLE>
<CAPTION>
INVESTOR'S
SALES CHARGE
------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION(1) 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>
(1) AIM Small Cap Opportunities Fund will not accept any single purchase order
in excess of $250,000.
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, 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 the 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.
SOF--09/99 A- 2
<PAGE> 40
AIM SPECIAL OPPORTUNITIES FUNDS
PURCHASING SHARES
MINIMUM INVESTMENTS PER SPECIAL OPPORTUNITIES FUND ACCOUNT
The minimum initial investment for Special Opportunities Fund accounts is
$10,000. The minimum subsequent investment is $1,000. The maximum amount for a
single purchase order of AIM Small Cap Opportunities Fund is $250,000.
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
<TABLE>
<CAPTION>
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 transfer slip from your confirmation statement
agent, to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application to Call the transfer agent to receive a
the transfer agent. Call the transfer reference number. Then, use the wire
agent at (800) 959-4246 to receive a instructions at left.
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
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the transfer
agent to place your purchase order.
- -----------------------------------------------------------------------------------------------------------
</TABLE>
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the Special Opportunities
Funds by authorizing the 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
$1,000. 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 your Special Opportunities 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 Special Opportunities Fund is $1,000. The minimum
amount you can exchange to any other 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
A- 3 SOF--09/99
<PAGE> 41
AIM SPECIAL OPPORTUNITIES FUNDS
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
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (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.
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 redeem by telephone. The transfer agent must
receive your call during the hours the New York Stock
Exchange (NYSE) is open for business 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.
SOF--09/99 A- 4
<PAGE> 42
AIM SPECIAL OPPORTUNITIES FUNDS
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.
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, 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. 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 provided incorrect information in
opening an account or in the course of conducting subsequent transactions, 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 from 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
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 WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares of the Special Opportunities Funds for Class A shares of
another AIM Fund or AIM Cash Reserve Shares of AIM Money Market Fund; or
(2) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(3) 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 and maximum 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
A- 5 SOF--09/99
<PAGE> 43
AIM SPECIAL OPPORTUNITIES FUNDS
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 the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
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.
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.
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
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' shares may change on days when you will not be able to purchase
or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. 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.
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.
SOF--09/99 A- 6
<PAGE> 44
--------------------------------
AIM SMALL CAP OPPORTUNITIES 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 Small Cap Opportunities Fund
SEC 1940 Act file number: 811-08697
- -----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com SCO-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 45
STATEMENT OF
ADDITIONAL INFORMATION
AIM LARGE CAP OPPORTUNITIES FUND
AIM MID CAP OPPORTUNITIES FUND
AIM SMALL CAP OPPORTUNITIES FUND
(SERIES PORTFOLIOS OF
AIM SPECIAL OPPORTUNITIES 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 SEPTEMBER 27, 1999
RELATING TO THE AIM LARGE CAP OPPORTUNITIES FUND PROSPECTUS
DATED SEPTEMBER 27, 1999,
THE AIM MID CAP OPPORTUNITIES FUND PROSPECTUS DATED SEPTEMBER 27, 1999
AND THE AIM SMALL CAP OPPORTUNITIES FUND PROSPECTUS DATED SEPTEMBER 27, 1999
<PAGE> 46
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 Quotations..................................................................................5
PORTFOLIO TRANSACTIONS AND BROKERAGE..............................................................................6
General Brokerage Policy.................................................................................6
Allocation of Portfolio Transactions.....................................................................6
Allocation of IPO Securities Transactions................................................................7
Section 28(e) Standards..................................................................................7
Transactions with Regular Brokers........................................................................8
Brokerage Commissions Paid...............................................................................8
Portfolio Turnover.......................................................................................8
INVESTMENT STRATEGIES AND RISKS...................................................................................8
Equity Securities........................................................................................8
Common Stocks............................................................................................9
Preferred Stocks.........................................................................................9
Convertible Securities...................................................................................9
Foreign Securities......................................................................................10
Risk Factors Regarding Foreign Securities...............................................................10
Foreign Exchange Transactions...........................................................................11
Illiquid Securities.....................................................................................12
Rule 144A Securities....................................................................................12
Lending of Portfolio Securities.........................................................................12
Repurchase Agreements...................................................................................12
Reverse Repurchase Agreements...........................................................................13
Real Estate Investment Trusts...........................................................................13
Borrowings and Leverage.................................................................................13
Special Situations......................................................................................14
Warrants................................................................................................14
Investment in Unseasoned Issuers........................................................................14
Investment in Other Investment Companies................................................................14
Temporary Defensive Investments.........................................................................14
HEDGING AND OTHER INVESTMENT TECHNIQUES..........................................................................14
Short Sales.............................................................................................19
INVESTMENT RESTRICTIONS..........................................................................................20
Fundamental Restrictions................................................................................20
Non-fundamental Restrictions............................................................................22
MANAGEMENT.......................................................................................................23
Trustees and Officers...................................................................................23
Remuneration of Trustees.......................................................................26
AIM Funds Retirement Plan for Eligible Directors/Trustees......................................27
Deferred Compensation Agreements...............................................................28
Investment Advisory and Administrative Services Agreements..............................................28
THE DISTRIBUTION PLANS...........................................................................................30
</TABLE>
i
<PAGE> 47
<TABLE>
<S> <C>
The Class A and C Plan..................................................................................30
The Class B Plan........................................................................................31
Both Plans..............................................................................................31
THE DISTRIBUTOR..................................................................................................36
SALES CHARGES AND DEALER CONCESSIONS.............................................................................38
REDUCTIONS IN INITIAL SALES CHARGES..............................................................................41
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS......................................................................44
HOW TO PURCHASE AND REDEEM SHARES................................................................................46
NET ASSET VALUE DETERMINATION....................................................................................47
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.........................................................................48
Reinvestment of Dividends and Distributions.............................................................48
Tax Matters.............................................................................................48
Qualification as a Regulated Investment Company.........................................................48
Investment in Foreign Financial Instruments.............................................................49
Hedging Transactions....................................................................................50
Excise Tax on Regulated Investment Companies............................................................51
Fund Distributions......................................................................................51
Sale or Redemption of Shares............................................................................53
Foreign Shareholders....................................................................................53
Effect of Future Legislation; Local Tax Considerations..................................................54
SHAREHOLDER INFORMATION..........................................................................................54
MISCELLANEOUS INFORMATION........................................................................................56
Audit Reports...........................................................................................56
Legal Matters...........................................................................................56
Custodian and Transfer Agent............................................................................57
Control Persons and Principal Holders of Securities.....................................................57
Other Information.......................................................................................58
APPENDIX.........................................................................................................59
Description of Commercial Paper Ratings.................................................................59
Description of Corporate Bond Ratings...................................................................59
FINANCIAL STATEMENTS.............................................................................................FS
</TABLE>
ii
<PAGE> 48
INTRODUCTION
AIM Special Opportunities Funds (the "Trust") is a series mutual fund.
The rules and regulations of the 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 September 27, 1999, which relates
to AIM Large Cap Opportunities Fund ("Large Cap"), a separate prospectus, dated
September 27, 1999, which relates to AIM Mid Cap Opportunities Fund ("Mid Cap"),
and a separate prospectus, dated September 27, 1999, which relates to AIM Small
Cap Opportunities Fund ("Small Cap"). Copies of the Large Cap, Mid Cap and Small
Cap prospectuses (each a "Prospectus" and collectively, the "Prospectuses") and
additional copies of this Statement of Additional Information may be obtained
without charge by writing the principal distributor of the Fund's 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 Large Cap, Mid Cap
and Small Cap. 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 herein 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 is organized as a Delaware business trust pursuant to an
Agreement and Declaration of Trust, dated March 13, 1998, as amended (the "Trust
Agreement"). The Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end series management investment
company, and may consist of one or more series portfolios with one or more
classes as authorized from time to time by the Board of Trustees. Large Cap, Mid
Cap and Small Cap (each a "Fund" and collectively, the "Funds") are series
portfolios of the Trust. 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.
Shares of beneficial interest of the Trust are redeemable at their net
asset value at the option of the shareholder or at the option of the Trust in
certain circumstances. For information concerning the methods of redemption,
investors should consult the Prospectuses under the caption "Redeeming Shares."
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 of such Fund and its relative classes. Any general expenses of
the Trust not readily identified 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 of Trustees of the Trust. Each Fund offers three separate classes of
shares as follows: Class A shares, Class B shares and Class C shares. Each such
class represents interests in the
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<PAGE> 49
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.
Class A shares, Class B shares and Class C shares of the same Fund
represent interests in that Fund's assets and have identical voting, dividend,
liquidation and other rights on the same terms and conditions, except that each
class of shares bears differing class-specific expenses, is subject to differing
sales loads, conversion features and exchange privileges, and has exclusive
voting rights on matters pertaining to that class's distribution plan (although
shareholders of Class A shares and Class B shareholders of a given Fund must
approve any material increase in fees payable with respect to the Class A shares
of such Fund under the Class A and C Plan).
Shareholders of the Funds are entitled to one vote per share (with
proportionate voting for fractional shares), irrespective of the relative net
asset value of the Class A shares, Class B shares and Class C shares of the
Funds. However, on matters affecting one portfolio of the Trust or one class of
shares, a separate vote of shareholders of that class is required. Shareholders
of a class are not entitled to vote on any matter which does not affect that
class but which requires a separate vote of another class. An example of a
matter which would be voted on separately by shareholders of a class of shares
is approval of a distribution plan. When issued, shares of the Funds are fully
paid and nonassessable, have no preemptive or subscription rights, and are fully
transferable. Other than the automatic conversion of Class B shares to Class A
shares, there are no conversion rights. Shareholders of the Funds do not have
cumulative voting rights, which means that in situations in which shareholders
elect trustees, 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 term "majority of the outstanding shares" of the Trust, of a
particular Fund or a particular class of a Fund means, respectively, the vote of
the lesser of (a) 67% or more of the shares of the Trust, Fund or such class
present at a meeting of the Trust's shareholders, if the holders of more than
50% of the outstanding shares of the Trust, such Fund or such class are present
or represented by proxy, or (b) more than 50% of the outstanding shares of the
Trust or such Fund or such class.
The Trust is not required to hold annual or regular meetings of
shareholders. Meetings of shareholders of the Funds will be held from time to
time to consider matters requiring a vote of such shareholders in accordance
with the requirements of the 1940 Act, state law or the provisions of the Trust
Agreement. It is not expected that shareholder meetings will be held annually.
The Trust Agreement provides that the trustees of the Trust shall hold
office during the existence of the Trust, except as follows: (a) any trustee may
resign or retire; (b) any trustee may be removed by a vote of 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 removed by a written instrument
signed by a majority of the trustees.
Under Delaware law, shareholders of a Delaware business trust shall be
entitled to the same limitations of 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
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<PAGE> 50
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, the officers and employees or
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. Such
person may not be indemnified against any liability to the Trust or to the
Trust's shareholders to which he or she 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. 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 total
return. All advertisements of the Funds will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of the Funds' shares. 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. Additional performance
information is contained in a Fund's Annual Report to Shareholders, which is
available upon request and without charge.
Each Fund's total return is calculated in accordance with a
standardized formula for computation of annualized total return. Standardized
total return for Class A shares reflects the deduction of the maximum initial
sales charge at the time of purchase. Standardized total return for Class B and
Class C shares reflects the deduction of the maximum applicable contingent
deferred sales charge on a redemption of shares held for the period. Total
returns quoted in advertising reflect all aspects of a Fund's return, including
the effect of reinvesting dividends and capital gain distributions, and any
change in the Fund's net asset value per share over the period. Average annual
returns are calculated by determining the growth or decline in value of a
hypothetical investment in a 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.
BECAUSE AVERAGE ANNUAL RETURNS TEND TO EVEN OUT VARIATIONS IN A FUND'S RETURN,
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 A FUND.
In addition to average annual returns, the Funds 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 a 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.
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<PAGE> 51
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 reimbursements 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 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.
Some or all of the Funds may participate in the Initial Public Offering
("IPO") market, and a significant portion of those Funds' returns may be
attributable to their investment in IPOs, which have a magnified impact due to
the Funds' small asset base. There is no guarantee that as the Funds' assets
grow, they will continue to experience substantially similar performance by
investing in IPOs.
A 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 the Funds by such monitoring
services.
A 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 Standard & Poor's 500 Stock Index (the "S&P 500"), 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. Shares of a Fund are not insured and their
value will vary with market conditions.
In addition, a Fund's long-term performance may be described in
advertising in relation to historical, political and/or economic events. A
Fund's advertising may from time to time include discussions of general economic
conditions and interest rates. A 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, the Funds' sales literature and/or advertisements
may disclose (i) top holdings included in a 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.
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<PAGE> 52
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).
The average annual total returns of Mid Cap and Small Cap (cumulative
returns in the case of Class A shares of Mid Cap and Class C shares of Small
Cap) were as follows:
CLASS A AVERAGE ANNUAL RETURNS
<TABLE>
<CAPTION>
Since
One Year Inception*
-------- ----------
<S> <C> <C>
SMALL CAP 43.95% 36.75%
</TABLE>
* The inception date for the Class A shares of Small Cap is June 29,
1998.
CLASS B AVERAGE ANNUAL RETURNS
<TABLE>
<CAPTION>
Since
One Year Inception*
-------- ----------
<S> <C> <C>
MID CAP N/A N/A
SMALL CAP 46.30% 40.28%
</TABLE>
* The inception date for Class B shares of Small Cap is July 13, 1998.
As of July 31, 1999, Class B shares of Mid Cap were not available.
CLASS A CUMULATIVE RETURNS
<TABLE>
<CAPTION>
Since
One Year Inception*
-------- ----------
<S> <C> <C>
MID CAP N/A 49.15%
</TABLE>
* The inception date for the Class A shares of Mid Cap is December 30,
1998.
CLASS C CUMULATIVE RETURNS
<TABLE>
<CAPTION>
Since
One Year Inception*
-------- ----------
<S> <C> <C>
MID CAP N/A N/A
SMALL CAP N/A 28.31%
</TABLE>
* Inception date for the Class C shares of Small Cap is December 30,
1998. As of July 31, 1999, Class C shares of Mid Cap were not available.
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<PAGE> 53
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. (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.
AIM will seek, whenever possible, to recapture for the benefit of a
Fund any commissions, fees, brokerage or similar payments paid by the Fund on
portfolio transactions. Normally, the only fees which AIM can recapture are the
soliciting dealer fees on the tender of a Fund's portfolio securities in a
tender or exchange offer.
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 a 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 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.
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage several 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 AIM 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
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<PAGE> 54
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 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 may also
be considered for purchase by one or more other AIM Funds. In such cases, it
shall be AIM's practice to specifically combine or otherwise bunch indications
of interest for IPO securities for all AIM Funds 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 that seeks to
participate in a particular IPO by reviewing a number of factors, including
suitability of the investment with the AIM Fund's investment objective, policies
and strategies, the liquidity of the AIM Fund 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 in a manner designed to be fair and equitable for
the eligible AIM Funds, and so that there is equal allocation of IPOs over the
longer term. Where multiple funds are eligible, rotational participation may
occur, based on the extent to which an AIM Fund has participated in previous
IPOs as well as the size of the AIM Fund. Each eligible AIM Fund with an asset
level of less than $500 million will be placed in one or three tiers, depending
upon its asset level. The AIM Funds in the tier containing funds 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 net assets. This process
continues until all of the AIM Funds in the three tiers receive their
Allocations, or until the shares are all allocated. Should securities remain
after this process, eligible AIM Funds will receive their Allocations on a
straight pro rata basis. For the tier of AIM Funds not receiving a full
Allocation, the Allocation may be made only to certain AIM Funds so that each
may receive close to or exactly 40 basis points.
Any AIM Funds 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 will be placed. The price per share of
securities purchased in such syndicate transactions will be the same for each
AIM Fund.
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 Trust's 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 electronic communication of trade information, 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.
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<PAGE> 55
TRANSACTIONS WITH REGULAR BROKERS
As of July 31, 1999, Small Cap entered into a repurchase agreement with
the following regular broker, Warburg Dillon Read, Inc., as that term is defined
in Rule 10b-1 under the 1940 Act, having the noted market value of $8,243,752.
BROKERAGE COMMISSIONS PAID
For the fiscal period ended July 31, 1998, Small Cap paid brokerage
commissions of $79,068. For the fiscal period or year ended July 31, 1999, Mid
Cap and Small Cap paid brokerage commissions of $19,692 and $2,857,494,
respectively. For the fiscal period or year ended July 31, 1999, AIM allocated
certain of Mid Cap and Small Cap's brokerage transactions to certain
broker-dealers that provided AIM with certain research, statistical and other
information. Such transactions amounted to $1,527,504 and $242,463,623,
respectively, and the related brokerage commissions were $2,054 and $452,089,
respectively.
PORTFOLIO TURNOVER
Any particular security will be sold, and the proceeds reinvested,
whenever such action is deemed prudent from the viewpoint of each Fund's
investment objectives, regardless of the holding period of that security. Large
Cap expects that the portfolio turnover rate will be more than 150%. Higher
portfolio turnover involves corresponding greater transaction costs which are
borne directly by the Funds, and may increase capital gains which are taxable as
ordinary income when distributed to shareholders. Changes in the portfolio
holdings are made without regard to whether a sale would result in a profit or
loss.
INVESTMENT STRATEGIES AND RISKS
The following discussion of investment strategies and risks supplements
the discussion of the investment strategies and risks set forth in the
Prospectus of each Fund under the headings "Investment Objective and Strategies"
and "Principal Risks of Investing in the Fund." The investment objectives of Mid
Cap and Small Cap are deemed to be fundamental policies and, therefore, unless
permitted by law, may not be changed without the approval of a majority of each
Fund's outstanding shares (within the meaning of the 1940 Act.) The investment
objective of Large Cap is non-fundamental and may be changed without shareholder
approval. Each Fund's investment policies, strategies and practices are not
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. The Funds have adopted investment restrictions, some of
which are fundamental and cannot be changed without shareholder approval. See
"Investment Restrictions" herein. Individuals considering the purchase of shares
of the Funds should recognize that there are risks in the ownership of any
security and that no assurance can be given that the Funds will achieve their
investment objectives.
The Funds are non-diversified portfolios (as defined in the 1940 Act),
which means that each Fund 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.) The Funds intend to
satisfy the diversification requirements of the Internal Revenue Code to qualify
as a regulated investment company. See "Dividends, Distributions and Tax
Matters" herein.
EQUITY SECURITIES
Each Fund will invest primarily in equity securities. While the Funds
may invest in securities of companies of varying market capitalization, it is
anticipated that Large Cap will be invested primarily in
8
<PAGE> 56
securities of large capitalization companies, Mid Cap will be invested primarily
in securities of medium market capitalization companies, and Small Cap will be
invested primarily in securities of small capitalization companies. Small
capitalization companies may be in the early stages of development, have limited
product lines, markets, or financial resources, and/or lack management depth.
These companies may be more impacted by intense competition from larger
companies, and the trading market for their securities may be less liquid and
more volatile. As a result, investments in small companies involve greater risk
than investments in larger, more established companies, and the net asset value
of funds that invest in small companies may fluctuate more widely than other
funds that do not so invest or stock market indices such as the Dow Jones
Industrial Average or the Standard & Poor's 500 Stock Index.
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 up to 25% of their total assets 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.
Convertible securities consequently often involve attributes of both debt and
equity instruments, and investment in such securities requires analysis of both
credit and stock market risks. 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 and in some instances may be subject to conversion into or
exchanged for another security at the option of an issuer. Although the Funds
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, the Funds invest without regard to corporate bond
ratings.
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FOREIGN SECURITIES
Each Fund may invest up to 25% of its total assets in foreign
securities which may be payable in U.S. or foreign currencies and publicly
traded in the United States or abroad. For purposes of computing such
limitation, American Depository Receipts ("ADRs"), European Depository 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. To the extent the Funds invest 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. 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. 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. For a discussion of
the risks pertaining to investments in foreign obligations, see "Risk Factors
Regarding Foreign Securities" below.
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. Investments by a Fund in securities of foreign
corporations may involve considerations and risks that are different in certain
respects from an investment in securities of U.S. companies. Such risks include
possible imposition of withholding taxes on interest or dividends, possible
adoption of foreign governmental restrictions on repatriation of income or
capital invested, or other adverse political or economic developments.
Additionally, it may be more difficult to enforce the rights of a security
holder against a foreign corporation, and information about the operations of
foreign corporations may be more difficult to obtain and evaluate.
RISK FACTORS REGARDING FOREIGN SECURITIES
Investments by the Funds in foreign securities, whether denominated in
U.S. currencies or foreign currencies, may entail all of the risks set forth
below. Investments in ADRs, EDRs or similar securities also may entail some or
all of the risks as set forth below.
Currency Risk. The value of the Funds' foreign investments will be
affected by changes in currency exchange rates. The U.S. dollar value of a
foreign security decreases when the value of the U.S. dollar rises against the
foreign currency in which the security is denominated, and increases when the
value of the U.S. dollar falls against such currency.
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.
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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 the
Funds' 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 may buy and sell currencies either in the spot (cash) market
or in the forward market (through forward contracts generally expiring within
one year). The Funds have authority to deal in foreign exchange between
currencies of the different countries in which they will invest as a hedge
against possible variations in the foreign exchange rate between those
currencies. This may be accomplished through direct purchases or sales of
foreign currency, purchases of options on futures contracts with respect to
foreign currency, and contractual agreements to purchase or sell a specified
currency at a specified future date (up to one year) at a price set at the time
of the contract. Such contractual commitments may be forward contracts entered
into directly with another party or exchange-traded futures contracts. 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
forward contracts, and it may be difficult to enter into closing transactions
with respect to them. The Funds 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.
Each Funds' dealings in foreign exchange will be limited to hedging involving
either specific transactions or portfolio positions. Transaction hedging is the
purchase or sale of foreign currency with respect to specific receivables or
payables of the Funds accruing in connection with the purchase or sale of its
portfolio securities, the sale and redemption of shares of the Funds, or the
payment of dividends and distributions by the Funds. 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 Funds 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 may invest in
foreign securities.
Purchases and sales of foreign securities are usually made with foreign
currencies, and consequently each Fund may from time to time hold cash balances
in the form of foreign currencies and multinational currency units. Such foreign
currencies and multinational currency units will usually be acquired on a spot
(cash) basis at the spot rate prevailing in foreign exchange markets and will
result in currency conversion costs to a Fund. The Funds attempt to purchase and
sell foreign currencies on as favorable a basis as practicable; however, some
price spread on foreign exchange transactions (to cover service charges) may be
incurred, particularly when a Fund changes investments from one country to
another, or when U.S. dollars are used to purchase foreign securities. Certain
countries could adopt
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policies which would prevent the Funds from transferring cash out of such
countries, and a Fund may be affected either favorably or unfavorably by
fluctuations in relative exchange rates while a Fund holds foreign currencies.
ILLIQUID SECURITIES
Each Fund may invest up to 15% of its net assets in securities that
are illiquid. Illiquid securities include securities that cannot be disposed of
promptly (within seven days) in the normal course of business at a price at
which they are valued. Illiquid securities may include securities that are
subject to restrictions on resale because they have not been registered under
the Securities Act of 1933. Restricted securities may, in certain
circumstances, be resold pursuant to Rule 144A, and thus may or may not
constitute illiquid securities. Limitations on the resale of restricted
securities may have an adverse effect on their marketability, which may prevent
the Fund from disposing of them promptly at reasonable prices. The Fund may
have to bear the expense of registering such securities for resale, and the
risk of substantial delays in effecting such registrations. The Trust's Board
of Trustees is responsible for developing and establishing guidelines and
procedures for determining the liquidity of Rule 144A restricted securities on
behalf of the Funds and monitoring AIM's implementation of the guidelines and
procedures.
RULE 144A SECURITIES
Each Fund may purchase securities which, while privately placed, 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 the Funds, to trade in privately placed securities even though such
securities are not 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 the Funds' 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, a Fund's holdings of illiquid
securities will be reviewed to determine what, if any, action is required to
assure that such 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 each Fund's investments in illiquid securities if
qualified institutional buyers are unwilling to purchase such securities.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, each Fund may make
secured loans of portfolio securities amounting to not more than 33-1/3% of its
total assets. Securities loans are made to banks, brokers and other financial
institutions pursuant to agreements requiring that the loans be continuously
secured by collateral at least equal at all times to the value of the securities
lent marked to market on a daily basis. The collateral received will consist of
cash, U.S. Government securities, letters of credit or such other collateral as
may be permitted under each Fund's investment program. While the securities are
being lent, a Fund will continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities, as well as interest on the
investment of the collateral or a fee from the borrower. Each Fund has a right
to call each loan and obtain the securities on five business days' notice or, in
connection with securities trading on foreign markets, within such longer period
of time which coincides with the normal settlement period for purchases and
sales of such securities in such foreign markets. A Fund will not have the right
to vote securities while they are being lent, but it will call a loan in
anticipation of any important vote. The risks in lending portfolio securities,
as with other extensions of secured credit, consist of possible delay in
receiving additional collateral in the event the value of the collateral
decreased below the value of the securities loaned or of delay in recovering the
securities loaned or even loss of rights in the collateral should the borrower
of the securities fail financially. Loans will only be made to persons deemed by
AIM to be of good standing and will not be made unless, in the judgment of AIM,
the consideration to be earned from such loans would justify the risk.
REPURCHASE AGREEMENTS
Each Fund may 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 such Fund's holding period. In the event of
bankruptcy or other default of a seller of a repurchase agreement, a 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 a 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. To the extent that the Funds invest to a
significant degree in these instruments, their ability to achieve their
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investment objective may be adversely affected. A repurchase agreement is
collateralized by the security acquired by a 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.
REVERSE REPURCHASE AGREEMENTS
Each Fund may enter into reverse repurchase agreements. Reverse
repurchase agreements involve the sale of securities held by a Fund, with an
agreement that it will repurchase the securities at an agreed upon price and
date. Each 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 earned from the investment of the proceeds of the transaction is greater
than the interest expense of the transaction. Each Fund may employ reverse
repurchase agreements only in amounts up to 33 1/3% of the value of a Fund's
total assets at the time the Fund enters into a reverse repurchase agreement. At
the time it enters into a reverse repurchase agreement, a Fund will segregate
liquid assets having a dollar value equal to the repurchase price. The
segregated securities will be marked-to-market, and additional securities will
be segregated if necessary to maintain adequate coverage.
REAL ESTATE INVESTMENT TRUSTS
To the extent consistent with its investment objectives and policies,
each Fund may invest in securities issued by real estate investment trusts
("REITs"). Such investments will not exceed 25% of the total assets of each
Fund.
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. By investing in REITs indirectly
through the Funds, a shareholder will bear not only his/her proportionate share
of the expenses of the Funds, but also, indirectly, similar expenses of the
REIT.
To the extent that the Funds have the ability to invest in REITs, the
Funds could conceivably own real estate directly as a result of a default on the
securities it owns. The Funds, 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 conditions, adverse changes in the climate
for real estate, environmental liability risks, increases in property taxes and
operating expenses, 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, REITs may be affected by any
changes in the value of the underlying property in their portfolios. 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. REITs are also
subject to heavy cash flow dependency, defaults by borrowers, self-liquidation,
and the possibility of failing to maintain an exemption from the 1940 Act.
Changes in interest rates may also affect the value of debt securities held by
the Funds. By investing in REITs indirectly through the Funds, a shareholder
will bear not only his/her proportionate share of the expenses of the Funds, but
also, indirectly, similar expenses of the REITs.
BORROWINGS AND LEVERAGE
The Funds may borrow money from banks (including the Funds' custodian
bank), subject to the limitations under the 1940 Act. The Funds will limit
borrowings and reverse repurchase agreements to an aggregate of 33 1/3% of the
Funds' total assets at the time of the transaction.
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The Funds may employ "leverage" by borrowing money and using it to
purchase additional securities. Leverage increases both investment opportunity
and investment risk. If the investment gains on the securities purchased with
borrowed money exceed the interest paid on the borrowing, the net asset value of
the Funds' shares will rise faster than would otherwise be the case. On the
other hand, if the investment gains fail to cover the cost (including interest
on borrowings), or if there are losses, the net asset value of the Funds' shares
will decrease faster than would otherwise be the case. The Funds will maintain
asset coverage of at least 300% for all such borrowings, and should such asset
coverage at any time fall below 300%, the Funds will be required to reduce its
borrowing within three days to the extent necessary to satisfy this requirement.
To reduce its borrowing, the Fund might be required to sell securities at a
disadvantageous time. Interest on money borrowed is an expense the Fund would
not otherwise incur, and the Funds may therefore have little or no investment
income during periods of substantial borrowings.
SPECIAL SITUATIONS
Each Fund may invest in "special situations." A special situation
arises when, in the opinion of a 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.
WARRANTS
The Funds may 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 the warrant, the current market value of the underlying security, the
life of the warrant and various other investment factors. The investment in
warrants by each Fund may not exceed 10% of the value of the Fund's net assets.
INVESTMENT IN UNSEASONED ISSUERS
Each Fund may purchase securities in 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 Funds have obtained an
exemptive order from the SEC allowing them to invest in money market funds that
have AIM or an affiliate of AIM as an investment adviser (the "Affiliated Money
Market Funds"), provided that investments in Affiliated Money Market Funds do
not exceed 25% of the total assets of such Fund. With respect to a Fund's
purchase of shares of the Affiliated Money Market Funds, the Fund will
indirectly pay the Advisory fees and other operating expenses of the Affiliated
Money Market 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.
HEDGING AND OTHER INVESTMENT TECHNIQUES
The Funds may enter into transactions in options, futures and forward
contracts on a variety of instruments and indexes, in order to protect against
declines in the value of portfolio securities and increases in the cost of
securities to be acquired as well as to increase the Funds' return.
Options. The Funds may write (sell) "covered" put and call options and
buy put and call options, including securities index and foreign currency
options. A call option is a contract that gives to the holder the right to buy a
specified amount of the underlying security at a fixed or determinable price
(called the
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exercise or strike price) upon exercise of the option. A put option is a
contract that gives the holder the right to sell a specified amount of the
underlying security at a fixed or determinable price upon exercise of the
option. In the case of index options, exercises are settled through the payment
of cash rather than the delivery of property. A written call option is covered
if, for example, the Funds own the underlying security covered by the call or,
in the case of a call option on an index, holds securities the price changes of
which are expected to substantially correlate with the movement of the index. A
written put option is covered if, for example, the Funds segregate cash or
liquid securities with a value equal to the exercise price of the put option.
Options purchased or written by the Funds may be traded on the national
securities exchanges or negotiated with a dealer. Options traded in the
over-the-counter market may not be as actively traded as those on an exchange,
so it may be more difficult to value such options. In addition, it may be
difficult to enter into closing transactions with respect to such options. Such
options and the securities used as "cover" for such options, unless otherwise
indicated, would be considered illiquid securities.
In some instances in which the Funds have entered into agreements with
primary dealers with respect to the over-the-counter options it has written, and
such agreements would enable the Funds to have an absolute right to repurchase
at a pre-established formula price the over-the-counter option written by them,
the Funds would treat as illiquid only securities equal in amount to the formula
price described above less the amount by which the option is "in-the-money,"
i.e., the price of the option exceeds the exercise price.
The Funds may purchase put and call options and write covered put and
call options on foreign currencies for the purpose of protecting against
declines in the dollar value of portfolio securities and against increases in
the dollar cost of securities to be acquired. Each Fund may use up to 10% of its
total assets to purchase put and call options on foreign currencies. Such
investment strategies will be used as a hedge and not for speculation. As in the
case of other types of options, the writing of an option on foreign currency
will constitute a partial hedge, up to the amount of the premium received.
Moreover, the Funds could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on foreign currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements adverse
to the Funds' position, it may forfeit the entire amount of the premium plus
related transaction costs. Options on foreign currencies may be traded on the
national securities exchanges or in the over-the-counter market. As described
above, options traded in the over-the-counter market may not be as actively
traded as those on an exchange, so it may be more difficult to value such
options. In addition, it may be difficult to enter into closing transactions
with respect to options traded over-the-counter.
Options are subject to certain risks, including the risk of imperfect
correlation between the option and the Funds' other investments and the risk
that there may not be a liquid secondary market for the option when the Funds
seek to hedge against adverse market movements. This may cause the Funds to lose
the entire premium on purchased options or reduce their ability to effect
closing transactions at favorable prices.
The Funds will not write options if, immediately after such sale, the
aggregate value of the securities or obligations underlying the outstanding
options exceeds 50% of the Funds' total assets. The Funds will not purchase
options if, at the time of the investment, the aggregate premiums paid for
outstanding options will exceed 25% of the Funds' total assets.
Each Fund may write covered call options both to reduce the risks
associated with certain of its investments and to increase total investment
return through the receipt of premiums. In return for the premium income, a Fund
loses any opportunity to profit from an increase in the market price of the
underlying securities, above the exercise price, while the contract is
outstanding, except to the extent the premium represents a profit. The Fund also
retains the risk of loss if the price of the security declines, although the
premium is intended to offset that loss in whole or in part. As long as its
obligations under the option continue, a Fund must assume that the call may be
exercised at any time and that the net
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proceeds realized from the sale of the underlying securities pursuant to the
call may be substantially below the prevailing market price.
Each Fund may enter into a "closing purchase transaction", by
purchasing an option identical to the one it has written, and terminate its
obligations under the covered call. A Fund will realize a gain (or loss) from a
closing purchase transaction if the amount paid to purchase a call option is
less (or more) than the premium received upon writing the corresponding call
option. Any loss resulting from the exercise or closing out of a call option is
likely to be offset in whole or in part by unrealized appreciation of the
underlying security owned by a Fund primarily because a price increase of a call
option generally reflects an increase in the market price of the securities on
which the option is based. In order to sell portfolio securities that cover a
call option, a Fund will effect a closing purchase transaction so as to close
out any existing covered call option on those securities. A closing purchase
transaction for exchange-traded options may be made only on a national
securities exchange. A liquid secondary market on an exchange may not always
exist for any particular option, or at any particular time, and, for some
options, such as over-the-counter options, no secondary market on an exchange
may exist. If a Fund is unable to effect a closing purchase transaction, it will
not sell the underlying security until the option expires or until it delivers
the underlying security upon exercise.
Each Fund may write put options to earn additional income in the form
of option premiums if it expects the price of the underlying securities to
remain stable or rise during the option period so that the option will not be
exercised. A Fund may also write put options if it expects a decline in the
price of the underlying securities and intends to exercise the option at a price
which, offset by the option premium, is less than the current price. The risk of
either strategy is that the price of the underlying securities may decline by an
amount greater than the premium received.
The Funds may effect a closing purchase transaction to realize a profit
on an outstanding put option or to prevent an outstanding put option from being
exercised. If a Fund is able to enter into a closing purchase transaction, it
will realize a profit (or loss) from that transaction if the cost of the
transaction is less (or more) than the premium received from the writing of the
option. After writing a put option, a Fund may incur a loss equal to the
difference between the exercise price of the option and the sum of the market
value of the underlying securities plus the premiums received from the sale of
the option.
The purchase of put options on securities enables a Fund to preserve,
at least partially, unrealized gains in an appreciated security in its portfolio
without actually selling the security. In addition, the Funds may continue to
receive interest or dividend income on the security.
The Funds may write call options on securities or securities indexes
for the purpose of providing a partial hedge against a decline in the value of
its portfolio securities. The Funds may write put options on securities or
securities indexes in order to earn additional income or (in the case of put
options written on individual securities) to purchase the underlying security at
a price below the current market price. If the Funds write an option which
expires unexercised or is closed out by the Funds at a profit, they will retain
all or part of the premium received for the option, which will increase its
gross income. If the price of the underlying security moves adversely to the
Funds' position, the option may be exercised and the Funds will be required to
sell or purchase the underlying security at a disadvantageous price, or, in the
case of index options, delivery an amount of cash, which loss may only be
partially offset by the amount of premium received.
The Funds may also purchase put or call options on securities and
securities indexes in order to hedge against changes in interest rates or stock
prices which may adversely affect the prices of securities that the Funds want
to purchase at a later date, to hedge their existing investments against a
decline in value, or to attempt to reduce the risk of missing a market or
industry segment advance or decline. In the event that the expected changes in
interest rates or stock prices occur, the Funds may be able to offset the
resulting adverse effect on the Funds by exercising or selling the options
purchased. The premium paid for a put or call option plus any transaction costs
will reduce the benefit, if any, realized by the Funds upon exercise or
liquidation of the option. Unless the price of the underlying
16
<PAGE> 64
security or level of the securities index changes by an amount in excess of the
premium paid, the option may expire without value to the Funds.
An option on a securities index, unlike a stock option (which gives the
holder the right to purchase or sell a specified stock at a specified price)
gives the holder the right to receive a cash "exercise settlement amount" equal
to (i) the difference between the exercise price of the option and the value of
the underlying stock index on the exercise date, multiplied by (ii) a fixed
"index multiplier." A securities index fluctuates with changes in the market
values of the securities included in the index. For example, some securities
index options are based on a broad market index such as the S&P 500 or the NYSE
Composite Index, or a narrower market index such as the S&P 100. Indexes may
also be based on an industry or market segment such as the AMEX Oil and Gas
Index or the Computer and Business Equipment Index. Options on stock indexes are
currently traded on the following exchanges, among others: The Chicago Board
Options Exchange, New York Stock Exchange, and American Stock Exchange. Options
on indexes of debt securities and other types of securities indexes are not
currently available. If such options are introduced and traded on exchanges in
the future, the Funds may use them.
The value of securities index options in any investment strategy
depends upon the extent to which price movements in the portion of the
underlying securities correlate with price movements in the selected securities
index. Perfect correlation is not possible because the securities held or to be
acquired by a Fund will not exactly match the composition of the securities
indexes on which options are written. In the purchase of securities index
options the principal risk is that the premium and transaction costs paid by a
Fund in purchasing an option will be lost if the changes (increase in the case
of a call, decrease in the case of a put) in the level of the index do not
exceed the cost of the option. In writing securities index options, the
principal risk is that a Fund could bear a loss on the options that would be
only partially offset (or not offset at all) by the increased value or reduced
cost of the hedged securities. Moreover, in the event a Fund was unable to close
an option it had written, it might be unable to sell the securities used as
cover.
Each Fund, for hedging purposes, may purchase and write options in
combination with each other to adjust the risk and return characteristics of a
Fund's overall position. For example, a Fund may purchase a put option and write
a covered call option on the same underlying instrument, in order to construct a
combined position whose risk and return characteristics are similar to selling a
futures contract. This technique, called a "collar," enables a Fund to offset
the cost of purchasing a put option with the premium received from writing the
call option. However, by selling the call option, a Fund gives up the ability
for potentially unlimited profit from the put option. Another possible combined
position would involve writing a covered call option at one strike price and
buying a call option at a lower price, in order to reduce the risk of the
written covered call option in the event of a substantial price increase.
Because combined options positions involve multiple trades, they result in
higher transaction costs and may be more difficult to open and close out.
17
<PAGE> 65
Futures Contracts and Forwards. A futures contract is a bilateral
agreement to buy or sell a security (or deliver a cash settlement price, in the
case of an index future) for a set price in the future. When the contract is
entered into, a good faith deposit, known as initial margin, is made with the
broker. Subsequent daily payments, known as variation margin, are made to and by
the broker reflecting changes in the value of the security or level of the
index. Futures contracts are authorized by boards of trade designated as
"contracts markets" by the Commodity Futures Trading Commission ("CFTC").
Certain results may be accomplished more quickly, and with lower transaction
costs, in the futures market (because of its greater liquidity) than in the cash
market.
A Fund will incur brokerage fees when it purchases and sells futures
contracts, and it will be required to maintain margin deposits. Positions taken
in the futures markets are typically liquidated through offsetting transactions,
which may result in a gain or a loss, before delivery or cash settlement is
required. However, a Fund may close out a position by making or taking delivery
of the underlying securities wherever it appears economically advantageous to do
so.
Purchases of options on futures contracts may present less risk than
the purchase and sale of the underlying futures contracts, since the potential
loss is limited to the amount of the premium plus related transaction costs. A
call option on a futures contract gives the purchaser the right, in return for
the premium paid, to purchase a futures contract (assume a "long" position) at a
specified exercise price at any time before the option expires. A put option
gives the purchaser the right, in return for the premium paid, to sell a futures
contract (assume a "short" position), for a specified exercise price, at any
time before the option expires.
Positions in futures contracts may be closed out only on an exchange or
a board of trade which provides the market for such futures. Although each Fund
intends to purchase or sell futures only on exchanges or boards of trade where
there appears to be an active market, there may not always be a liquid market,
and it may not be possible to close a futures position at that time; in the
event of adverse price movements, the Fund would continue to be required to make
daily cash payments of maintenance margin. Whenever futures positions are used
to hedge portfolio securities, however, any increase in the price of the
underlying securities held by a Fund may partially or completely offset losses
on the futures contracts.
If a broker or clearing member of an options or futures clearing
corporation were to become insolvent, a Fund could experience delays and might
not be able to trade or exercise options or futures purchased through that
broker. In addition, a Fund could have some or all of its positions closed out
without its consent. If substantial and widespread, these insolvencies could
ultimately impair the ability of the clearing corporations themselves. While the
principal purpose of engaging in these transactions is to limit the effects of
adverse market movements, the attendant expense may cause a Fund's returns to be
less than if the transactions had not occurred. Their overall effectiveness,
therefore, depends on AIM's accuracy in predicting future changes in interest
rate levels or securities price movements, as well as on the expense of engaging
in these transactions.
Each Fund has the ability to short futures.
The Funds may purchase and sell stock index futures contracts to hedge
the value of the portfolio against changes in market conditions. Each Fund may
also purchase put and call options on futures contracts and write "covered" put
and call options on futures contracts in order to hedge against changes in stock
prices. Although the Funds are authorized to invest in futures contracts and
related options with respect to non-U.S. instruments, they will limit such
investments to those which have been approved by the CFTC for investment by U.S.
investors. The Funds may enter into futures contracts and buy and sell related
options, provided that the futures contracts and related options investments are
made for "bona fide hedging" purposes, as defined under CFTC regulations. No
more than 25% of each Fund's total assets will be committed to initial margin
deposits required pursuant to futures contracts. Percentage investment
limitations on the Funds' investment in options on futures contracts are set
forth above under "Options."
18
<PAGE> 66
Bona fide Hedging. Each Fund will only enter into options and futures
transactions for bona fide hedging purposes. The CFTC has defined bona fide
hedging in its Rule 1.3(z) which provides that the transaction must be
"economically appropriate to the reduction of risks in the conduct and
management of a commercial enterprise." Common uses of financial futures and
related options by the Funds that would satisfy the Rule include the following:
(1) to hedge various pertinent securities market risks (e.g.
interest rate movements, and broad based or specific equity or
fixed-income market movements);
(2) to establish a position as a temporary substitute for
purchasing or selling particular securities;
(3) to maintain liquidity while simulating full investment in the
securities markets.
SHORT SALES
The Funds intend from time to time to sell securities short. A short
sale is effected when it is believed that the price of a particular security
will decline, and involves the sale of a security which the Funds do not own in
the hope of purchasing the same security at a later date at a lower price. To
make delivery to the buyer, the Funds must borrow the security from a
broker-dealer through which the short sale is executed, and the broker-dealer
delivers such securities, on behalf of the Funds, to the buyer. The
broker-dealer is entitled to retain the proceeds from the short sale until the
Fund delivers to such broker-dealer the securities sold short. In addition, the
Funds are required to pay to the broker-dealer the amount of any dividends paid
on shares sold short.
To secure their obligation to deliver to such broker-dealer the
securities sold short, the Fund must segregate an amount of cash or liquid
securities equal to the difference between the market value of the securities
sold short at the time they were sold short and any cash or liquid securities
deposited as collateral with the broker in connection with the short sale (not
including the proceeds of the short sale). Furthermore, until the Funds replace
the borrowed security, they must daily maintain the segregated assets at a level
so that (1) the amount deposited in it plus the amount deposited with the broker
(not including the proceeds from the short sale) will equal the current market
value of the securities sold short, and (2) the amount deposited in it plus the
amount deposited with the broker (not including the proceeds from the short
sale) will not be less than the market value of the securities at the time they
were sold short. As a result of these requirements, the Funds will not gain any
leverage merely by selling short, except to the extent that it earns interest on
the immobilized cash or liquid securities while also being subject to the
possibility of gain or loss from the securities sold short.
The Funds are said to have a short position in the securities sold
until they deliver to the broker-dealer the securities sold, at which time the
Funds receive the proceeds of the sale. The Funds will normally close out a
short position by purchasing on the open market and delivering to the
broker-dealer an equal amount of the securities sold short.
The amount of each Fund's net assets that will at any time be in the
type of deposits described above (that is, collateral deposits or segregated
assets) will not exceed 25%. These deposits do not have the effect of limiting
the amount of money that the Funds may lose on a short sale, as the Funds'
possible losses may exceed the total amount of deposits.
The Funds will realize a gain if the price of a security declines
between the date of the short sale and the date on which the Funds purchase a
security to replace the borrowed security. On the other hand, the Funds will
incur a loss if the price of the security increases between those dates. The
amount of any gain will be decreased and the amount of any loss increased by any
premium or interest that the Funds may be required to pay in connection with a
short sale. It should be noted that possible losses from short sales differ from
those that could arise from a cash investment in a security in that losses from
a short sale may be limitless, while the losses from a cash investment in a
security cannot exceed
19
<PAGE> 67
the total amount of the Funds' investment in the security. For example, if a
Fund purchases a $10 security, potential loss is limited to $10; however, if a
Fund sells a $10 security short, it may have to purchase the security for return
to the broker-dealer when the market value of that security is $50, thereby
incurring a loss of $40.
The Funds may also make short sales "against the box." A short sale is
"against the box" to the extent that the Funds contemporaneously own or have the
right to obtain securities identical to those sold short without payment of
further consideration. Such short sales will also be subject to the limitations
on short sale transactions referred to above. Short sales "against the box"
result in a "constructive sale" and require the Funds to recognize any taxable
gain unless an exception to the constructive sale rule applies.
In addition to enabling the Funds to hedge against market risk, short
sales may afford the Funds an opportunity to earn additional current income to
the extent the Funds are able to enter into arrangements with broker-dealers
through which the short sales are executed to receive income with respect to the
proceeds of the short sales during the period the Funds' short positions remain
open. The Funds believe that many broker-dealers will be willing to enter into
such arrangements, but there is no assurance that the Funds will be able to
enter into such arrangements to the desired degree.
INVESTMENT RESTRICTIONS
FUNDAMENTAL RESTRICTIONS
Large Cap is subject to the following investment restrictions, which
may be changed only by a vote of a majority of the Fund's outstanding shares:
(a) the Fund may not borrow money, except as permitted by 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 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").
(b) the Fund may not issue senior securities, except as may be
permitted by the 1940 Act Laws, Interpretations and Exemptions.
(c) 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.
(d) 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.
(e) 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.
(f) 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 such as futures, contracts and
options thereon or investing in securities that are secured by physical
commodities.
20
<PAGE> 68
(g) the Fund may not make personal loans or loans to persons
who control or are under the common control of the Fund, except to the
extent permitted by 1940 Act Laws, Interpretations and Exemptions. This
restriction does not prevent the Fund from 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.
(h) the Fund may, notwithstanding any other fundamental
investment policy or restriction, 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 Large Cap 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 Large Cap has this
flexibility, the Board of Trustees of the Trust has adopted internal
guidelines for the Fund relating to certain of these restrictions which
the adviser must follow in managing the Fund. Any changes to these
guidelines, which are set forth below, require the approval of the
Board of Trustees.
1. In complying with the borrowing restriction set forth in (a),
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 other investment companies or their
series portfolios that have AIM or an affiliate of AIM as an
investment adviser (an "AIM Fund") on such terms and
conditions of any exemptive orders issued by the SEC.
2. In complying with the concentration restriction set forth in
(d) above, 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.
3. In complying with the lending restrictions set forth in (g)
above, the Fund may lend up to 33 1/3% of its total assets and
may lend money to another AIM Fund, on such terms and
conditions as the SEC may require in an exemptive order.
4. Notwithstanding the restriction set forth in (h) above, 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 limitations as
the Fund.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from changes in values of assets will not
be considered a violation of the restriction.
The following restrictions are fundamental policies that have been
adopted by Mid Cap and Small Cap, and, unless permitted by law, they will not be
changed without approval of a majority of each Fund's outstanding voting
securities.
Neither Mid Cap nor Small Cap will:
(1) concentrate its investments; that is, invest 25% or more of the
value of its assets in issuers which conduct their business operations in the
same industry;
(2) invest for the purpose of exercising control over or management
over a company except that a Fund may purchase securities of other investment
companies to the extent permitted by applicable law or exemptive order;
(3) act as an underwriter, except to the extent that, in connection
with the disposition of portfolio securities, a Fund may be deemed to be an
underwriter for purposes of the 1933 Act;
21
<PAGE> 69
(4) purchase or sell real estate or any interest therein, except that a
Fund may, as appropriate and consistent with its investment policies and other
investment restrictions, invest in securities of entities secured by real estate
or marketable interests therein or securities of issuers that engage in real
estate operations or interests therein, and may hold and sell real estate
acquired as a result of ownership in such securities;
(5) purchase or sell commodity contracts, except that a Fund may, as
appropriate and consistent with its investment policies and other investment
restrictions, enter into futures contracts on securities, securities indices and
currency, options on such futures contracts, forward foreign currency exchange
contracts, forward commitments and repurchase agreements;
(6) make loans, except for collateralized loans of portfolio securities
in an amount not exceeding 33 1/3% of a Fund's total assets. This restriction
does not prevent a Fund from purchasing government obligations, short-term
commercial paper, master demand notes, or publicly traded debt, including bonds,
notes, debentures, certificates of deposit, bankers acceptances and equipment
trust certificates, nor does this restriction apply to loans made under
insurance policies, or through entry into repurchase agreements, to the extent
they may be viewed as loans; and
(7) issue senior securities, except to the extent permitted by the 1940
Act, including permitted borrowings.
In addition, each of Mid Cap and Small Cap 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
limitations as each Fund.
NON-FUNDAMENTAL RESTRICTIONS
The following investment restrictions apply to Mid Cap and Small Cap
and are not fundamental. They may be changed for either Fund without approval of
that Fund's voting securities.
(1) Neither Mid Cap nor Small Cap will invest more than 15% of its
assets in securities considered illiquid or not readily marketable, including
repurchase agreements having a maturity of more than seven days.
(2) Neither Mid Cap nor Small Cap will purchase or retain the
securities of any issuer if, to the knowledge of AIM, those officers and
Trustees of the Trust, its adviser or distributor owning individually more than
1/2 of 1% of the securities of such issuer together own more than 5% of the
securities of such issuer.
(3) The Trust does not currently intend to invest all of the assets of
either Mid Cap or Small Cap in the securities of a single open-end management
investment company with the same fundamental investment objectives, policies and
limitations as that Fund.
(4) Neither Mid Cap nor Small Cap may invest in securities issued by
other investment companies except as part of a merger, reorganization or other
acquisition and except to the extent permitted by (i) the 1940 Act, as amended
from time to time, (ii) the rules and regulations promulgated by the SEC under
the 1940 Act, as amended from time to time, or (iii) an exemption or other
relief from the provisions of the 1940 Act.
22
<PAGE> 70
MANAGEMENT
The overall management of the business and affairs of the Funds is
vested with the Trust's Board of Trustees. The Board of Trustees approves all
significant agreements between the Trust and persons or companies furnishing
services to the Funds, including the Master Advisory Agreement with AIM, the
Master Administrative Services Agreement with AIM, the Master Distribution
Agreement with AIM Distributors as the distributor of the shares of the Funds,
the Custodian Agreement with State Street Bank and Trust Company as custodian
and the Transfer Agency and Service Agreement with A I M Fund Services, Inc.
("AFS"), a wholly owned subsidiary of AIM, as transfer agent. The day-to-day
operations of the Funds are delegated to the officers of the Trust and to AIM,
subject always to the objectives and policies of the Funds 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 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. All of the Trust's executive officers hold similar offices with some
or all of the other AIM Funds.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
POSITIONS HELD WITH
NAME, ADDRESS AND AGE REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- ------------------- ----------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
*CHARLES T. BAUER (80) Trustee and Chairman Chairman of the Board of Directors, A I M
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 Vice
Chairman and Director, AMVESCAP PLC.
- --------------------------------------------------------------------------------------------------------------------
BRUCE L. CROCKETT (55) Trustee Director, ACE Limited (insurance company).
906 Frome Lane Formerly, Director, President and Chief Executive
McLean, VA 22102 Officer, COMSAT Corporation and Chairman, Board
of Governors of INTELSAT, (international
communications company).
- --------------------------------------------------------------------------------------------------------------------
OWEN DALY II (75) Trustee Director, Cortland Trust Inc. (investment
Six Blythewood Road company). Formerly, Director, CF & I Steel Corp.,
Baltimore, MD 21210 Monumental Life Insurance Company and Monumental
General Insurance Company; and Chairman of the
Board of Equitable Bancorporation.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------
* A director who is an "interested person" of A I M Advisors, Inc. and
the Company as defined in the 1940 Act.
23
<PAGE> 71
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
POSITIONS HELD WITH
NAME, ADDRESS AND AGE REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- ------------------- ----------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EDWARD K. DUNN, JR. (64) Trustee Chairman of the Board of Directors, Mercantile
2 Hopkins Plaza, 20th Floor Mortgage Corp. Formerly, Vice Chairman of the
Baltimore, MD 21201 Board of Directors and President, Mercantile-Safe
Deposit & Trust Co.; and President, Mercantile
Bankshares.
- --------------------------------------------------------------------------------------------------------------------
JACK FIELDS (47) Trustee Chief Executive Officer, Texana Global, Inc.
8810 Will Clayton Parkway (foreign trading company) and Twenty First
Jetero Plaza, Suite E Century, Inc. (a governmental affairs company).
Humble, TX 77338 Formerly, Member of the U.S. House of
Representatives.
- --------------------------------------------------------------------------------------------------------------------
*CARL FRISCHLING (62) Trustee Partner, Kramer, Levin, Naftalis & Frankel LLP
919 Third Avenue (law firm). Formerly, Partner, Reid & Priest
New York, NY 10022 (law firm).
- --------------------------------------------------------------------------------------------------------------------
**ROBERT H. GRAHAM (52) Trustee and President Director, President and Chief Executive 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, AMVESCAP PLC.
- --------------------------------------------------------------------------------------------------------------------
PREMA MATHAI-DAVIS (48) Trustee Chief Executive Officer, YWCA of the U.S.A.;
350 Fifth Avenue, Suite 301 Commissioner, New York City Department for the
New York, NY 10118 Aging; and Member, Board of Directors,
Metropolitan Transportation Authority of New York
State.
- --------------------------------------------------------------------------------------------------------------------
LEWIS F. PENNOCK (56) Trustee Attorney in private practice in Houston, Texas.
6363 Woodway, Suite 825
Houston, TX 77057
- --------------------------------------------------------------------------------------------------------------------
LOUIS S. SKLAR (60) Trustee Executive Vice President, Development and
Transco Tower, 50th Floor Operations, Hines Interests Limited Partnership
2800 Post Oak Blvd. (real estate development).
Houston, TX 77056
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------
* A director who is an "interested person" of A I M Advisors, Inc. and
the Company as defined in the 1940 Act.
** A director who is an "interested person" of the Company as defined in
the 1940 Act.
24
<PAGE> 72
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
POSITIONS HELD WITH
NAME, ADDRESS AND AGE REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- ------------------- ----------------------------------------
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GARY T. CRUM (52) Senior Vice President Director and President, A I M Capital Management,
Inc.; Director and Executive Vice President,
A I M Management Group Inc. and A I M Advisors,
Inc.; and Director, A I M Distributors, Inc. and
AMVESCAP PLC.
- --------------------------------------------------------------------------------------------------------------------
EDGAR M. LARSEN (59) Senior Vice President Vice President, A I M Capital Management, Inc.
- --------------------------------------------------------------------------------------------------------------------
CAROL F. RELIHAN (44) Senior Vice Director, Senior Vice President, General Counsel
President and and Secretary, A I M Advisors, Inc.; Senior Vice
Secretary President, General Counsel and Secretary, A I M
Management Group Inc.; Director, Vice President
and General Counsel, Fund Management Company; Vice
President and General Counsel, A I M Fund
Services, Inc.; and Vice President, A I M Capital
Management, Inc. and A I M Distributors, Inc.
- --------------------------------------------------------------------------------------------------------------------
DANA R. SUTTON (40) Vice President and Vice President and Fund Controller,
Treasurer A I M Advisors, Inc.; and Assistant Vice
President and Assistant Treasurer, Fund
Management Company.
- --------------------------------------------------------------------------------------------------------------------
MELVILLE B. COX (55) 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.
- --------------------------------------------------------------------------------------------------------------------
</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, Sklar and Ms. Mathai-Davis. The Audit
Committee is responsible for meeting with the Trust's auditors to review audit
procedures and results and to consider any matters arising from an audit to be
brought to the attention of the directors as a whole with respect to the Trust's
fund accounting or its internal accounting controls, and considering such
matters as may from time to time be set forth in a charter adopted by the Board
of Trustees and such committee.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly, Dunn, Fields, Frischling, Pennock, Sklar (Chairman) and Ms.Mathai-Davis.
The Investment Committee is responsible for reviewing portfolio compliance,
brokerage allocation, portfolio investment pricing issues, interim dividend and
distribution issues, and considering such matters as may from time to time be
set forth in a charter adopted by the Board of Trustees and such committee.
25
<PAGE> 73
The members of the Nominating and Compensation Committee are Messrs.
Crockett (Chairman), Daly, Dunn, Fields, Pennock, Sklar and Ms. Mathai-Davis.
The Nominating and Compensation Committee is responsible for considering and
nominating individuals to stand for election as trustees who are not interested
persons as long as the Trust maintains a distribution plan pursuant to Rule
12b-1 under the 1940 Act, reviewing from time to time the compensation payable
to the disinterested trustees, and considering such matters as may from time to
time be set forth in a charter adopted by the Board of Trustees and such
committee.
All of the Trust's Trustees also serve as directors or trustees of some
or all of the other investment companies managed or advised by A I M Advisors,
Inc. ("AIM Funds"). All of the Trust's executive officers hold similar offices
with some or all of the other AIM Funds.
Remuneration of Trustees
Each trustee is reimbursed for expenses incurred in connection with
each meeting of the Board of Trustees or any Committee 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
AGGREGATE BENEFITS
COMPENSATION ACCRUED TOTAL
FROM THE BY ALL AIM COMPENSATION
TRUSTEE TRUST(1) FUNDS(2) FROM ALL AIM FUNDS(3)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer $ 0 $ 0 $ 0
- ----------------------------------------------------------------------------------------------------------
Bruce L. Crockett 1,600 37,485 96,000
- ----------------------------------------------------------------------------------------------------------
Owen Daly II 1,600 122,898 96,000
- ----------------------------------------------------------------------------------------------------------
Edward K. Dunn Jr 1,600 0 78,889
- ----------------------------------------------------------------------------------------------------------
Jack Fields 1,595 15,826 95,500
- ----------------------------------------------------------------------------------------------------------
Carl Frischling(4) 1,594 97,971 95,500
- ----------------------------------------------------------------------------------------------------------
Robert H. Graham 0 0 0
- ----------------------------------------------------------------------------------------------------------
John F. Kroeger(5) 263 107,896 91,654
- ----------------------------------------------------------------------------------------------------------
Prema Mathai-Davis 1,468 0 32,636
- ----------------------------------------------------------------------------------------------------------
Lewis F. Pennock 1,594 45,766 95,500
- ----------------------------------------------------------------------------------------------------------
Ian Robinson(6) 944 94,442 94,500
- ----------------------------------------------------------------------------------------------------------
Louis S. Sklar 1,589 90,232 95,500
==========================================================================================================
</TABLE>
26
<PAGE> 74
(1) The total amount of compensation deferred by all Trustees of the Trust
during the fiscal year ended July 31, 1999, including interest earned
thereon, was $8,778.
(2) During the fiscal year ended July 31, 1999, the total amount of expenses
allocated to the company in respect of such retirement benefits was $1,391.
Data reflects compensation for the calendar year ended December 31, 1998.
(3) Each Trustee serves as director or trustee of a total of 12 registered
investment companies advised by AIM. Data reflects compensation for the
calendar year ended December 31, 1998.
(4) During the year ended July 31, 1999, Mid Cap and Small Cap, each paid
$1,758 and $2,606, respectively, in legal fees to Mr. Frischling's law
firm, Kramer, Levin, Naftalis & Frankel LLP for services rendered.
(5) Mr. Kroeger was a Trustee until June 11, 1998, when he resigned. On that
date he became a consultant to the Trust. Of the amount listed above, $0
was for compensation for services as a Trustee and the remainder as a
consultant. 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 Trustee 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, the normal retirement date is the date on which the eligible trustee has
attained age 65 and has completed at least five years of continuous service with
one or more of the regulated investment companies managed, administered or
distributed by AIM or its affiliates (the "Applicable AIM Funds"). Each eligible
trustee is entitled to receive an annual benefit from the Applicable AIM Funds
commencing on the first day of the calendar quarter coincident with or following
his date of retirement equal to 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 any benefits under the Plan commences, the trustee's
surviving spouse (if any) shall receive a quarterly survivor's benefit equal to
50% of the amount payable to the deceased trustee for no more than ten years
beginning the first day of the calendar quarter following the date of the
trustee's death. Payments under the Plan are not secured or funded by any
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 Ms. Mathai-Davis are 12, 12, 1, 2, 22, 20, 18, 11, 10 and
1 years, respectively.
27
<PAGE> 75
ESTIMATED BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
====================================================
Number of
Years of Annual Retirement
Service With Paid By All Applicable
The 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, Sklar and Ms. Mathai-Davis (for
purposes of this paragraph only, the "deferring trustees") have each executed a
Deferred Compensation Agreement (collectively, the "Agreements"). Pursuant to
the 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, in generally equal quarterly installments over a period of five (5) or ten
(10) years (depending on the 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 deferral account, the balance of the deferral account will be
distributed to his designated beneficiary in a single lump sum payment as soon
as practicable after such deferring trustee's death. The Agreements are not
funded and, with respect to the payments of amounts held in the deferral
accounts, the deferring trustees have the status of unsecured creditors of the
Trust and of each other AIM Fund from which they are deferring compensation.
INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENTS
AIM serves as the investment advisor to each Fund pursuant to a Master
Investment Advisory Agreement, as amended (the "Master Advisory Agreement"). AIM
was organized in 1976, and, together with its subsidiaries, advises or manages
approximately 125 investment company portfolios encompassing a broad range of
investment objectives. AIM is a 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 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 directors and officers of
AIM are also executive officers of the Trust and their affiliations are shown
under "Trustees and Officers".
28
<PAGE> 76
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, (b) to file reports or
duplicate confirmations regarding such transactions, (c) to refrain from
personally engaging in (i) short-term trading of a security, (ii) transactions
involving a security within seven days of an AIM Fund transaction involving the
same security, and (iii) transactions involving securities being considered for
investment by an AIM Fund, and (d) to abide by certain other provisions under
the Code of Ethics. The Code of Ethics also prohibits investment personnel and
all other AIM employees from purchasing securities in an initial public
offering. Personal trading reports are reviewed periodically by AIM, and the
Board of Trustees reviews quarterly and annual reports (including information on
any substantial violations of the Code of Ethics). Sanctions for violations of
the Code of Ethics may include censure, monetary penalties, suspension or
termination of employment.
The Trust has entered into the Master Advisory Agreement and a Master
Administrative Services Agreement (the "Master Administrative Services
Agreement") on behalf of the Funds with AIM.
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.
The Master Advisory Agreement provides that the Funds will pay or cause
to be paid all expenses of the Funds not assumed by AIM, 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 Funds 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 will continue in effect 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 a Fund (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 "Qualified Trustees") by votes cast
in person at a meeting called for such purpose. The Master Advisory Agreement
provides that the Board of Trustees of the Trust, a majority of the outstanding
voting securities of a Fund or AIM may terminate the agreement on 60 days'
written notice without penalty. The 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 fees 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 Funds. Fee waiver or
reductions set forth in the Master Advisory Agreement may not be terminated
without shareholder approval.
Pursuant to the Master Advisory Agreement, AIM receives a fee from
Large Cap calculated at an annual rate of 1.00% of the first $1 billion of Large
Cap's average daily net assets, plus 0.95% of Large Cap's average daily net
assets in excess of $1 billion. With respect to Mid Cap, AIM receives a fee
calculated at an annual rate of 1.00% of the first $1 billion of Mid Cap's
average daily net assets, plus 0.95% of Mid Cap's average daily net assets in
excess of $1 billion. With respect to Small Cap, AIM receives a fee calculated
at an annual rate of 1.00% of Small Cap's average daily net assets.
29
<PAGE> 77
For the fiscal period or year ended July 31, 1999, Mid Cap and Small
Cap paid to AIM $0 and $2,594,463, respectively, in advisory fees net of any
expense limitations (fee waivers). For the fiscal period or year ended July 31,
1999, AIM waived $16,036 of advisory fees for Mid Cap and did not waive any
advisory fees for Small Cap.
The Master Administrative Services Agreement provides that AIM may
perform or arrange for the performance of certain accounting, and shareholder
services and other administrative services to the Funds which are not required
to be performed by AIM under the Master Advisory Agreement. For such services,
AIM would be entitled to receive from a 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 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 a Fund, and (ii) the affirmative vote of a majority of the
Qualified Trustees by votes cast in person at a meeting called for such purpose.
The Master Administrative Services Agreement will terminate as to a Fund upon
the termination of the Master Advisory Agreement with respect to the Fund. The
agreement terminates automatically in the event of its assignment.
In addition, the Transfer Agency and Service Agreement for the Funds
provides that 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 Funds, maintain shareholder
accounts and provide shareholders with information regarding the Funds and their
accounts.
Mid Cap and Small Cap paid AIM $50,801 and $109,921, respectively, as
reimbursement of administrative services costs for the fiscal period or year
ended July 31, 1999. For the fiscal period or year ended July 31, 1999, AFS
received an amount of $640 and $194,117 for transfer agency and shareholder
services fees with respect to Class A shares of Mid Cap and Class A, Class B and
Class C shares of Small Cap, respectively.
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 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 the Funds pay compensation to
AIM Distributors at an annual rate of 1.00% of the average daily net assets
attributable to Class C shares. 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.
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 the Funds. Payments
can also be directed by AIM Distributors to selected institutions who have
entered into service agreements with respect to Class A and Class C shares of
the Funds and who provide continuing personal services to their customers who
own Class A and Class C shares of the Funds. The service fees payable to
selected institutions are calculated at the annual rate of 0.25% of the average
daily net asset value of those Fund
30
<PAGE> 78
shares that are held in such institution's customers' accounts which were
purchased on or after a prescribed date set forth in the Plan.
Of the aggregate amount payable under the Class A and C Plan, payments
to dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of the
Funds, in amounts of up to 0.25% of the average net assets of the Funds
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 A and C Plan also imposes a cap on the total amount of sales charges,
including asset-based sales charges, that may be paid by the Trust with respect
to the Funds.
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 the
Funds (the "Class B Plan", and collectively with the Class A and C Plan, the
"Plans"). Under the Class B Plan, the Funds 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: preparing and distributing
advertising material and 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 Funds' 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 Funds'
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 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 a Fund 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
Fund shares; and such other administrative services as a Fund 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 record keeping for and administrative services to 401(k) plans.
31
<PAGE> 79
The Trust may also enter into Variable Group Annuity Contractholder
Service Agreements ("Variable Contract Agreements") on behalf of a Fund
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 Internal Revenue Code. Services provided pursuant to such
Variable Contract Agreements may include some or all of the following: answering
inquiries regarding a 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 a 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.
Financial intermediaries and any other person entitled to receive
compensation for selling shares of a Fund may receive different compensation for
selling shares of one particular class over another.
Under a Shareholder Service Agreement, a Fund agrees 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 a Fund during such period at the annual rate of 0.25%
of the average daily net asset value of a Fund's 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.
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 Funds.
Payments pursuant to the Plans are subject to any applicable
limitations imposed by rules of the National Association of Securities Dealers,
Inc. ("NASD"). The Plans conform to rules of the NASD by limiting payments made
to dealers and other financial institutions who provide continuing personal
shareholder services to their customers who purchase and own shares of a Fund to
no more than 0.25% per annum of the average daily net assets of the funds
attributable to the customers of such dealers or financial institutions, and by
imposing a cap on the total sales charges, including asset based sales charges,
that may be paid by the Fund and its classes.
Each Plan provides that no provision of the Plan will be interpreted to
prohibit payments during periods when sales of shares of the Funds have been
discontinued, suspended or otherwise limited.
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 period or year ended July 31, 1999, with respect to
their Class A Shares, Mid Cap and Small Cap paid AIM Distributors under the Plan
$5,613 and $516,599, respectively, or an amount equal to 0.35% of average daily
net assets. For the fiscal period or year ended July 31, 1999, with respect to
its Class B Shares, Mid Cap and Small Cap paid AIM Distributors under the Plan
$0 and $1,106,186, respectively, or an amount equal to 1.00% of average daily
net assets. For the fiscal period or year ended July 31, 1999, with respect to
their Class C Shares, Mid Cap and Small Cap paid AIM
32
<PAGE> 80
Distributors under the Plan $0 and $12,281, respectively, or an amount equal to
1.00% of average daily net assets, respectively. As of July 31, 1999, Class B
and C shares of Mid Cap were not available.
An estimate by category of actual fees paid by the following Funds
under the Class A and C Plan during the fiscal period or year ended July 31,
1999, were allocated as follows:
33
<PAGE> 81
<TABLE>
<CAPTION>
MID CAP SMALL CAP
------- ---------
<S> <C> <C>
CLASS A
Advertising $ 5,432 $ 100,253
Printing and mailing 0 9,193
prospectuses, semi-
annual reports and
annual reports
(other than to current
shareholders)
Seminars 0 23,511
Compensation to 0 0
Underwriters to partially
offset other marketing
expenses
Compensation to 181 383,642
Dealers including
finder's fees
Compensation to 0 0
Sales Personnel
Annual Report Total 5,613 516,599
</TABLE>
An estimate by category of actual fees paid by the following Funds
under the Class B Plan during the fiscal period or year ended July 31, 1999,
were allocated at follows:
<TABLE>
<CAPTION>
SMALL CAP
-----------
<S> <C>
CLASS B
Advertising $ 183,400
Printing and mailing 16,435
prospectuses, semi-
annual reports and
annual reports
(other than to current
shareholders)
Seminars 41,345
Compensation to 829,639
Underwriters to partially
offset other marketing
expenses
Compensation to 35,367
Dealers
Compensation to 0
Sales Personnel
Annual Report Totals 1,106,186
</TABLE>
34
<PAGE> 82
An estimate by category of actual fees paid by the following Funds
under the Class A and C Plan during the fiscal period or year ended July 31,
1999, were allocated as follows:
<TABLE>
<CAPTION>
SMALL CAP
---------
<S> <C>
CLASS C
Advertising $ 78
Printing and mailing 0
prospectuses, semi-
annual reports and
annual reports
(other than to current
shareholders)
Seminars 0
Compensation to 9,211
Underwriters to partially
offset other marketing
expenses
Compensation to 2,992
Dealers including
finder's fees
Compensation to 0
Sales Personnel
Annual Report Totals 12,281
</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.
Both Plans require that the Distribution Agreements provide that AIM
Distributors (or dealers of financial institutions who offer and sell Class C
shares) will be deemed to have performed all services required to be performed
in order to receive an asset-backed sales charge on the average daily net assets
attributable to Class B or Class C shares upon settlement of each sale of a
Class B or Class C share.
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 ("Independent 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 affected class of the Funds and its
respective shareholders.
The Plans do not obligate the Funds 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 Funds will not be
obligated to pay more than that fee. If AIM Distributors' expenses are less than
the fee it receives, AIM Distributors will retain the full amount of the fee.
Unless the Plans are terminated earlier in accordance with their terms,
they continue as long as such continuance is specifically approved at least
annually by the Board of Trustees, including a majority of the Independent
Trustees. The Plans may be terminated with respect to a Class by the vote of a
35
<PAGE> 83
majority of the Independent Trustees, or by the vote of a majority of the
outstanding voting securities of such Class of the Funds.
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 majority of the Independent
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 Independent Trustees is committed to the discretion of the
Independent 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 a 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 a 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
each Fund's Class A shares and up to 1.00% of such assets of each Fund's Class C
shares and the Class B Plan allows payments of up to 1.00% of the average daily
net assets of the 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, a registered broker-dealer and a wholly owned subsidiary of AIM,
pursuant to which AIM Distributors acts as distributor of Class A, Class B and
Class C Shares of the Funds. The address of AIM Distributors is 11 Greenway
Plaza, Suite 100, Houston, TX 77046-1173. 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 and C shares of the Funds and a separate
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 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 Fund's shares, including expenses of
advertising in connection with such public offerings. AIM Distributors has not
undertaken to sell any specified number of shares of any class of the Funds.
The Distribution Agreements provide AIM Distributors with the exclusive
right to distribute Class A, Class B and Class C shares of the Funds directly
and through institutions with whom AIM Distributors has entered into selected
dealer agreements. The Distribution Agreements provide that AIM Distributors (or
dealers or financial institutions who offer and sell Class C shares) will be
deemed to have performed all services required to be performed in order to
receive an asset-backed sales charge on the average
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<PAGE> 84
daily net assets attributable to Class B or Class C shares upon settlement of
each sale of a Class B or Class C share.
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 dealers 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 the Funds' average daily
net assets attributable to Class B shares attributable to the sales efforts of
AIM Distributors.
AIM Distributors expects to pay sales commissions from its own
resources to dealers and institutions who sell Class B shares of the Funds at
the time of such sales. Payments with respect to Class B shares will equal 4.0%
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 the Funds, 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 the Funds' 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 from the Funds 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,
dealers and institutions will receive on a quarterly basis the full amount
payable by the Funds with respect to Class C shares 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 automatically 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 affect 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.
For the period or year ended July 31, 1999, the total sales charge paid
in connection with the sale of Class A shares of Mid Cap and Small Cap were $374
and $1,454,296, respectively, and the amount retained by AIM Distributors was
$15 and $212,220, respectively. For the period or year ended
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<PAGE> 85
July 31, 1999, the contingent deferred sales charges paid by Mid Cap and Small
Cap Class A, Class B and Class C shareholders was $ 0 and $6,932, 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 European Development
Fund, AIM Europe Growth Fund, AIM Global Utilities Fund, AIM Global Growth &
Income Fund, AIM International 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 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
Investor's Sales Charge Concession
----------------------------- ----------
As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction(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.
38
<PAGE> 86
<TABLE>
<CAPTION>
Dealer
Investor's Sales Charge Concession
----------------------------- ----------
As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
---------------------------------- ------------- ---------- ----------
<S> <C> <C> <C>
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.
<TABLE>
<CAPTION>
Dealer
Investor's Sales Charge Concession
----------------------------- ----------
As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
---------------------------------- ------------- ---------- ----------
<S> <C> <C> <C>
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 $1,000,0000 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
39
<PAGE> 87
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.
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.
40
<PAGE> 88
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
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
41
<PAGE> 89
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 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
42
<PAGE> 90
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;
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 directors 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.
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<PAGE> 91
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; and
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.
As used above, immediate family includes an individual and his or her
spouse, children, parents and parents of spouse.
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
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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, AIM Advisor MultiFlex 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, 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 or 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:
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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.
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 set forth herein under the caption "REDUCTIONS IN INITIAL
SALES CHARGES - Purchases at Net Asset Value".
The following formula may be used by an investor to determine the
public offering price per Class A share of an investment:
Net Asset Value / ( 1 - Sales Charge as % of Offering Price) = Offering
Price
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
each Prospectus 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
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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 Funds not reasonably practicable.
NET ASSET VALUE DETERMINATION
In accordance with the current rules and regulations of the SEC, the
net asset value of a share of each Fund is determined once daily as of the close
of trading 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 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 trading on the NYSE will generally be used. The
net asset value per share is determined by subtracting the liabilities (e.g.,
the expenses) of a Fund from its assets and dividing the result by the total
number of shares outstanding. Determination of a 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. 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 securities
(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 institution-size trading in similar groups of
securities, developments related to special securities, dividend rate, yield,
quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. 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. 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," "Redeeming Shares - How to
Redeem Shares" and "Pricing of Shares" in each 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 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
will not be reflected in the computation of a Fund's net asset value. If events
materially affecting the value of such
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<PAGE> 95
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 Funds. 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 a 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 Funds 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 its shareholders that are not
described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Funds 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 is treated as a separate association taxable as a
corporation. Each Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, a 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) and 90% of its
tax-exempt income 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.
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 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.
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In addition to satisfying the requirements described above, each Fund
must satisfy an asset diversification test (the "Asset Diversification Test") in
order to qualify as a regulated investment company. Under this test, at the
close of each quarter of a Fund's taxable year, at least 50% of the value of the
Fund's assets must consist of cash and cash items, U.S. Government securities,
securities of other regulated investment companies, and securities of other
issuers (as to which the Fund has not invested more than 5% of the value of the
Fund's total assets in securities of such issuer and as to which the Fund does
not hold more than 10% of the outstanding voting securities of such issuer), and
no more than 25% of the value of its total assets may be invested in the
securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more issuers
which the Fund controls and which are engaged in the same or similar trades or
businesses.
For purposes of the Asset Diversification Test, the Internal Revenue
Service ("IRS") has ruled that the issuer of a purchased listed call option on
stock is the issuer of the stock underlying the option. The IRS has also
informally ruled that, in general, the issuers of purchased or written call and
put options on securities, of long and short positions on futures contracts on
securities and of options on such future contracts are the issuers of the
securities underlying such financial instruments where the instruments are
traded on an exchange. The IRS has informally suggested, however, that the
issuer of certain purchased over-the-counter options may be the writer of such
options.
Where the writer of a listed call option owns the underlying
securities, the IRS has ruled that the Asset Diversification Test will be
applied solely to such securities and not to the value of the option itself.
With respect to options on securities indexes, futures contracts on securities
indexes and options on such futures contracts, the IRS has informally ruled that
the issuers of such options and futures contracts are the separate entities
whose securities are listed on the index, in proportion to the weighing of
securities in the computation of the index. It is unclear under present law who
should be treated as the issuer of forward foreign currency exchange contracts,
of options on foreign currencies, or of foreign currency futures and related
options. It has been suggested that the issuer in each case may be the foreign
central bank or the foreign government backing the particular currency. Due to
this uncertainty and because the Funds may not rely on informal rulings of the
IRS, the Funds may find it necessary to seek a ruling from the IRS as to the
application of the Asset Diversification Test to certain of the foregoing types
of financial instruments or to limit its holdings of some or all such
instruments in order to stay within the limits of such test.
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 the Fund's current and accumulated earnings
and profits. Such distributions generally will be eligible for the dividends
received deduction in the case of corporate shareholders.
INVESTMENT IN FOREIGN FINANCIAL INSTRUMENTS
Under Code Section 988, gains or losses from certain foreign currency
forward contracts or fluctuations in exchange rates will generally be treated as
ordinary income or loss. Such Code Section 988 gains or losses will increase or
decrease the amount of each Fund's investment company taxable income available
to be distributed to shareholders as ordinary income, rather than increasing or
decreasing the amount of the Fund's net capital gains. Additionally, if Code
Section 988 losses exceed other investment company taxable income during a
taxable year, a Fund would not be able to pay any ordinary income dividends, and
any such dividends paid before the losses were realized, but in the same taxable
year, would be recharacterized as a return of capital to shareholders, thereby
reducing the tax basis of Fund shares.
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HEDGING TRANSACTIONS
Some of the forward foreign currency exchange contracts, options and
futures contracts that 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% to noncorporate 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.
The Funds may engage in certain hedging transactions (such as short
sales "against the box") that 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 generally 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 in the taxable year which includes such date).
Other hedging transactions in which the Funds may engage may result in
"straddles" or "conversion transactions" for U.S. federal income tax purposes.
The straddle and conversion transaction rules may affect the character of gains
(or in the case of the straddle rules, losses) realized by a Fund. In addition,
losses realized by a Fund on positions that are part of a straddle may be
deferred under the straddle rules, rather than being taken into account in
calculating the taxable income for the taxable year in which the losses are
realized. Because only a few regulations implementing the straddle rules and the
conversion transaction rules have been promulgated, the tax consequences to a
Fund's hedging transactions are not entirely clear. The hedging transactions may
increase the amount of short-term capital gain realized by a Fund (and, if they
are conversion transactions, the amount of ordinary income) which is taxed as
ordinary income when distributed to shareholders.
Each Fund may make one or more of the elections available under the
Code which are applicable to straddles. If a Fund makes any of the elections,
the amount, character, and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of any of the foregoing rules governing Section
1256 contracts, constructive sales and straddle and conversion transactions may
affect the character of gains or losses, defer losses and/or accelerate the
recognition of gains or losses from the affected investment or straddle
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 or decreased as compared to a fund that did not engage in such
transactions.
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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,
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.
Each Fund may either retain or distribute to shareholders its net
capital gain for each taxable year. The Funds currently intend 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 a Fund prior to the date on which the shareholder
acquired his shares. Conversely, if a Fund elects to retain its net capital
gain, it 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 a 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 a 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),
during the 90-day period beginning on the date which is 45 days before the date
on which the stock becomes ex-dividend (during the 180-day period beginning on
the date which is 90 days before such date, in the case of certain preferred
stock), 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
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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 a 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 a
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 a Fund 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 the 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 a 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 AIM 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 a 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.
Each Fund 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 Internal Revenue Service for failure
to report the receipt
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of interest or dividend income properly, or (c) who has failed to certify to the
Fund that it is not subject to backup withholding or that it is a corporation or
other "exempt recipient."
SALE OR REDEMPTION OF 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 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.
If a shareholder (a) incurs a sales load in acquiring shares of a Fund,
(b) disposes of such shares less then 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.
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.
53
<PAGE> 101
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 September 10, 1999. 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 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. AIM Funds will issue share certificates upon
written request to AFS. Otherwise, shares are held on the shareholder's behalf
and recorded on the Fund books. AIM Funds will not issue certificates for shares
held in prototype retirement plans.
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
54
<PAGE> 102
Funds. AIM Distributors reserves the right to impose conditions on dealers or
investment advisors who make telephone exchanges of shares of the funds,
including the condition that any such dealer or investment advisor enter into an
agreement (which contains additional conditions with respect to exchanges of
shares) with AIM Distributors. To exchange shares by telephone, a shareholder,
dealer or investment advisor who has satisfied the foregoing conditions must
call AFS at (800) 959-4246. If a shareholder is unable to reach AFS by
telephone, he may also request exchanges by telegraph or use overnight courier
services to expedite exchanges by mail, which will be effective on the business
day received by the Transfer Agent as long as such request is received prior to
NYSE Close. The Transfer Agent and AIM Distributors 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.
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. 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.
55
<PAGE> 103
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 qualifies as an "eligible guarantor institution," an investor
should contact the Client Services Department of AFS.
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
AUDIT REPORTS
The Board of Trustees will issue semi-annual reports of the financial
statements of the Funds to the shareholders. Financial statements, audited by
independent auditors, will be issued annually. The firm of KPMG LLP, 700
Louisiana, Houston, Texas 77002, currently serves as the auditors of each Fund.
LEGAL MATTERS
Legal matters for the Trust have been passed upon by Ballard Spahr
Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, Pennsylvania 19103.
56
<PAGE> 104
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 ("AFS" or the
"Transfer Agent"), 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 purchases of the 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 Funds.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of September 3, 1999, the trustees and officers of the Trust, as a
group, owned less than 1% of all classes of outstanding shares of the Trust. To
the best knowledge of the Trust, the name and addresses of the holders of 5% or
more of the outstanding shares of each class of the Trust's equity securities as
of September 3, 1999, and the percentage of the outstanding shares held by such
holders are set forth below:
<TABLE>
<CAPTION>
Percentage
Name and Address Percentage Owned Owned of Record
Fund of Owner of Record* and Beneficially
- -------------------- --------------------------------- ---------------- -------------------
<S> <C> <C> <C>
AIM Mid Cap A I M Advisors, Inc. 32.18%** -0-
Opportunities Fund - Attn: David Hessel
Class A Shares 11 Greenway Plaza, Suite 1919
Houston, TX 77046
W. Gary Littlepage and Melinda L. -0- 14.75%
Littlepage Ten In Common
4623 Banning Dr.
Houston, TX 77027
Charles T. Bauer -0- 12.43%
C/o AIM Management Group Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046
</TABLE>
- ----------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
** A shareholder who holds 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.
57
<PAGE> 105
<TABLE>
<CAPTION>
Percentage
Name and Address Percentage Owned Owned of Record
Fund of Owner of Record and Beneficially
- -------------------- ----------------------------------- ---------------- ----------------
<S> <C> <C> <C>
CFP Holdings Ltd (Partnership) 5.69% -0-
Attn: Gary Crum
11 Greenway Plaza, Suite 100
Houston, TX 77046
AIM Small Cap Merrill Lynch Pierce Fenner & Smith 8.01% -0-
Opportunities Fund - FBO The Sole Benefit of Customers
Class A Shares Attn: Fund Administration
4800 Deer Lake Dr., East 2nd Floor
Jacksonville, FL 32246
AIM Small Cap Merrill Lynch Pierce Fenner & Smith 23.14% -0-
Opportunities Fund - FBO The Sole Benefit of Customers
Class B Shares Attn: Fund Administration
4800 Deer Lake Dr., East 2nd Floor
Jacksonville, FL 32246
AIM Small Cap Merrill Lynch Pierce Fenner & Smith 29.62% -0-
Opportunities Fund - FBO The Sole Benefit of Customers
Class C Shares Attn: Fund Administration
4800 Deer Lake Dr., East 2nd Floor
Jacksonville, FL 32246
</TABLE>
- --------------------
* The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
AIM, 11 Greenway Plaza, Suite 100, Houston, Texas, 77046, has provided
the initial capitalization of Large Cap and, accordingly, as of the date of this
Statement of Additional Information, owned all the outstanding shares of Large
Cap. Although Large Cap expects the sale of its shares to the public pursuant to
its Prospectus will promptly reduce the percentage of such shares owned by AIM,
as long as AIM owns over 25% of the shares of Large Cap that are outstanding, it
may be presumed to be in "control" of Large Cap, as defined in the 1940 Act.
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 pursuant to the Prospectuses. The Registration Statement is
available for inspection by the public at the SEC in Washington, D.C.
58
<PAGE> 106
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.
59
<PAGE> 107
FINANCIAL STATEMENTS
FS
<PAGE> 108
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Mid Cap Opportunities Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Mid Cap Opportunities Fund (a series
of AIM Special Opportunities Funds) including the
schedule of investments, as of July 31, 1999, and the
related statement of operations, changes in net assets,
and financial highlights for the period December 30, 1998
(dated operations commenced) through July 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 July 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 Mid Cap
Opportunities Fund as of July 31, 1999, the results of
its operations, changes in its net assets and financial
highlights for the period December 30, 1998 (date
operations commenced) through July 31, 1999, in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
KPMG LLP
September 3, 1999
Houston, Texas
FS-1
<PAGE> 109
SCHEDULE OF INVESTMENTS
July 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-86.26%
AUTO PARTS & EQUIPMENT-1.21%
Danaher Corp. 300 $ 17,119
- -------------------------------------------------------------
SPX Corp.(a) 200 17,000
- -------------------------------------------------------------
Tower Automotive, Inc.(a) 1,000 23,812
- -------------------------------------------------------------
57,931
- -------------------------------------------------------------
BANKS (REGIONAL)-2.54%
Bank United Corp.-Class A 600 23,100
- -------------------------------------------------------------
Compass Bancshares, Inc. 2,200 63,387
- -------------------------------------------------------------
First Tennessee National Corp. 600 21,975
- -------------------------------------------------------------
National Commerce Bancorporation 600 13,387
- -------------------------------------------------------------
121,849
- -------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.22%
Adolph Coors Co. 200 10,650
- -------------------------------------------------------------
BIOTECHNOLOGY-0.29%
Biogen, Inc.(a) 200 13,762
- -------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.58%
Univision Communications, Inc.(a) 400 27,700
- -------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-9.41%
ADC Telecommunications, Inc.(a) 3,000 133,500
- -------------------------------------------------------------
Comverse Technology, Inc.(a) 300 22,669
- -------------------------------------------------------------
Copper Mountain Networks, Inc.(a) 400 48,400
- -------------------------------------------------------------
General Instrument Corp.(a) 300 13,612
- -------------------------------------------------------------
JDS Uniphase Corp.(a) 400 36,150
- -------------------------------------------------------------
L-3 Communications Holdings, Inc.(a) 600 25,762
- -------------------------------------------------------------
QUALCOMM, Inc.(a) 1,000 156,000
- -------------------------------------------------------------
Scientific-Atlanta, Inc. 400 14,600
- -------------------------------------------------------------
450,693
- -------------------------------------------------------------
COMPUTERS (HARDWARE)-1.16%
Apple Computer, Inc.(a) 1,000 55,687
- -------------------------------------------------------------
COMPUTERS (NETWORKING)-2.03%
Gadzoox Networks, Inc.(a) 700 52,675
- -------------------------------------------------------------
VeriSign, Inc.(a) 600 44,475
- -------------------------------------------------------------
97,150
- -------------------------------------------------------------
COMPUTERS (PERIPHERALS)-2.63%
Adaptec, Inc.(a) 1,200 46,650
- -------------------------------------------------------------
Lexmark International Group,
Inc.-Class A(a) 200 12,600
- -------------------------------------------------------------
QLogic Corp.(a) 400 66,750
- -------------------------------------------------------------
126,000
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-16.22%
Adobe Systems, Inc. 500 $ 42,875
- -------------------------------------------------------------
Check Point Software Technologies
Ltd.-ADR (Israel)(a) 1,000 68,437
- -------------------------------------------------------------
Citrix Systems, Inc.(a) 700 36,444
- -------------------------------------------------------------
Commerce One, Inc.(a) 800 39,800
- -------------------------------------------------------------
Electronic Arts, Inc.(a) 550 31,316
- -------------------------------------------------------------
Electronics for Imaging, Inc.(a) 900 49,331
- -------------------------------------------------------------
Gemstar International Group Ltd.(a) 400 26,500
- -------------------------------------------------------------
Intuit, Inc.(a) 400 32,725
- -------------------------------------------------------------
ISS Group, Inc.(a) 1,200 26,100
- -------------------------------------------------------------
Liquid Audio, Inc.(a) 1,250 35,156
- -------------------------------------------------------------
Lycos, Inc.(a) 2,000 82,625
- -------------------------------------------------------------
Macromedia, Inc.(a) 1,300 45,337
- -------------------------------------------------------------
Network Solutions, Inc.(a) 600 37,350
- -------------------------------------------------------------
Novell, Inc.(a) 1,100 28,325
- -------------------------------------------------------------
Portal Software, Inc.(a) 850 35,567
- -------------------------------------------------------------
Rational Software Corp.(a) 900 30,037
- -------------------------------------------------------------
RealNetworks, Inc.(a) 300 22,894
- -------------------------------------------------------------
Verio, Inc.(a) 700 49,919
- -------------------------------------------------------------
Veritas Software Corp.(a) 1,000 56,125
- -------------------------------------------------------------
776,863
- -------------------------------------------------------------
ELECTRIC COMPANIES-0.85%
Montana Power Co. 600 40,612
- -------------------------------------------------------------
ELECTRICAL EQUIPMENT-3.51%
American Power Conversion Corp.(a) 1,500 31,125
- -------------------------------------------------------------
CommScope, Inc.(a) 750 25,641
- -------------------------------------------------------------
Conexant Systems, Inc.(a) 1,350 84,881
- -------------------------------------------------------------
Vishay Intertechnology, Inc.(a) 1,250 26,719
- -------------------------------------------------------------
168,366
- -------------------------------------------------------------
ELECTRONICS (COMPONENT
DISTRIBUTORS)-1.25%
C-COR.net Corp.(a) 2,000 59,750
- -------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-1.08%
PE Corp-PE Biosystems Group 600 33,637
- -------------------------------------------------------------
Waters Corp.(a) 300 17,925
- -------------------------------------------------------------
51,562
- -------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-9.64%
ASM Lithography Holding N.V.-ADR
(Netherlands)(a) 200 12,150
- -------------------------------------------------------------
Altera Corp.(a) 1,000 36,250
- -------------------------------------------------------------
Burr-Brown Corp.(a) 1,500 57,375
- -------------------------------------------------------------
Flextronics International Ltd.(a) 500 22,437
- -------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 110
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (SEMICONDUCTORS)-(CONTINUED)
GlobeSpan, Inc.(a) 500 $ 25,375
- -------------------------------------------------------------
LSI Logic Corp.(a) 700 35,219
- -------------------------------------------------------------
Micrel, Inc.(a) 400 31,600
- -------------------------------------------------------------
MIPS Technologies, Inc.-Class A(a) 1,500 55,500
- -------------------------------------------------------------
National Semiconductor Corp.(a) 1,300 32,175
- -------------------------------------------------------------
PMC-Sierra, Inc.(a) 1,200 93,900
- -------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 400 25,550
- -------------------------------------------------------------
Xilinx, Inc.(a) 550 34,306
- -------------------------------------------------------------
461,837
- -------------------------------------------------------------
ENTERTAINMENT-0.70%
SFX Entertainment, Inc.(a) 750 33,609
- -------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-1.64%
KLA-Tencor Corp.(a) 500 33,875
- -------------------------------------------------------------
Terayon Communication Systems, Inc.(a) 600 44,737
- -------------------------------------------------------------
78,612
- -------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-0.40%
SEI Investments Co. 200 19,350
- -------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-0.79%
Allergan, Inc. 400 37,800
- -------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-1.00%
MedImmune, Inc.(a) 600 47,925
- -------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.15%
Trigon Healthcare, Inc.(a) 200 6,975
- -------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-2.26%
Bausch & Lomb, Inc. 400 28,725
- -------------------------------------------------------------
Biomet, Inc. 800 29,100
- -------------------------------------------------------------
VISX, Inc.(a) 500 50,625
- -------------------------------------------------------------
108,450
- -------------------------------------------------------------
HOUSEHOLD FURNISHING &
APPLIANCES-0.96%
Furniture Brands International,
Inc.(a) 800 21,600
- -------------------------------------------------------------
La-Z-Boy, Inc. 1,000 24,437
- -------------------------------------------------------------
46,037
- -------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.64%
AFLAC, Inc. 200 9,275
- -------------------------------------------------------------
Protective Life Corp. 600 21,413
- -------------------------------------------------------------
30,688
- -------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.24%
TD Waterhouse Group, Inc.(a) 650 11,294
- -------------------------------------------------------------
INVESTMENT MANAGEMENT-0.36%
Federated Investors, Inc.-Class B 900 17,156
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
LEISURE TIME (PRODUCTS)-0.59%
Callaway Golf Co. 1,000 $ 11,563
- -------------------------------------------------------------
Harley-Davidson, Inc. 300 16,613
- -------------------------------------------------------------
28,176
- -------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-4.51%
ENSCO International, Inc. 1,900 38,831
- -------------------------------------------------------------
Nabors Industries, Inc.(a) 1,800 41,963
- -------------------------------------------------------------
R&B Falcon Corporation(a) 3,000 30,188
- -------------------------------------------------------------
Rowan Companies, Inc.(a) 2,200 41,388
- -------------------------------------------------------------
Transocean Offshore, Inc. 800 24,550
- -------------------------------------------------------------
Weatherford International, Inc.(a) 1,000 39,188
- -------------------------------------------------------------
216,108
- -------------------------------------------------------------
PUBLISHING-0.36%
Reader's Digest Association,
Inc.-Class A 500 17,406
- -------------------------------------------------------------
RAILROADS-0.69%
Kansas City Southern Industries, Inc. 600 33,150
- -------------------------------------------------------------
RESTAURANTS-1.58%
Brinker International, Inc.(a) 900 25,088
- -------------------------------------------------------------
Outback Steakhouse, Inc.(a) 550 18,356
- -------------------------------------------------------------
Sonic Corp.(a) 1,000 32,125
- -------------------------------------------------------------
75,569
- -------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-1.95%
Best Buy Co., Inc.(a) 700 52,238
- -------------------------------------------------------------
Tandy Corp. 800 41,050
- -------------------------------------------------------------
93,288
- -------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.32%
Kohl's Corp.(a) 200 15,213
- -------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.62%
Dollar Tree Stores, Inc.(a) 700 29,619
- -------------------------------------------------------------
RETAIL (HOME SHOPPING)-1.21%
Lands' End, Inc.(a) 400 18,125
- -------------------------------------------------------------
Spiegel, Inc.-Class A(a) 4,400 39,875
- -------------------------------------------------------------
58,000
- -------------------------------------------------------------
RETAIL (SPECIALTY)-4.26%
Bed Bath & Beyond, Inc.(a) 900 30,544
- -------------------------------------------------------------
Claire's Stores, Inc. 900 21,375
- -------------------------------------------------------------
eToys, Inc.(a) 1,250 49,922
- -------------------------------------------------------------
Linens 'n Things, Inc.(a) 500 23,125
- -------------------------------------------------------------
Payless ShoeSource, Inc.(a) 200 10,800
- -------------------------------------------------------------
Tiffany & Co. 800 40,250
- -------------------------------------------------------------
Zale Corp.(a) 700 28,000
- -------------------------------------------------------------
204,016
- -------------------------------------------------------------
</TABLE>
FS-3
<PAGE> 111
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY-APPAREL)-1.45%
Abercrombie & Fitch Co.-Class A(a) 280 $ 11,620
- -------------------------------------------------------------
American Eagle Outfitters, Inc.(a) 550 21,244
- -------------------------------------------------------------
Intimate Brands, Inc. 315 13,565
- -------------------------------------------------------------
TJX Companies, Inc. (The) 700 23,144
- -------------------------------------------------------------
69,573
- -------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.58%
Astoria Financial Corp. 300 11,419
- -------------------------------------------------------------
GreenPoint Financial Corp. 500 16,188
- -------------------------------------------------------------
27,607
- -------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-1.81%
Lamar Advertising Co.(a) 1,000 40,625
- -------------------------------------------------------------
Nielsen Media Research(a) 1,000 32,500
- -------------------------------------------------------------
Student Advantage, Inc.(a) 1,000 13,625
- -------------------------------------------------------------
86,750
- -------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.47%
Ariba, Inc.(a) 250 22,398
- -------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-0.70%
Critical Path, Inc.(a) 1,000 33,500
- -------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.19%
Fiserv, Inc.(a) 300 8,944
- -------------------------------------------------------------
SPECIALTY PRINTING-0.23%
Valassis Communications, Inc.(a) 300 11,175
- -------------------------------------------------------------
TELECOMMUNICATIONS
(CELLULAR/WIRELESS)-1.85%
Crown Castle International Corp.(a) 2,000 42,125
- -------------------------------------------------------------
Phone.com, Inc.(a) 750 46,641
- -------------------------------------------------------------
88,766
- -------------------------------------------------------------
TELEPHONE-0.32%
NTL, Inc.-ADR (United Kingdom)(a) 150 15,581
- -------------------------------------------------------------
TEXTILES (APPAREL)-0.81%
Jones Apparel Group, Inc.(a) 501 16,470
- -------------------------------------------------------------
Tommy Hilfiger Corp.(a) 600 22,163
- -------------------------------------------------------------
38,633
- -------------------------------------------------------------
Total Common Stocks (Cost
$3,414,158) 4,131,780
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. GOVERNMENT AGENCY
SECURITIES-4.95%
FEDERAL HOME LOAN MORTGAGE CORP.,
Disc. Notes, 4.97%, 08/02/99 (Cost
$236,967)(b) $237,000 236,934
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION MARKET
CONTRACTS PRICE DATE VALUE
<S> <C> <C> <C> <C>
OPTIONS PURCHASED-8.94%
CALLS-1.06%
Amazon.com, Inc.
(Retail-Internet) 10 $120 Sep-99 $ 5,500
- ---------------------------------------------------------------------
Conoco, Inc. (Oil &
Gas-Exploration &
Production) 25 25 Aug-99 4,297
20 27.5 Aug-99 1,125
- ---------------------------------------------------------------------
OSX Index (Oil &
Gas-Services) 75 80 Aug-99 30,469
15 80 Sep-99 9,750
- ---------------------------------------------------------------------
51,141
- ---------------------------------------------------------------------
PUTS-7.88%
S & P 500 Index 21 1325 Sep-99 87,150
6 1350 Sep-99 31,500
5 1375 Sep-99 32,937
27 1350 Dec-99 225,788
- ---------------------------------------------------------------------
377,375
- ---------------------------------------------------------------------
Total Options Purchased (Cost $325,841) 428,516
- ---------------------------------------------------------------------
TOTAL INVESTMENTS-100.15% 4,797,230
- ---------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS-(0.15%) (7,355)
- ---------------------------------------------------------------------
NET ASSETS-100.00% $4,789,875
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(c)
1-800 CONTACTS, Inc. 1,000 $ 20,500
- ------------------------------------------------------------
Advanced Micro Devices, Inc. 1,600 27,500
- ------------------------------------------------------------
autobytel.com Inc. 600 10,762
- ------------------------------------------------------------
Carrier Access Corp. 700 23,100
- ------------------------------------------------------------
Clorox Co. (The) 300 33,600
- ------------------------------------------------------------
Complete Business Solution, Inc. 750 14,250
- ------------------------------------------------------------
Deere & Company 400 15,300
- ------------------------------------------------------------
Duane Reade Inc. 800 25,400
- ------------------------------------------------------------
Enhance Financial Services Group, Inc. 700 14,525
- ------------------------------------------------------------
Excel Switching Corp. 1,500 40,875
- ------------------------------------------------------------
First Health Group Corp. 900 21,375
- ------------------------------------------------------------
First Sierra Financial, Inc. 2,200 43,863
- ------------------------------------------------------------
IMRglobal Corp. 500 8,562
- ------------------------------------------------------------
Jabil Circuit, Inc. 500 21,031
- ------------------------------------------------------------
Lincare Holdings, Inc. 250 7,500
- ------------------------------------------------------------
MapQuest.com, Inc. 750 11,203
- ------------------------------------------------------------
Net.B@nk, Inc. 250 5,375
- ------------------------------------------------------------
Newell Rubbermaid, Inc. 950 41,088
- ------------------------------------------------------------
NextCard, Inc. 1,200 43,350
- ------------------------------------------------------------
Nordstrom, Inc. 1,000 31,438
- ------------------------------------------------------------
</TABLE>
FS-4
<PAGE> 112
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(c)-(CONTINUED)
Quintiles Transnational Corp. 1,000 $ 38,000
- ------------------------------------------------------------
Safescience, Inc. 1,000 20,500
- ------------------------------------------------------------
Sapient Corp. 2,500 138,125
- ------------------------------------------------------------
Shared Medical Systems Corp. 300 17,963
- ------------------------------------------------------------
SMART Modular Technologies, Inc. 1,400 26,075
- ------------------------------------------------------------
Stewart Enterprises, Inc.-Class A 1,000 12,437
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(c)-(CONTINUED)
Sunrise Assisted Living, Inc. 1,000 $ 30,187
- ------------------------------------------------------------
Terayon Communication Systems, Inc. 300 11,737
- ------------------------------------------------------------
Wesley Jessen VisionCare, Inc. 700 22,138
- ------------------------------------------------------------
Whole Foods Market, Inc. 1,100 48,400
- ------------------------------------------------------------
$826,159
- ------------------------------------------------------------
</TABLE>
Abbreviations:
ADR - American Depositary Receipt
DISC - Discount
Notes to Schedule of Investments:
(a)Non-income producing security.
(b)Security is traded on a discount basis. The interest rate shown represents
the rate of discount paid or received at the time of purchase by the Fund.
(c)Collateral on short sales was segregated by the Fund in the amount of
$852,718 which represents 100% of the market value of securities sold short
as of 07/31/99.
See Notes to Financial Statements.
FS-5
<PAGE> 113
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$3,976,966) $4,797,230
- ---------------------------------------------------------
Receivables for:
Investments sold 43,354
- ---------------------------------------------------------
Investments sold short 827,993
- ---------------------------------------------------------
Fund shares sold 5,155
- ---------------------------------------------------------
Amount due from advisor 29,034
- ---------------------------------------------------------
Dividends 527
- ---------------------------------------------------------
Other assets 10,634
- ---------------------------------------------------------
Investment for deferred compensation plan 1,475
- ---------------------------------------------------------
Total assets 5,715,402
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 21,555
- ---------------------------------------------------------
Options written (premiums received $19,586) 23,506
- ---------------------------------------------------------
Amount due to broker 36,192
- ---------------------------------------------------------
Short positions covered 580
- ---------------------------------------------------------
Deferred compensation plan 1,475
- ---------------------------------------------------------
Market value of securities sold short
(proceeds from short sales $827,993) 826,159
- ---------------------------------------------------------
Accrued administrative services fees 7,199
- ---------------------------------------------------------
Accrued distribution fees 1,926
- ---------------------------------------------------------
Accrued trustees' fees 654
- ---------------------------------------------------------
Accrued transfer agent fees 202
- ---------------------------------------------------------
Accrued operating expenses 6,079
- ---------------------------------------------------------
Total liabilities 925,527
- ---------------------------------------------------------
Net assets applicable to shares outstanding $4,789,875
- ---------------------------------------------------------
NET ASSETS:
Class A $4,789,875
- ---------------------------------------------------------
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 303,481
- ---------------------------------------------------------
Class A:
Net asset value and redemption price per
share $ 15.78
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $15.78
divided by 94.50%) $ 16.70
- ---------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
For the period December 30, 1998 (date operations commenced) through July 31,
1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 14,172
- ---------------------------------------------------------
Dividend 3,369
- ---------------------------------------------------------
Total investment income 17,541
- ---------------------------------------------------------
EXPENSES:
Advisory fees 16,036
- ---------------------------------------------------------
Administrative services fees 50,801
- ---------------------------------------------------------
Legal fees 10,564
- ---------------------------------------------------------
Custodian fees 7,228
- ---------------------------------------------------------
Transfer agent fees 995
- ---------------------------------------------------------
Trustees' fees 4,457
- ---------------------------------------------------------
Distribution fees 5,613
- ---------------------------------------------------------
Interest expense 528
- ---------------------------------------------------------
Registration and filing fees 9,030
- ---------------------------------------------------------
Printing fees 12,786
- ---------------------------------------------------------
Dividends on short sales 899
- ---------------------------------------------------------
Other 2,226
- ---------------------------------------------------------
Total expenses 121,163
- ---------------------------------------------------------
Less: Expenses paid indirectly (6,404)
- ---------------------------------------------------------
Fees waived and reimbursed by advisor (84,548)
- ---------------------------------------------------------
Net expenses 30,211
- ---------------------------------------------------------
Net investment income (loss) (12,670)
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, SECURITIES SOLD
SHORT, FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 476,294
- ---------------------------------------------------------
Futures contracts 2,195
- ---------------------------------------------------------
Securities sold short (39,027)
- ---------------------------------------------------------
Option contracts written 15,377
- ---------------------------------------------------------
454,839
- ---------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 820,263
- ---------------------------------------------------------
Securities sold short 1,834
- ---------------------------------------------------------
Option contracts written (3,919)
- ---------------------------------------------------------
818,178
- ---------------------------------------------------------
Net gain from investment securities,
securities sold short, futures and
option contracts 1,273,017
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $1,260,347
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
FS-6
<PAGE> 114
STATEMENT OF CHANGES IN NET ASSETS
For the period December 30, 1998 (date operations commenced) through July 31,
1999
<TABLE>
<S> <C>
OPERATIONS:
Net investment income (loss) $ (12,670)
- ------------------------------------------------------------------------
Net realized gain from investment securities, securities
sold short, futures and option contracts 454,839
- ------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, securities sold short, futures and option
contracts 818,178
- ------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,260,347
- ------------------------------------------------------------------------
Share transactions-net:
Class A 3,529,528
- ------------------------------------------------------------------------
Net increase in net assets 4,789,875
- ------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
- ------------------------------------------------------------------------
End of period $4,789,875
- ------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Shares of beneficial interest $3,529,528
- ------------------------------------------------------------------------
Undistributed net investment income (loss) --
- ------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, securities sold short, futures and option
contracts 442,169
- ------------------------------------------------------------------------
Unrealized appreciation of investment securities,
securities sold short, futures and option contracts 818,178
- ------------------------------------------------------------------------
$4,789,875
- ------------------------------------------------------------------------
</TABLE>
NOTES TO FINANCIAL STATEMENTS
July 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Mid Cap Opportunities Fund (the "Fund") is a series portfolio of AIM Special
Opportunities Funds (the "Trust"). The Trust is a Delaware business trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of two
investment portfolios. The Fund commenced operations on December 30, 1998. The
Fund currently offers Class A shares 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 and Class C shares of the Fund are not currently available. Class A shares are
sold with a front-end sales charge. Matters affecting each portfolio or class
are 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 capital appreciation.
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 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 either are not readily
available or are questionable are valued at fair value as determined in good
faith by or under the supervision of the Trust's officers in a manner
specifically authorized by the Board of Trustees. Short-term obligations
having 60 days or less to maturity are valued at amortized cost which
approximates market value.
B. Accounting for Securities Sold Short -- When the Fund sells common stock
short, an amount equal to the proceeds of the sale is recorded as an asset.
This asset is offset by a liability (representing the borrowed security)
recorded on the books of the Fund at the market value of the common stock
determined each day in accordance with the procedures for security valuations
discussed in section "A" above. The Fund's risk is that the value of the
security will increase rather than decline and thus an unrealized loss will
be recorded. When the Fund
FS-7
<PAGE> 115
closes out a short position by delivering the stock sold short, the Fund will
realize a gain or loss and the liability related to such short position will
be eliminated. The Fund is required to segregate cash or securities as
collateral at a level that is equal to the current market value of the
securities sold short to secure its obligation to the broker who delivered
such securities to the buyer on behalf of the Fund. The amount segregated as
collateral deposits will not at anytime exceed 25% of the Fund's net assets.
C. 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, dividend expense on
short sales and distributions to shareholders are recorded on the ex-dividend
date. On July 31, 1999 undistributed net investment income was increased by
$12,670 and undistributed net realized gains was decreased by $12,670 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 reclassifications discussed above.
D. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
E. Call Options -- The Fund may write and buy call options, including securities
index options. 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 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.
An option on a securities index gives the holder the right to receive a
cash "exercise settlement amount" equal to the difference between the
exercise price of the option and the value of the underlying stock index on
the exercise date, multiplied by a fixed "index multiplier." A securities
index fluctuates with changes in the market values of the securities included
in the index. In the purchase of securities index options the principal risk
is that the premium and transaction costs paid by the Fund in purchasing an
option will be lost if the changes in the level of the index do not exceed
the cost of the option. In writing securities index options, the principal
risk is that the Fund could bear a loss on the options that would be only
partially offset (or not offset at all) by the increased value or reduced
cost of hedged securities. Moreover, in the event the Fund were unable to
close an option it had written, it might be unable to sell the securities
used as cover.
The Fund will not write options if, immediately thereafter, the aggregate
value of the securities underlying all such options, determined as of the
dates such options were written, would exceed 50% of the total assets of the
Fund.
F. Put Options -- The Fund may purchase and write put options including
securities index options. By purchasing a put option, the Fund obtains the
right (but not the obligation) to sell the options' underlying instrument at
a fixed strike price. In return for this right, a Fund pays an option
premium. The option's underlying instrument may be a security, securities
index, or a futures contract. Put options may be used by a 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 hedge. The Fund may write put options to earn
additional income in the form of option premiums if it expects the price of
the underlying securities to remain stable or rise during the option period
so that the option will not be exercised. The risk in this strategy is that
the price of the underlying securities may decline by an amount greater than
the premium received. The Fund will not purchase options if, at the time of
the investment, the aggregate premiums paid for outstanding options will
exceed 25% of the Fund's total assets.
G. Stock Index Futures Contracts -- The Fund may purchase or sell stock index
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 or cash 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
FS-8
<PAGE> 116
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 the change in the value of the
contracts may not correlate with changes in the value of the Fund's portfolio
being 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 between
the classes.
NOTE 2- ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 1% of the
Fund's average daily net assets for the first $1 billion of net assets and 0.95%
of the Fund's average daily net assets above $1 billion. During the period
December 30, 1998 (date operations commenced) through July 31, 1999, AIM waived
fees of $16,036 and reimbursed expenses of $68,512.
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 December 30, 1998 (date
operations commenced) through July 31, 1999, AIM was paid $50,801 for such
services.
The Fund, pursuant to a transfer agency and shareholder service agreement, has
agreed to pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer
agency shareholder services to the Fund. During the period December 30, 1998
(date operations commenced) through July 31, 1999, AFS was paid $656 for such
services.
The Trust 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 Trust has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.35% of the average daily net assets attributable to the
Class A shares and 1.00% of the average daily net assets attributable to the
Class C shares. The Fund pursuant to the Class B Plan, pays AIM Distributors
compensation at an annual rate of 1.00% of the average daily net assets
attributable to the Class B 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. As of July 31, 1999, Class B and
Class C Shares are not currently available. During the period December 30, 1998
(date operations commenced) through July 31, 1999, Class A paid AIM Distributors
$5,613 as compensation under the Plan. AIM Distributors received commissions of
$279 from sales of the Class A shares of the Fund during the period December 30,
1998 (date operations commenced) through July 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. Certain officers and trustees of the
Trust are officers and directors of AIM, AIM Distributors and AFS.
Certain officers and trustees of the Trust are officers and directors of AIM,
AIM Distributors and AFS. During the year ended July 31, 1999, the Fund paid
legal fees of $1,758 for services rendered by Kramer, Levin, Naftalis & Frankel
LLP as counsel to the Board of Trustees. A member of that firm is a trustee of
the Trust.
NOTE 3-INDIRECT EXPENSES
During the period December 30, 1998 (date operations commenced) through July 31,
1999, the Fund received reductions in transfer agency fees from AFS (an
affiliate of AIM) and reductions in custodian fees of $16 and $6,388,
respectively under expense offset arrangements. The effect of the above
arrangements resulted in a reduction of the Fund's total expenses of $6,404
during the period December 30, 1998 (date operations commenced) through July 31,
1999.
NOTE 4-TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an
"interested person" of AIM. The Trust may invest trustees' fees, if so elected
by a trustee, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 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) $240,000,000 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
December 30, 1998 (date operations commenced) through July 31, 1999, the average
outstanding daily balance of bank loans for the Fund was $11,268 with a weighted
average interest rate of 5.45%. Interest expense (excluding commitment fees) for
the Fund for the period ended July 31, 1999 was $362. The funds which are
parties to the line of credit are charged a commitment fee of 0.06% on the
unused balance of the committed line. The commitment fee is allocated among such
funds based on their respective average net assets for the period.
FS-9
<PAGE> 117
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the period December 30, 1998 (date
operations commenced) through July 31, 1999 was $6,357,151 and $3,621,567,
respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of July 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of:
Investment securities $ 921,619
- --------------------------------------------------------
Securities sold short 38,335
- --------------------------------------------------------
Aggregate unrealized (depreciation) of:
Investment securities (108,615)
- --------------------------------------------------------
Securities sold short (36,501)
- --------------------------------------------------------
Net unrealized appreciation of investment
securities $ 814,838
- --------------------------------------------------------
Cost of investments for tax purposes is $3,984,226.
Proceeds from securities sold short for tax purposes is
$827,993.
</TABLE>
NOTE 7-CALL OPTION CONTRACTS WRITTEN
Transactions in call options written during the period ending July 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
NUMBER
OF PREMIUMS
CONTRACTS RECEIVED
--------- --------
<S> <C> <C>
Beginning of period -- --
- ----------------------------------------------------------------------------------
Opened 64 $ 27,740
- ----------------------------------------------------------------------------------
Closed (63) (27,605)
- ----------------------------------------------------------------------------------
Expired (1) (135)
- ----------------------------------------------------------------------------------
End of year -- --
- ----------------------------------------------------------------------------------
</TABLE>
NOTE 8-PUT OPTIONS WRITTEN
Transactions in put options written during the period ending July 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
NUMBER
OF PREMIUMS
CONTRACTS RECEIVED
--------- ---------
<S> <C> <C>
Beginning of period -- --
- -----------------------------------------------------------------------------------
Opened 27 $ 23,279
- -----------------------------------------------------------------------------------
Closed (6) (3,693)
- -----------------------------------------------------------------------------------
End of year 21 $ 19,586
- -----------------------------------------------------------------------------------
</TABLE>
Open put options written at July 31, 1999 are as follows:
<TABLE>
<CAPTION>
NUMBER UNREALIZED
CONTRACT STRIKE OF PREMIUMS JULY 31, 1999 APPRECIATION
MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
ISSUE -------- ----------- --------- -------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
S&P 500 INDEX SEP-99 $ 1,025 2 $ 444 $ 481 $ (37)
- ---------------------------------------------------------------------------------------------------------------------------------
S&P 500 INDEX SEP-99 1,050 2 468 625 (157)
- ---------------------------------------------------------------------------------------------------------------------------------
S&P 500 INDEX DEC-99 1,025 11 13,329 15,950 (2,621)
- ---------------------------------------------------------------------------------------------------------------------------------
S&P 500 INDEX DEC-99 975 6 5,345 6,450 (1,105)
- ---------------------------------------------------------------------------------------------------------------------------------
21 $19,586 $23,506 $(3,920)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 9-SHARE INFORMATION
Changes in shares Class A outstanding during the period December 30, 1998 (date
operations commenced) through July 31, 1999 are as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
------- ----------
<S> <C> <C>
Sold 331,198 $3,867,041
- ----------------------------------------------------------------------------------
Reacquired (27,717) (337,513)
- ----------------------------------------------------------------------------------
303,481 $3,529,528
- ----------------------------------------------------------------------------------
</TABLE>
FS-10
<PAGE> 118
NOTE 10-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A outstanding
during the period December 30, 1998 (date operations commenced) through July 31,
1999.
<TABLE>
<CAPTION>
<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) 5.82
- ------------------------------------------------------------ --------
Total from investment operations 5.78
- ------------------------------------------------------------ --------
Net asset value, end of period $ 15.78
- ------------------------------------------------------------ --------
Total return(a) 57.80%
- ------------------------------------------------------------ --------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 4,790
- ------------------------------------------------------------ --------
Ratio of expenses to average net assets excluding interest
expense:
Including waivers and reimbursements 2.25%(b)
- ------------------------------------------------------------ --------
Excluding waivers and reimbursements 7.52%(b)
- ------------------------------------------------------------ --------
Ratio of net investment income (loss) to average net
assets(c) (0.79)%(b)
- ------------------------------------------------------------ --------
Ratio of interest expense to average net assets 0.03%(b)
- ------------------------------------------------------------ --------
Portfolio turnover rate 135%
- ------------------------------------------------------------ --------
</TABLE>
(a)Does not deduct sales charges and is not annualized for periods less than one
year.
(b)Ratios are annualized and based on average net assets of $2,735,067.
(c)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 (6.06)% (annualized).
FS-11
<PAGE> 119
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Small Cap Opportunities Fund:
We have audited the accompanying statement of assets and
liabilities of the AIM Small Cap Opportunities Fund (a
series of AIM Special Opportunities Funds) including the
schedule of investments, as of July 31, 1999, and the
related statement of operations and cash flows for the
year then ended, the statements of changes in net assets
and financial highlights for the year then ended and for
the period June 29, 1998 (date operations commenced)
through July 31, 1998. 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 July 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 Small
Cap Opportunities Fund as of July 31, 1999, the results
of its operations and cash flows for the year then ended,
the statements of changes in its net assets and the
financial highlights for the year then ended and for the
period June 29, 1998 (date operations commenced) through
July 31, 1998, in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
KPMG LLP
September 3, 1999
Houston, Texas
FS-12
<PAGE> 120
SCHEDULE OF INVESTMENTS
July 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-105.63%
AIR FREIGHT-0.93%
Atlas Air, Inc.(a) 49,500 $ 1,587,094
- --------------------------------------------------------------
Eagle USA Airfreight, Inc.(a) 50,000 1,818,750
- --------------------------------------------------------------
3,405,844
- --------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.65%
Tower Automotive, Inc.(a) 100,000 2,381,250
- --------------------------------------------------------------
BANKS (REGIONAL)-4.14%
Bank United Corp.-Class A 150,000 5,775,000
- --------------------------------------------------------------
First Virginia Banks, Inc. 46,000 2,205,125
- --------------------------------------------------------------
Golden State Bancorp, Inc.(a) 75,000 1,659,375
- --------------------------------------------------------------
Greater Bay Bancorp 75,000 2,484,375
- --------------------------------------------------------------
Trustmark Corp. 125,000 3,007,812
- --------------------------------------------------------------
15,131,687
- --------------------------------------------------------------
BUILDING MATERIALS-1.47%
Elcor Corp. 93,000 3,824,625
- --------------------------------------------------------------
TJ International, Inc. 50,000 1,550,000
- --------------------------------------------------------------
5,374,625
- --------------------------------------------------------------
CHEMICALS (SPECIALTY)-1.17%
ChiRex, Inc.(a) 65,000 2,128,750
- --------------------------------------------------------------
Optical Coating Laboratory, Inc. 30,000 2,152,500
- --------------------------------------------------------------
4,281,250
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-7.86%
Copper Mountain Networks, Inc.(a) 30,000 3,630,000
- --------------------------------------------------------------
Davox Corp.(a) 125,000 2,015,625
- --------------------------------------------------------------
Digital Microwave Corp.(a) 125,000 1,484,375
- --------------------------------------------------------------
Dycom Industries, Inc.(a) 50,000 2,387,500
- --------------------------------------------------------------
Harmonic, Inc.(a) 85,000 6,757,500
- --------------------------------------------------------------
Juniper Networks, Inc.(a) 8,300 1,348,231
- --------------------------------------------------------------
L-3 Communications Holdings,
Inc.(a) 50,000 2,146,875
- --------------------------------------------------------------
Microwave Power Devices, Inc.(a) 155,000 2,111,875
- --------------------------------------------------------------
Polycom, Inc.(a) 75,000 2,512,500
- --------------------------------------------------------------
Proxim, Inc.(a) 80,000 4,345,000
- --------------------------------------------------------------
28,739,481
- --------------------------------------------------------------
COMPUTERS (PERIPHERALS)-5.54%
DSP Communications, Inc.(a) 225,000 5,273,437
- --------------------------------------------------------------
QLogic Corp.(a) 46,500 7,759,687
- --------------------------------------------------------------
SanDisk Corp.(a) 52,500 4,029,375
- --------------------------------------------------------------
Xircom, Inc.(a) 100,000 3,193,750
- --------------------------------------------------------------
20,256,249
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE &
SERVICES)-15.40%
Clarify, Inc.(a) 85,000 $ 2,799,687
- --------------------------------------------------------------
Commerce One, Inc.(a) 26,900 1,338,275
- --------------------------------------------------------------
Concord Communications, Inc.(a) 40,000 1,640,000
- --------------------------------------------------------------
CoStar Group, Inc.(a) 60,000 2,295,000
- --------------------------------------------------------------
Digex, Inc.(a) 50,000 1,115,624
- --------------------------------------------------------------
DSP Group, Inc.(a) 85,000 3,373,437
- --------------------------------------------------------------
InfoSpace.com, Inc.(a) 35,000 1,607,812
- --------------------------------------------------------------
ISS Group, Inc.(a) 120,000 2,610,000
- --------------------------------------------------------------
Kronos, Inc.(a) 50,000 2,418,750
- --------------------------------------------------------------
Macromedia, Inc.(a) 100,000 3,487,500
- --------------------------------------------------------------
Macrovision Corp.(a) 30,000 2,100,000
- --------------------------------------------------------------
Mercury Interactive Corp.(a) 100,000 4,612,500
- --------------------------------------------------------------
Natural MicroSystems Corp.(a) 245,000 2,924,687
- --------------------------------------------------------------
Omega Research, Inc.(a) 200,000 2,025,000
- --------------------------------------------------------------
Portal Software, Inc.(a) 31,550 1,320,170
- --------------------------------------------------------------
QRS Corp.(a) 60,000 3,247,500
- --------------------------------------------------------------
RadiSys Corp.(a) 90,000 3,701,250
- --------------------------------------------------------------
Rational Software Corp.(a) 170,000 5,673,750
- --------------------------------------------------------------
Verio, Inc.(a) 60,000 4,278,750
- --------------------------------------------------------------
Verity, Inc.(a) 75,000 3,712,500
- --------------------------------------------------------------
56,282,192
- --------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES &
GIFTS)-1.08%
Fossil, Inc.(a) 75,000 3,937,500
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-4.80%
CommScope, Inc.(a) 125,000 4,273,437
- --------------------------------------------------------------
DII Group, Inc.(a) 100,000 3,706,250
- --------------------------------------------------------------
Helix Technology Corp. 125,000 3,343,750
- --------------------------------------------------------------
Oak Industries, Inc.(a) 55,000 2,368,438
- --------------------------------------------------------------
Sawtek, Inc.(a) 60,000 3,840,000
- --------------------------------------------------------------
17,531,875
- --------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.65%
Aeroflex, Inc.(a) 125,000 2,367,188
- --------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-1.52%
Alpha Industries, Inc.(a) 70,000 3,570,000
- --------------------------------------------------------------
Varian Semiconductor Equipment
Associates, Inc.(a) 85,000 1,976,250
- --------------------------------------------------------------
5,546,250
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-8.84%
Amkor Technology, Inc.(a) 125,000 1,921,875
- --------------------------------------------------------------
</TABLE>
FS-13
<PAGE> 121
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (SEMICONDUCTORS)-(CONTINUED)
Burr-Brown Corp.(a) 125,000 $ 4,781,250
- --------------------------------------------------------------
Flextronics International Ltd.(a) 55,000 2,468,125
- --------------------------------------------------------------
MIPS Technologies, Inc.-Class A(a) 125,000 4,625,000
- --------------------------------------------------------------
PMC-Sierra, Inc.(a) 80,000 6,260,000
- --------------------------------------------------------------
RF Micro Devices, Inc.(a) 30,000 2,293,125
- --------------------------------------------------------------
S3, Inc.(a) 250,000 2,812,500
- --------------------------------------------------------------
SDL, Inc.(a) 30,000 2,038,125
- --------------------------------------------------------------
Semtech Corp.(a) 40,000 2,475,000
- --------------------------------------------------------------
TranSwitch Corp.(a) 60,000 2,632,500
- --------------------------------------------------------------
32,307,500
- --------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-3.28%
Advanced Energy Industries, Inc.(a) 100,000 3,781,250
- --------------------------------------------------------------
Brooks Automation, Inc.(a) 150,000 4,068,750
- --------------------------------------------------------------
Credence Systems Corp.(a) 100,000 4,150,000
- --------------------------------------------------------------
12,000,000
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.25%
Advanta Corp.-Class B 150,000 2,643,750
- --------------------------------------------------------------
SEI Investments Co. 20,000 1,935,000
- --------------------------------------------------------------
4,578,750
- --------------------------------------------------------------
FOOTWEAR-0.44%
K-Swiss, Inc. 50,000 1,621,875
- --------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-2.32%
Hollywood Park, Inc.(a) 175,000 3,237,500
- --------------------------------------------------------------
Isle of Capri Casinos, Inc.(a) 300,000 2,793,750
- --------------------------------------------------------------
Station Casinos, Inc.(a) 125,000 2,453,125
- --------------------------------------------------------------
8,484,375
- --------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-1.77%
Alpharma, Inc.-Class A 75,000 2,784,375
- --------------------------------------------------------------
Jones Pharma, Inc. 85,000 3,689,531
- --------------------------------------------------------------
6,473,906
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-5.77%
CardioThoracic Systems, Inc.(a) 200,000 3,550,000
- --------------------------------------------------------------
Colorado MEDtech, Inc.(a) 175,000 3,412,500
- --------------------------------------------------------------
Eclipse Surgical Technologies,
Inc.(a) 200,000 2,737,500
- --------------------------------------------------------------
Laser Vision Centers, Inc.(a) 50,000 3,143,750
- --------------------------------------------------------------
Summit Technology, Inc.(a) 75,000 1,795,313
- --------------------------------------------------------------
VISX, Inc.(a) 23,000 2,328,750
- --------------------------------------------------------------
Xomed Surgical Products, Inc.(a) 90,000 4,100,625
- --------------------------------------------------------------
21,068,438
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (SPECIALIZED
SERVICES)-1.63%
Hooper Holmes, Inc. 150,000 $ 2,962,500
- --------------------------------------------------------------
Techne Corp.(a) 100,000 3,000,000
- --------------------------------------------------------------
5,962,500
- --------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-1.10%
Investment Technology Group, Inc. 75,000 2,657,813
- --------------------------------------------------------------
Southwest Securities Group, Inc. 33,000 1,359,188
- --------------------------------------------------------------
4,017,001
- --------------------------------------------------------------
INVESTMENT MANAGEMENT-0.65%
Federated Investors, Inc.-Class B 125,000 2,382,813
- --------------------------------------------------------------
LEISURE TIME (PRODUCTS)-2.49%
National R.V. Holdings, Inc.(a) 75,000 1,870,313
- --------------------------------------------------------------
THQ Inc.(a) 85,000 2,385,313
- --------------------------------------------------------------
Zomax Media, Inc.(a) 90,000 4,848,750
- --------------------------------------------------------------
9,104,376
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.78%
Dril-Quip, Inc.(a) 130,000 2,835,625
- --------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-2.47%
Cal Dive International, Inc.(a) 80,000 2,710,000
- --------------------------------------------------------------
Patterson Energy, Inc.(a) 300,000 2,887,500
- --------------------------------------------------------------
Precision Drilling Corp.-ADR
(Canada)(a) 150,000 3,431,250
- --------------------------------------------------------------
9,028,750
- --------------------------------------------------------------
RESTAURANTS-5.30%
Brinker International, Inc.(a) 100,000 2,787,500
- --------------------------------------------------------------
CEC Entertainment, Inc.(a) 50,000 1,575,000
- --------------------------------------------------------------
Foodmaker, Inc.(a) 125,000 3,421,875
- --------------------------------------------------------------
O'Charley's, Inc.(a) 175,000 2,690,625
- --------------------------------------------------------------
RARE Hospitality International,
Inc.(a) 125,000 2,789,063
- --------------------------------------------------------------
Sonic Corp.(a) 120,000 3,855,000
- --------------------------------------------------------------
Taco Cabana-Class A(a) 250,000 2,250,000
- --------------------------------------------------------------
19,369,063
- --------------------------------------------------------------
RETAIL (COMPUTERS &
ELECTRONICS)-3.32%
CDW Computer Centers, Inc.(a) 70,000 3,465,000
- --------------------------------------------------------------
REX Stores Corp.(a) 70,000 2,603,125
- --------------------------------------------------------------
Tweeter Home Entertainment Group,
Inc.(a) 100,000 3,331,250
- --------------------------------------------------------------
Ultimate Electronics, Inc.(a) 150,000 2,728,125
- --------------------------------------------------------------
12,127,500
- --------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.63%
Ames Department Stores, Inc.(a) 56,300 2,308,300
- --------------------------------------------------------------
RETAIL (HOME SHOPPING)-0.99%
Spiegel, Inc.-Class A(a) 400,000 3,625,000
- --------------------------------------------------------------
</TABLE>
FS-14
<PAGE> 122
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY)-7.62%
Cheap Tickets, Inc.(a) 50,000 $ 2,893,750
- --------------------------------------------------------------
Claire's Stores, Inc. 125,000 2,968,750
- --------------------------------------------------------------
eToys, Inc.(a) 125,000 4,992,188
- --------------------------------------------------------------
Footstar, Inc.(a) 100,000 3,600,000
- --------------------------------------------------------------
Genesco, Inc.(a) 250,000 3,015,625
- --------------------------------------------------------------
Hollywood Entertainment Corp.(a) 170,000 2,996,250
- --------------------------------------------------------------
Linens 'n Things, Inc.(a) 75,000 3,468,750
- --------------------------------------------------------------
O'Reilly Automotive, Inc.(a) 52,000 2,216,500
- --------------------------------------------------------------
Sunglass Hut International, Inc.(a) 125,000 1,703,125
- --------------------------------------------------------------
27,854,938
- --------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-2.61%
AnnTaylor Stores Corp.(a) 75,000 2,878,125
- --------------------------------------------------------------
Catherines Stores Corp.(a) 175,000 2,296,875
- --------------------------------------------------------------
Chico's Fas, Inc.(a) 86,000 2,236,000
- --------------------------------------------------------------
Deb Shops, Inc. 100,000 2,112,500
- --------------------------------------------------------------
9,523,500
- --------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-2.09%
ACNielsen Corp.(a) 100,000 2,893,750
- --------------------------------------------------------------
Lamar Advertising Co.(a) 95,000 3,859,375
- --------------------------------------------------------------
Student Advantage, Inc.(a) 65,000 885,625
- --------------------------------------------------------------
7,638,750
- --------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-2.31%
Championship Auto Racing Teams,
Inc.(a) 100,000 3,300,000
- --------------------------------------------------------------
Coinstar, Inc.(a) 100,000 2,625,000
- --------------------------------------------------------------
Copart, Inc.(a) 105,000 2,520,000
- --------------------------------------------------------------
8,445,000
- --------------------------------------------------------------
SERVICES (DATA PROCESSING)-2.25%
CSG Systems International, Inc.(a) 98,000 2,180,500
- --------------------------------------------------------------
FactSet Research Systems, Inc. 60,000 2,992,500
- --------------------------------------------------------------
MedQuist, Inc.(a) 70,000 3,036,250
- --------------------------------------------------------------
8,209,250
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.51%
Viatel, Inc.(a) 50,000 1,850,000
- --------------------------------------------------------------
Total Common Stocks (Cost
$289,695,481) 386,052,601
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION
CONTRACTS PRICE DATE
<S> <C> <C> <C> <C>
OPTIONS PURCHASED-8.34%
CALLS-0.97%
Amazon.com, Inc.
(Retail-Specialty) 790 $ 120 Sep-99 $ 434,500
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION MARKET
CONTRACTS PRICE DATE VALUE
<S> <C> <C> <C> <C>
CALLS-(CONTINUED)
Conoco, Inc. (Oil &
Gas-Exploration &
Production) 1,480 $ 27.5 Aug-99 $ 83,250
1,975 25 Aug-99 339,453
- -----------------------------------------------------------------------
OSX Index (Oil &
Gas-Services) 2,935 80 Aug-99 1,192,344
1,500 80 Sep-99 975,000
- -----------------------------------------------------------------------
S & P 500 Index 445 1,360 Aug-99 534,000
- -----------------------------------------------------------------------
3,558,547
- -----------------------------------------------------------------------
PUTS-7.37%
S & P 500 Index 550 1,350 Sep-99 2,887,500
912 1,375 Sep-99 6,007,800
545 1,350 Dec-99 4,557,562
880 1,375 Dec-99 8,338,000
483 1,400 Dec-99 5,137,913
- -----------------------------------------------------------------------
26,928,775
- -----------------------------------------------------------------------
Total Options Purchased
(Cost
$21,782,210) 30,487,322
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
REPURCHASE AGREEMENT-2.25%(B)
Warburg Dillon Read LLC, 5.13%,
08/02/99 (Cost $8,243,752)(c) $8,243,752 $ 8,243,752
- --------------------------------------------------------------
TOTAL INVESTMENTS-116.22% 424,783,675
- --------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(16.22%) (59,292,345)
- --------------------------------------------------------------
NET ASSETS-100.00% $365,491,330
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(D)
1-800 CONTACTS, Inc. 99,000 $ 2,029,500
- -------------------------------------------------------------
Advanced Micro Devices, Inc. 130,000 2,234,375
- -------------------------------------------------------------
autobytel.com Inc. 54,100 970,419
- -------------------------------------------------------------
Blue Rhino Corp. 56,000 539,000
- -------------------------------------------------------------
Carrier Access Corp. 44,500 1,468,500
- -------------------------------------------------------------
Complete Business Solution, Inc. 75,000 1,425,000
- -------------------------------------------------------------
Covance, Inc. 100,000 1,962,500
- -------------------------------------------------------------
Duane Reade, Inc. 60,300 1,914,525
- -------------------------------------------------------------
E-Tek Dynamics, Inc. 100,000 4,193,750
- -------------------------------------------------------------
Enhance Financial Services Group, Inc. 104,300 2,164,225
- -------------------------------------------------------------
Excel Switching Corp. 150,000 4,087,500
- -------------------------------------------------------------
First Health Group Corp. 104,500 2,481,875
- -------------------------------------------------------------
First Sierra Financial, Inc. 175,000 3,489,062
- -------------------------------------------------------------
I2 Technologies, Inc. 100,000 3,075,000
- -------------------------------------------------------------
IMRglobal Corp. 50,000 856,250
- -------------------------------------------------------------
Ingram Micro, Inc.-Class A 80,000 2,275,000
- -------------------------------------------------------------
Jabil Circuit, Inc. 50,000 2,103,125
- -------------------------------------------------------------
</TABLE>
FS-15
<PAGE> 123
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(d)-(CONTINUED)
Lernout & Hasupie Speech Products N.V. 10,000 $ 329,375
- -------------------------------------------------------------
Lincare Holdings, Inc. 30,900 927,000
- -------------------------------------------------------------
MapQuest.com, Inc. 75,000 1,120,312
- -------------------------------------------------------------
Net.B@nk, Inc. 25,000 537,500
- -------------------------------------------------------------
Newell Rubbermaid, Inc. 75,000 3,243,750
- -------------------------------------------------------------
NextCard, Inc. 96,000 3,468,000
- -------------------------------------------------------------
Nordstrom, Inc. 75,000 2,357,813
- -------------------------------------------------------------
ProBusiness Services, Inc. 35,000 1,115,625
- -------------------------------------------------------------
Quintiles Transnational Corp. 75,000 2,850,000
- -------------------------------------------------------------
Sapient Corp. 193,500 10,690,875
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(d)-(CONTINUED)
Shared Medical Systems Corp. 25,000 $ 1,496,875
- -------------------------------------------------------------
SMART Modular Technologies, Inc. 100,000 1,862,500
- -------------------------------------------------------------
Stewart Enterprises, Inc.-Class A 349,000 4,340,688
- -------------------------------------------------------------
Sunrise Assisted Living, Inc. 75,000 2,264,063
- -------------------------------------------------------------
Terayon Communication Systems, Inc. 32,200 1,259,825
- -------------------------------------------------------------
Wesley Jessen VisionCare, Inc. 74,300 2,349,737
- -------------------------------------------------------------
Whole Foods Market, Inc. 99,500 4,378,000
- -------------------------------------------------------------
$81,861,544
- -------------------------------------------------------------
</TABLE>
Abbreviation
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a)Non-income producing security.
(b)Collateral on repurchase agreements, include the Fund's pro-rata interest in
joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value is at least 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c)Joint repurchase agreement entered into 07/30/99 with a maturing value of
$500,213,750. Collateralized by U.S. Treasury obligations.
(d)Collateral on short sales was segregated by the Fund in the amount of
$84,480,376 which represents 103.20% of market value.
See Notes to Financial Statements.
FS-16
<PAGE> 124
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$319,721,443) $424,783,675
- ---------------------------------------------------------
Receivables for:
Investments sold 6,230,259
- ---------------------------------------------------------
Investments sold short 83,160,426
- ---------------------------------------------------------
Fund shares sold 1,251,508
- ---------------------------------------------------------
Dividends and interest 34,574
- ---------------------------------------------------------
Investment for deferred compensation plan 4,409
- ---------------------------------------------------------
Other assets 424,047
- ---------------------------------------------------------
Total assets 515,888,898
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Cash to broker 561,250
- ---------------------------------------------------------
Investments purchased 4,307,523
- ---------------------------------------------------------
Fund shares reacquired 1,278,581
- ---------------------------------------------------------
Deferred compensation plan 4,409
- ---------------------------------------------------------
Loans 60,000,000
- ---------------------------------------------------------
Short position covered 48,349
- ---------------------------------------------------------
Market value of securities sold short
(proceeds from sales $83,160,426) 81,861,544
- ---------------------------------------------------------
Options written (premiums received
$1,266,631) 1,524,675
- ---------------------------------------------------------
Accrued advisory fees 299,603
- ---------------------------------------------------------
Accrued distribution fees 198,200
- ---------------------------------------------------------
Accrued trustees' fees 819
- ---------------------------------------------------------
Accrued transfer agent fees 16,471
- ---------------------------------------------------------
Accrued operating expenses 296,144
- ---------------------------------------------------------
Total liabilities 150,397,568
- ---------------------------------------------------------
Net assets applicable to shares outstanding $365,491,330
=========================================================
NET ASSETS:
Class A $205,720,739
=========================================================
Class B $153,793,107
=========================================================
Class C $ 5,977,484
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 13,848,576
=========================================================
Class B 10,428,103
=========================================================
Class C 404,564
=========================================================
Class A:
Net asset value and redemption price per
share $ 14.86
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $14.86
divided by 94.50%) $ 15.72
=========================================================
Class B:
Net asset value and offering price per
share $ 14.75
=========================================================
Class C:
Net asset value and offering price per
share $ 14.78
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For The Year Ended July 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 1,905,385
- ---------------------------------------------------------
Dividends 438,350
- ---------------------------------------------------------
Total investment income 2,343,735
- ---------------------------------------------------------
EXPENSES:
Advisory fees 2,594,463
- ---------------------------------------------------------
Administrative services fees 109,921
- ---------------------------------------------------------
Custodian fees 56,674
- ---------------------------------------------------------
Interest expense 1,456,556
- ---------------------------------------------------------
Transfer agent fees-Class A 182,036
- ---------------------------------------------------------
Transfer agent fees-Class B 160,849
- ---------------------------------------------------------
Transfer agent fees-Class C 1,786
- ---------------------------------------------------------
Trustees' fees 9,366
- ---------------------------------------------------------
Distribution fees-Class A 516,599
- ---------------------------------------------------------
Distribution fees-Class B 1,106,186
- ---------------------------------------------------------
Distribution fees-Class C 12,281
- ---------------------------------------------------------
Dividends on short sales 119,433
- ---------------------------------------------------------
Other 531,400
- ---------------------------------------------------------
Total expenses 6,857,550
- ---------------------------------------------------------
Less: Expenses paid indirectly (19,022)
- ---------------------------------------------------------
Net expenses 6,838,528
- ---------------------------------------------------------
Net investment income (loss) (4,494,793)
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, SECURITIES SOLD
SHORT, FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 27,586,081
- ---------------------------------------------------------
Securities sold short (2,444,340)
- ---------------------------------------------------------
Futures contracts (6,577,308)
- ---------------------------------------------------------
Option contracts written 494,853
- ---------------------------------------------------------
Option contracts purchased (10,070,868)
- ---------------------------------------------------------
8,988,418
- ---------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 100,335,190
- ---------------------------------------------------------
Securities sold short 1,231,833
- ---------------------------------------------------------
Futures contracts 3,348,202
- ---------------------------------------------------------
Option contracts written (322,484)
- ---------------------------------------------------------
Option contracts purchased 8,802,335
- ---------------------------------------------------------
113,395,076
- ---------------------------------------------------------
Net gain from investment securities,
securities sold short, futures and
option contracts 122,383,494
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $117,888,701
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-17
<PAGE> 125
STATEMENT OF CHANGES IN NET ASSETS
For the year ended July 31, 1999 and the period June 29, 1998 (date operations
commenced) through July 31, 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (4,494,793) $ 148,549
- -----------------------------------------------------------------------------------------
Net realized gain from investment securities, securities
sold short, futures and option contracts 8,988,418 1,217,379
- -----------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, securities sold short, futures
and option contracts 113,395,076 (7,292,005)
- -----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 117,888,701 (5,926,077)
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (102,881) --
- -----------------------------------------------------------------------------------------
Class B (48,732) --
- -----------------------------------------------------------------------------------------
Share transactions-net:
Class A 30,818,297 110,724,862
- -----------------------------------------------------------------------------------------
Class B 19,845,339 86,925,398
- -----------------------------------------------------------------------------------------
Class C 5,266,423 --
- -----------------------------------------------------------------------------------------
Net increase in net assets 173,667,147 191,724,183
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 191,824,183 100,000
- -----------------------------------------------------------------------------------------
End of period $365,491,330 $191,824,183
=======================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $253,662,739 $197,747,885
- -----------------------------------------------------------------------------------------
Undistributed net investment income (loss) (97,371) 150,924
- -----------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, securities sold short, futures and option
contracts 5,822,891 1,217,379
- -----------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, securities sold short, futures and option
contracts 106,103,071 (7,292,005)
- -----------------------------------------------------------------------------------------
$365,491,330 $191,824,183
=======================================================================================
</TABLE>
See Notes to Financial Statements.
FS-18
<PAGE> 126
STATEMENT OF CASH FLOWS
For the year ended July 31, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATIONS:
Interest and dividends $ 2,343,735
- ---------------------------------------------------------------------------
Expenses (6,838,528)
- ---------------------------------------------------------------------------
Net investment income (loss) (4,494,793)
- ---------------------------------------------------------------------------
ADJUSTMENTS TO RECONCILE NET INVESTMENT INCOME (LOSS) TO NET
CASH PROVIDED BY (USED IN) OPERATIONS:
Change in receivable for investments sold (5,975,467)
- ---------------------------------------------------------------------------
Change in receivable for fund shares sold 5,512,384
- ---------------------------------------------------------------------------
Change in receivable for dividends and interest (20,993)
- ---------------------------------------------------------------------------
Change in other assets (397,918)
- ---------------------------------------------------------------------------
Change in payables for investments purchased (18,635,702)
- ---------------------------------------------------------------------------
Change in payables for fund shares reacquired 706,435
- ---------------------------------------------------------------------------
Change in accrued expenses 653,379
- ---------------------------------------------------------------------------
Proceed from sales of securities* 680,068,332
- ---------------------------------------------------------------------------
Short sales activity* (2,395,991)
- ---------------------------------------------------------------------------
Purchases of securities* (884,986,394)
- ---------------------------------------------------------------------------
Net proceeds on short-term securities 115,161,314
- ---------------------------------------------------------------------------
Futures activity (4,603,556)
- ---------------------------------------------------------------------------
Options written activity 1,626,262
- ---------------------------------------------------------------------------
Net cash used in operations (117,782,708)
- ---------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITY:
Distributions paid to shareholders (151,613)
- ---------------------------------------------------------------------------
Dividends reinvested 137,874
- ---------------------------------------------------------------------------
Capital stock sold 154,523,491
- ---------------------------------------------------------------------------
Capital stock reacquired (98,731,306)
- ---------------------------------------------------------------------------
Borrowings 60,000,000
- ---------------------------------------------------------------------------
Net cash used in financing activity 115,778,446
- ---------------------------------------------------------------------------
Net increase (decrease) in cash (2,004,262)
- ---------------------------------------------------------------------------
Cash at beginning of period 1,443,012
- ---------------------------------------------------------------------------
Cash at end of period $ (561,250)
- ---------------------------------------------------------------------------
</TABLE>
* Other than short-term securities
See Notes to Financial Statements.
FS-19
<PAGE> 127
NOTES TO FINANCIAL STATEMENTS
July 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Small Cap Opportunities Fund (the "Fund") is a series portfolio of AIM
Special Opportunities Funds (the "Trust"). The Trust is a Delaware business
trust registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of two
investment portfolios. The Fund currently offers three different classes of
shares: Class A shares, Class B shares and Class C. Class A shares are sold with
a front-end sales charge. Class B and Class C shares are sold with a contingent
deferred sales charge. Matters affecting each portfolio or class are 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 capital appreciation.
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 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 either are not readily
available or are questionable are valued at fair value as determined in good
faith by or under the supervision of the Trust's officers in a manner
specifically authorized by the Board of Trustees. Short-term obligations
having 60 days or less to maturity are valued at amortized cost which
approximates market value.
B. Accounting for Securities Sold Short -- When the Fund sells common stock
short, an amount equal to the proceeds of the sale is recorded as an asset.
This asset is offset by a liability (representing the borrowed security)
recorded on the books of the Fund at the market value of the common stock
determined each day in accordance with the procedures for security valuations
discussed in section "A". The Fund's risk is that the value of the security
will increase rather than decline and thus an unrealized loss will be
recorded. When the Fund closes out a short position by delivering the stock
sold short, the Fund will realize a gain or loss and the liability related to
such short position will be eliminated. The Fund is required to segregate
cash or securities as collateral at a level that is equal to the current
market value of the securities sold short to secure its obligation to the
broker who delivered such securities to the buyer on behalf of the Fund. The
amount segregated as collateral deposits will not at any time exceed 25% of
the Fund's net assets.
C. 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, dividend expense on
short sales and distributions to shareholders are recorded on the ex-dividend
date. On July 31, 1999, undistributed net income increased by $4,398,111,
undistributed net realized gain decreased by $4,382,906 and capital stock
decreased by $15,205 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 reclassifications discussed above.
D. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
E. Call Options -- The Fund may write and buy call options, including securities
index options. 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 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
FS-20
<PAGE> 128
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.
An option on a securities index gives the holder the right to receive a
cash "exercise settlement amount" equal to the difference between the
exercise price of the option and the value of the underlying stock index on
the exercise date, multiplied by a fixed "index multiplier." A securities
index fluctuates with changes in the market values of the securities included
in the index. In the purchase of securities index options the principal risk
is that the premium and transaction costs paid by the Fund in purchasing an
option will be lost if the changes in the level of the index do not exceed
the cost of the option. In writing securities index options, the principal
risk is that the Fund could bear a loss on the options that would be only
partially offset (or not offset at all) by the increased value or reduced
cost of hedged securities. Moreover, in the event the Fund were unable to
close an option it had written, it might be unable to sell the securities
used as cover.
The Fund will not write options if, immediately thereafter, the aggregate
value of the securities underlying all such options, determined as of the
dates such options were written, would exceed 50% of the total assets of the
Fund.
F. Put Options -- The Fund may purchase and write put options including
securities index options. By purchasing a put option, the Fund obtains the
right (but not the obligation) to sell the options' underlying instrument at
a fixed strike price. In return for this right, a Fund pays an option
premium. The option's underlying instrument may be a security, securities
index, or a futures contract. Put options may be used by a 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 hedge. The Fund may write put options to earn
additional income in the form of option premiums if it expects the price of
the underlying securities to remain stable or rise during the option period
so that the option will not be exercised. The risk in this strategy is that
the price of the underlying securities may decline by an amount greater than
the premium received. The Fund will not purchase options if, at the time of
the investment, the aggregate premiums paid for outstanding options will
exceed 25% of the Fund's total assets.
G. Stock Index Futures Contracts -- The Fund may purchase or sell stock index
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 or cash 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 the change in the value of the contracts may not correlate with changes
in the value of the Fund's portfolio being 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 Trust 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 an annual rate of 1% of the
Fund's average daily net assets.
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 July 31, 1999, AIM was
paid $109,921 for such services.
The Fund, pursuant to a transfer agency and shareholder service agreement, has
agreed to pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer
agency shareholder services to the Fund. During the year ended July 31, 1999,
AFS was paid $197,079 for such services.
The Trust 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 Trust has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.35% of the average daily net assets attributable to the
Class A shares and 1.00% of the average daily net assets attributable to the
Class C shares. The Fund pursuant to the Class B Plan, pays AIM Distributors
compensation at an annual rate of 1.00% of the average daily net assets
attributable to the Class B 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 fiscal period or year
ended July 31, 1999, the Class A, Class B and Class C shares paid AIM
Distributors $516,599, $1,106,186, and $12,281, respectively, as compensation
under the Plans.
FS-21
<PAGE> 129
AIM Distributors received commissions of $212,220 from sales of the Class A
shares of the Fund during the year ended July 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 July 31, 1999, AIM
Distributors received $6,932 in contingent deferred sales charges imposed on
redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS. During the year ended
July 31, 1999, the Fund paid legal fees of $2,606 for services rendered by
Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A
member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
During the year ended July 31, 1999, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$2,962 and $16,060, respectively under expense offset arrangements. The effect
of the above arrangements resulted in a reduction of the Fund's total expenses
of $19,022 during the year ended July 31, 1999.
NOTE 4-TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an
"interested person" of AIM. The Trust may invest trustees' fees, if so elected
by a trustee, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 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) $240,000,000 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 July 31, 1999, the maximum amount outstanding during the period and also
outstanding at the end of the period was $60,000,000 while borrowings averaged
$24,774,247 per day with a weighted average interest rate of 5.46%. Interest
expense (excluding commitment fees) for the year ended July 31, 1999 was
$1,353,601. The funds which are parties to the line of credit are charged a
commitment fee of 0.06% on the unused balance of the committed line. The
commitment fee is allocated among such 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 July 31, 1999 was
$757,782,934 and $584,474,098, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of July 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of:
Investment securities $112,321,750
- ---------------------------------------------------------
Securities sold short 4,337,489
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of:
Investment securities (7,523,256)
- ---------------------------------------------------------
Securities sold short (3,038,607)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $106,097,376
- ---------------------------------------------------------
Cost of investments for tax purposes is $319,985,181.
Proceeds from securities sold short for tax purposes is
the same for tax and financial reporting purposes.
</TABLE>
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the year ended July 31, 1999 and the period
June 29, 1998 (date operations commenced) through July 31, 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 9,086,718 $ 99,751,555 11,173,989 $112,285,297
- ----------------------------------------------------------------------------
Class B* 4,403,590 48,831,913 8,700,960 87,549,103
- ----------------------------------------------------------------------------
Class C* 463,451 5,940,023 -- --
- ----------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 8,677 96,302 -- --
- ----------------------------------------------------------------------------
Class B* 3,755 41,572 -- --
- ----------------------------------------------------------------------------
Reacquired:
Class A (6,264,993) (69,029,559) (155,815) (1,560,435)
- ----------------------------------------------------------------------------
Class B* (2,617,703) (29,028,148) (62,499) (623,705)
- ----------------------------------------------------------------------------
Class C (58,887) (673,599) -- --
- ----------------------------------------------------------------------------
5,024,608 $ 55,930,059 19,656,635 $197,650,260
- ----------------------------------------------------------------------------
</TABLE>
* Class B and Class C shares commenced sales on July 13, 1998 and December 30,
1998, respectively.
FS-22
<PAGE> 130
NOTE 8-CALL OPTION CONTRACTS
Transactions in call options written during the year ended July 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of period 775 $ 71,774
- -------------------------------------------------------------------------------------
Written 9,268 4,479,947
- -------------------------------------------------------------------------------------
Closed (9,642) (4,495,288)
- -------------------------------------------------------------------------------------
Expired (401) (56,433)
- -------------------------------------------------------------------------------------
End of period -- $ --
- -------------------------------------------------------------------------------------
</TABLE>
NOTE 9-PUT OPTION CONTRACTS
Transactions in put option contracts written during the year ended July 31, 1999
are summarized as follows:
<TABLE>
<CAPTION>
PUT OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of period 100 $ 63,448
- -------------------------------------------------------------------------------------
Written 3,148 2,245,778
- -------------------------------------------------------------------------------------
Closed (1,265) (843,702)
- -------------------------------------------------------------------------------------
Expired (300) (198,893)
- -------------------------------------------------------------------------------------
End of period 1,683 $ 1,266,631
- -------------------------------------------------------------------------------------
</TABLE>
Open put option contracts written at July 31, 1999 were as follows:
<TABLE>
<CAPTION>
JULY 31,
1999 UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUM MARKET APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
- ----- -------- ------ --------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
S&P 500 Index SEP 99 $1,025 200 $ 44,398 $ 48,125 $ (3,727)
SEP 99 1,050 444 104,039 138,750 (34,711)
DEC 99 1,025 589 717,347 854,050 (136,703)
DEC 99 975 450 400,847 483,750 (82,903)
------------------------------------------------
1,683 $1,266,631 $1,524,675 $(258,044)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 10-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A outstanding
during the year ended July 31, 1999 and the period June 29, 1998 (date sales
commenced) through July 31, 1998, for a share of Class B outstanding during the
year ended July 31, 1999 and the period July 13, 1998 (date sales commenced)
through July 31, 1998, and for a share of Class C outstanding during the period
December 30, 1998 (date sales commenced) through July 31, 1999.
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------- ------------------- CLASS C
1999 1998 1999 1998 1999
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.76 $ 10.00 $ 9.76 $ 10.07 $11.70
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Income from investment operations:
Net investment income (loss) (0.09)(a) 0.02(a) (0.17)(a) 0.01(a) (0.11)(a)
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Net gains (losses) on securities (both realized and
unrealized) 5.20 (0.26) 5.17 (0.32) 3.19
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Total from investment operations 5.11 (0.24) 5.00 (0.31) 3.08
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Dividends from net investment income (0.01) -- (0.01) -- --
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Net asset value, end of period $ 14.86 $ 9.76 $ 14.75 $ 9.76 $14.78
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Total return(b) 52.36% (2.40)% 51.30% (3.08)% 29.31%
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $205,721 $107,540 $153,793 $84,285 $5,977
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Ratio of expenses to average net assets, excluding interest 1.79%(c) 1.59%(d) 2.47%(c) 2.30%(d) 2.47%(c)
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Ratio of interest expense to average net assets 0.56%(c) -- 0.56%(c) -- 0.56%(c)
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Ratio of net investment income (loss) to average net assets (1.44)%(c) 2.00%(d) (2.12)%(c) 1.29%(d) (2.12)%(c)
- ------------------------------------------------------------ -------- -------- -------- ------- ------
Portfolio turnover rate 220% 13% 220% 13% 220%
- ------------------------------------------------------------ -------- -------- -------- ------- ------
</TABLE>
(a)Calculated using average shares outstanding.
(b)Does not deduct sales charges and is not annualized for periods less than one
year.
(c)Ratios are annualized and based on average net assets of $147,599,614,
$110,618,591, and $2,094,655 for Class A, Class B and Class C shares,
respectively.
(d)Annualized.
FS-23
<PAGE> 131
PART C
OTHER INFORMATION
Item 23. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C> <C>
a (1) - (a) Agreement and Declaration of Trust of Registrant was filed as an Exhibit to the Registration Statement filed
March 13, 1998.
- (b) First Amendment to Agreement and Declaration of Trust of Registrant was filed as an Exhibit to Post-Effective
Amendment No. 1 on October 7, 1998.
- (c) Second Amendment to Agreement and Declaration of Trust of Registrant, dated August 10, 1998, was filed as an
Exhibit to Post-Effective Amendment No. 2 on October 8, 1998.
- (d) Third Amendment to Agreement and Declaration of Trust of Registrant, dated September 26, 1998, is filed
herewith electronically.
(2) - (a) Amended and Restated Agreement and Declaration of Trust of Registrant, dated November 5, 1998, was filed as an
Exhibit to Post-Effective Amendment No. 3 on July 14,1999, and is hereby incorporated by reference.
- (b) First Amendment to Amended and Restated Agreement and Declaration of Trust of Registrant, dated July 13, 1999,
was filed as an Exhibit to Post-Effective Amendment No. 3 on July 14, 1999, and is hereby incorporated by
reference.
b (1) - (a) By-Laws of Registrant were filed as an Exhibit to the Registration Statement filed March 13, 1998.
- (b) First Amendment to By-Laws of Registrant, dated September 26, 1998, was filed as an Exhibit to Post-Effective
Amendment No. 3 on July 14, 1999.
(2) - (a) Amended and Restated By-Laws of Registrant, dated November 5, 1998, was filed as an Exhibit to Post-Effective
Amendment No. 3 on July 14, 1999, and is hereby incorporated by reference.
- (b) First Amendment to Amended and Restated By-Laws of Registrant, dated June 9, 1999, was filed as an Exhibit to
Post-Effective Amendment No. 3 on July 14, 1999, and is hereby incorporated by reference.
c (1) - Specimen Certificate for Class A Shares of AIM Small Cap Opportunities Fund was filed as an Exhibit to
Pre-Effective Amendment No. 1 on May 21, 1998, and is hereby incorporated by reference.
(2) - Specimen Certificate for Class B Shares of AIM Small Cap Opportunities Fund was filed as an Exhibit to
Pre-Effective Amendment No. 1 on May 21, 1998, and is hereby incorporated by reference.
</TABLE>
C-1
<PAGE> 132
<TABLE>
<S> <C> <C>
(3) - Specimen Certificate for Class C Shares of AIM Small Cap Opportunities Fund was filed as an Exhibit to
Pre-Effective Amendment No. 1 on May 21, 1998, and is hereby incorporated by reference.
(4) - Specimen Certificate for Class A shares of AIM Mid Cap Opportunities Fund was filed as an Exhibit to Post-Effective
Amendment No. 2 on October 8, 1998, and is hereby incorporated by reference.
(5) - Specimen Certificate for Class B shares of AIM Mid Cap Opportunities Fund was filed as an Exhibit to Post-Effective
Amendment No. 2 on October 8, 1998, and is hereby incorporated by reference.
(6) - Specimen Certificate for Class C shares of AIM Mid Cap Opportunities Fund was filed as an Exhibit to Post-Effective
Amendment No. 2 on October 8, 1998, and is hereby incorporated by reference.
d (1) - (a) Master Investment Advisory Agreement, dated June 24, 1998, between Registrant and A I M Advisors, Inc. was
filed as an Exhibit to Post-Effective Amendment No. 1 on October 7, 1998, and is hereby incorporated by reference.
- (b) Amendment No. 1 to Master Investment Advisory Agreement, dated December 7, 1998, between Registrant and A I M
Advisors, Inc. was filed as an Exhibit to Post-Effective Amendment No. 3 on July 14, 1999, and is hereby
incorporated by reference.
- (c) Form of Amendment No. 2 to Master Investment Advisory Agreement between Registrant and A I M Advisors, Inc. was
filed as an Exhibit to Post-Effective Amendment No. 3 on July 14, 1999 and is hereby incorporated by reference.
(2) - (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 as an Exhibit to Registrant's Post
Effective Amendment No. 1 on October 7, 1998, and is hereby incorporated by reference.
- (b) Amendment No. 1 to Foreign Country Selection and Mandatory Securities Depository Responsibilities Delegation
Agreement, dated September 28, 1998, between Registrant and A I M Advisors, Inc. was filed as an Exhibit to
Post-Effective Amendment No. 3 on July 14, 1999, and is hereby incorporated by reference.
- (c) Amendment No. 2 to Foreign Country Selection and Mandatory Securities Depository Responsibilities Delegation
Agreement, dated December 14, 1998, between Registrant and A I M Advisors, Inc. was filed as an Exhibit to
Post-Effective Amendment No. 3 on July 14, 1999, and is hereby incorporated by reference.
- (d) Amendment No. 3 to Foreign Country Selection and Mandatory Securities Depository Responsibilities Delegation
Agreement, dated December 22, 1998, between Registrant and A I M Advisors, Inc. was filed as an Exhibit to
Post-Effective Amendment No. 3 on July 14, 1999, and is hereby incorporated by reference.
- (e) Amendment No. 4 to Foreign Country Selection and Mandatory Securities Depository Responsibilities Delegation
Agreement, dated January 26, 1999, between Registrant and
</TABLE>
C-2
<PAGE> 133
<TABLE>
<S> <C> <C>
A I M Advisors, Inc. was filed as an Exhibit to Post Effective Amendment No. 3 on July 14, 1999, and is hereby
incorporated by reference.
- (f) Amendment No. 5 to Foreign Country Selection and Mandatory Securities Depository Responsibilities Delegation
Agreement, dated March 1, 1999, between Registrant and A I M Advisors, Inc. was filed as an Exhibit to
Post-Effective Amendment No. 3 on July 14, 1999, and is hereby incorporated by reference.
- (g) Amendment No. 6 to Foreign Country Selection and Mandatory Securities Depository Responsibilities Delegation
Agreement, dated March 18, 1999, between Registrant and A I M Advisors, Inc. was filed as an Exhibit to
Post-Effective Amendment No. 3 on July 14, 1999, and is hereby incorporated by reference.
e (1) - (a) Master Distribution Agreement (Class A and Class C shares), dated June 24, 1998, between Registrant and A I M
Distributors, Inc. was filed as an Exhibit to Post-Effective Amendment No. 1 on October 7, 1998, and is hereby
incorporated by reference.
- (b) Amendment No. 1 to Master Distribution Agreement (Class A and Class C shares), dated December 7, 1998, between
Registrant and A I M Distributors, Inc. was filed as an Exhibit to Post-Effective Amendment No. 3 on July 14, 1999,
and is hereby incorporated by reference.
- (c) Form of Amendment No. 2 to Master Distribution Agreement (Class A and Class C shares) between Registrant and
A I M Distributors, Inc. was filed as an Exhibit to Post-Effective Amendment No. 3 on July 14, 1999 and is hereby
incorporated by reference.
(2) - Form of Selected Dealer Agreement between A I M Distributors, Inc. and selected dealers was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 1 on October 7, 1998, and is hereby incorporated by reference.
(3) - Form of Bank Selling Group Agreement between A I M Distributors, Inc. and banks was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 1 on October 7, 1998, and is hereby incorporated by reference.
(4) - (a) Master Distribution Agreement (Class B shares), dated June 24, 1998, between Registrant and A I M Distributors,
Inc. was filed as an Exhibit to Registrant's Post-Effective Amendment No. 1 on October 7, 1998, and is hereby
incorporated by reference.
- (b) Amendment No. 1 to Master Distribution Agreement (Class B shares), dated December 7, 1998, between Registrant
and A I M Distributors, Inc. was filed as an Exhibit to Post-Effective Amendment No. 3 on July 14, 1999, and is
hereby incorporated by reference.
- (c) Form of Amendment No. 2 to Master Distribution Agreement (Class B Shares) between Registrant and A I M
Distributors, Inc. was filed as an Exhibit to Post-Effective Amendment No. 3 on July 14, 1999 and is hereby
incorporated by reference.
f (1) - AIM Funds Retirement Plan for Eligible Directors/Trustees effective as of March 8, 1994, as restated September 18,
1995, was filed as an Exhibit to the Registration Statement filed March 13, 1998, and is hereby incorporated by
reference.
(2) - Form of Deferred Compensation Agreement for Registrant's Non-Affiliated Directors was filed as an Exhibit to the
Registration Statement filed March 13, 1998, and is hereby incorporated by reference.
</TABLE>
C-3
<PAGE> 134
<TABLE>
<S> <C> <C>
g (1) - (a) Custodian Contract, dated June 26, 1998, between Registrant and State Street Bank and Trust Company was filed
as an Exhibit to Registrant's Post-Effective Amendment No. 1 on October 7, 1998, and is hereby incorporated by
reference.
- (b) Amendment, dated September 9, 1998, to the Custodian Contract, dated June 26, 1998, between Registrant and
State Street Bank and Trust Company, was filed as an Exhibit to Registrant's Post-Effective Amendment No. 1 filed
on October 7, 1998, and is hereby incorporated by reference.
(2) - (a) Subcustodian Agreement with Chase Bank of Texas, N.A. (formerly, Texas Commerce Bank, National Association) was
filed as an Exhibit to the Registration Statement filed March 13, 1998, and is hereby incorporated by reference.
- (b) Amendment No. 1, dated October 2, 1998, to the Subcustodian Agreement among Chase Bank of Texas, N.A.
(formerly, Texas Commerce Bank, National Association), State Street Bank and Trust Company, A I M Fund Services,
Inc., was filed as an Exhibit to Registrant's Post-Effective Amendment No. 1 on October 7, 1998 and is hereby
incorporated by reference.
h (1) - (a) Transfer Agency and Service Agreement, dated June 24, 1998, between Registrant and A I M Fund Services, Inc.
was filed as an Exhibit to Registrant's Post-Effective Amendment No. 1 on October 7, 1998, and is hereby
incorporated by reference.
- (b) Amendment No. 1 to the Transfer Agency and Service Agreement, dated January 1, 1999, between Registrant and
A I M Fund Services, Inc. is filed herewith electronically.
(2) - (a) Remote Access and Related Services Agreement, dated as of December 23, 1994, was filed as an Exhibit to the
Registration Statement filed March 13, 1998, and is hereby incorporated by reference.
- (b) Amendment No. 1, dated October 4, 1995, to the Remote Access and Related Services Agreement was filed as an
Exhibit to the Registration Statement filed March 13, 1998, 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, was filed as an Exhibit to the Registration Statement filed March 13, 1998, and is hereby incorporated by
reference.
- (d) Amendment No. 3, dated as of February 1, 1997, to the Remote Access and Related Services Agreement, dated
December 23, 1994, was filed as an Exhibit to the Registration Statement filed March 13, 1998, and is hereby
incorporated by reference.
- (e) Exhibit 1, effective as of August 4, 1997, to the Remote Access and Related Services Agreement, dated December
23, 1994, was filed as an Exhibit to the Registration Statement filed March 13, 1998, and is hereby incorporated by
reference.
- (f) Preferred Registration Technology Escrow Agreement, dated September 10, 1997, was filed as an Exhibit to the
Registration Statement filed March 13, 1998, and is hereby incorporated by reference.
</TABLE>
C-4
<PAGE> 135
<TABLE>
<S> <C> <C>
- (g) Form of Revised Exhibit 1, to the Remote Access and Related Services Agreement, dated December 23, 1994, was
filed as an Exhibit to Pre-Effective Amendment No. 1 on May 21, 1998, and is hereby incorporated by reference.
- (h) Amendment No. 4, dated June 30, 1998, to the Remote Access and Related Services Agreement, dated December 23,
1994, was filed as an Exhibit to Post-Effective Amendment No. 1 on October 7, 1998, and is hereby incorporated by
reference.
- (i) Amendment No. 5, dated July 1, 1998, to the Remote Access and Related Services Agreement, dated December 23,
1994, was filed as an Exhibit to Post-Effective Amendment No. 1 on October 7, 1998, and is hereby incorporated by
reference.
- (j) Amendment No. 6, dated August 30, 1999, to the Remote Access and Related Services Agreement for IMPRESSNet(TM)
Services, dated December 23, 1994, is filed herewith electronically.
(3) - (a) Master Administrative Services Agreement, dated June 24, 1998, between Registrant and A I M Advisors, Inc. was
filed as an Exhibit to Post-Effective Amendment No. 1 on October 7, 1998, and is hereby incorporated by reference.
- (b) Amendment No. 1 to Master Administrative Services Agreement, dated December 7, 1998, between Registrant and
A I M Advisors, Inc. was filed as an Exhibit to Post-Effective Amendment No. 3 on July 14, 1999, and is hereby
incorporated by reference.
- (c) Form of Amendment No. 2 to Master Administrative Services Agreement between Registrant and A I M Advisors, Inc.
was filed as an Exhibit to Post-Effective Amendment No. 3 on July 14, 1999 and is hereby incorporated by reference.
(4) - Shareholder Sub-Accounting Services Agreement, dated as of October 1, 1993, was filed as an Exhibit to the
Registration Statement filed March 13, 1998, and is hereby incorporated by reference.
(5) - Form of Memorandum of Agreement between Registrant and A I M Advisors, Inc. is filed herewith electronically.
i (1) - Opinion and Consent of Ballard Spahr Andrews & Ingersoll, LLP was filed as an Exhibit to Post-Effective Amendment
No. 3 on July 14, 1999, and is hereby incorporated by reference.
(2) - Consent of Ballard Spahr Andrews & Ingersoll, LLP is filed herewith electronically.
j - Consent of KPMG LLP is filed herewith electronically.
k - Financial Statements - None.
l (1) - (a) Initial Capitalization Agreement of Registrant's AIM Small Cap Opportunities Fund was filed as an Exhibit to
Pre-Effective Amendment No. 1 on May 21, 1998, and is hereby incorporated by reference.
- (b) Initial Capitalization Agreement of Registrant's AIM Mid Cap Opportunities Fund was filed as an Exhibit to
Post-Effective Amendment No. 3 on July 14, 1999, and is hereby incorporated by reference.
</TABLE>
C-5
<PAGE> 136
<TABLE>
<S> <C> <C>
- (c) Form of Initial Capitalization Agreement of Registrant's AIM Large Cap Opportunities Fund was filed as an
Exhibit to Post-Effective Amendment No. 3 on July 14, 1999 and is hereby incorporated by reference.
m (1) - (a) Master Distribution Plan for Registrant's Class A and Class C shares was filed as an Exhibit to Post-Effective
Amendment No. 1 on October 7, 1998, and is hereby incorporated by reference.
- (b) Amendment No. 1 to Master Distribution Plan, dated December 7, 1998, for Registrant's Class A and Class C
shares was filed as an Exhibit to Post-Effective Amendment No. 3 on July 14, 1999, and is hereby incorporated by
reference.
- (c) Form of Amendment No. 2 to Master Distribution Plan for Registrant's Class A and C shares was filed as an
Exhibit to Post-Effective Amendment No. 3 on July 14, 1999 and is hereby incorporated by reference.
(2) - Form of Shareholder Service Agreement to be used in connection with Registrant's Master Distribution Plan was filed
as an Exhibit to Post-Effective Amendment No. 3 on July 14, 1999 and is hereby incorporated by reference.
(3) - Form of Bank Shareholder Service Agreement to be used in connection with Registrant's Master Distribution Plan was
filed as an Exhibit to Post-Effective Amendment No. 3 on July 14, 1999 and is hereby incorporated by reference.
(4) - Form of Variable Group Annuity Contractholder Service Agreement to be used in connection with Registrant's Master
Distribution Plan was filed as an Exhibit to Post-Effective Amendment No. 3 on July 14, 1999 and is hereby
incorporated by reference.
(5) - Form of Agency Pricing Agreement (for Class A Shares) to be used in connection with Registrant's Master
Distribution Plan was filed as an Exhibit to Post-Effective Amendment No. 3 on July 14, 1999 and is hereby
incorporated by reference.
(6) - Forms of Service Agreement for Brokers for Bank Trust Departments and for Bank Trust Departments to be used in
connection with Registrant's Master Distribution Plan were filed as an Exhibit to Post-Effective Amendment No. 3 on
July 14, 1999 and is hereby incorporated by reference.
(7) - (a) Master Distribution Plan for Registrant's Class B shares was filed as an Exhibit to Registrant's Post-Effective
Amendment No. 1 on October 7, 1998, and is hereby incorporated by reference.
- (b) Amendment No. 1 to Master Distribution Plan, dated December 7, 1998, for Registrant's Class B shares was filed
as an Exhibit to Post-Effective Amendment No. 3 on July 14, 1999, and is hereby incorporated by reference.
- (c) Form of Amendment No. 2 to Master Distribution Plan for Registrant's Class B shares was filed as an Exhibit to
Post-Effective Amendment No. 3 on July 14, 1999 and is hereby incorporated by reference.
n (1) - Second Amended and Restated Multiple Class Plan (Rule 18f-3) was filed as an Exhibit to Pre-Effective Amendment No.
1 on May 21, 1998.
</TABLE>
C-6
<PAGE> 137
<TABLE>
<S> <C> <C>
(2) - Third Amended and Restated Multiple Class Plan (Rule 18f-3) is filed herewith electronically.
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. is filed herewith electronically.
(2) - Code of Ethics of AIM Special Opportunities Funds, effective as of March 10, 1998, is filed herewith
electronically.
</TABLE>
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.
Not Applicable
Item 25. Indemnification
State the general effect of any contract, arrangements 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 (the "Agreement"),
dated February 4, 1998, as amended, provides, among other things (i) that
trustees shall not be liable for any act or omission or any conduct
whatsoever (except for liabilities to the Registrant or its shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of duty); (ii) for the indemnification by the Registrant of the
trustees and officers to the fullest extent permitted by the Delaware
Business Trust Act; and (iii) that the shareholders and former shareholders
of the Registrant are held harmless by the Registrant (or applicable
portfolio or class) from personal liability arising from their status as
such, and are indemnified by the Registrant (or applicable portfolio or
class) against all loss and expense arising from such personal liability in
accordance with the Registrant's Bylaws and applicable law.
A I M Advisors, Inc., the Registrant and other investment companies managed
by A I M Advisors, Inc., their respective officers, trustees, directors and
employees (the "Insured Parties") are insured under an investment Advisory
Professional and Directors and 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 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 "Management--Investment 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 29(b) of this Part C.
C-7
<PAGE> 138
Item 27. Principal Underwriters
(a) A I M Distributors, Inc., the Registrant's principal underwriter, also
acts as a principal underwriter to the following investment companies:
AIM Advisor Funds, Inc.
AIM Equity Funds, Inc. (Retail Classes)
AIM Funds Group
AIM Growth Series
AIM International Funds, Inc.
AIM Investment Funds
AIM Investment Securities Funds (Retail Classes)
AIM Series Trust
AIM Summit Fund, Inc.
AIM Tax-Exempt Funds, Inc.
AIM Variable Insurance Funds, Inc.
GT Global Floating Rate Fund, Inc. (d/b/a AIM Floating Rate Fund)
(b)
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ----------------- -------------------------- ---------------
<S> <C> <C>
Charles T. Bauer Chairman of the Chairman of the
Board of Directors Board of Trustees
Michael J. Cemo President & Director None
Gary T. Crum Director Senior Vice President
Robert H. Graham Senior Vice President President & Trustee
& Director
W. Gary Littlepage Senior Vice President None
& Director
James L. Salners Executive Vice President None
John Caldwell Senior Vice President None
Gordon J. Sprague Senior Vice President None
Michael C. Vessels Senior Vice President None
Marilyn M. Miller Senior Vice President None
Gene L. Needles Senior Vice President None
</TABLE>
- --------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-8
<PAGE> 139
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ----------------- -------------------------- ---------------
<S> <C> <C>
B.J. Thompson First Vice President None
Kathleen J. Pflueger Secretary Assistant Secretary
Ofelia M. Mayo Vice President, Assistant Assistant Secretary
Secretary & General Counsel
Melville B. Cox Vice President & Chief Vice President
Compliance Officer
Dawn M. Hawley Vice President & Treasurer None
James R. Anderson Vice President None
Mary K. Coleman Vice President None
Mary A. Corcoran Vice President None
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
</TABLE>
- --------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-9
<PAGE> 140
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ----------------- -------------------------- ---------------
<S> <C> <C>
David E. Hessel Assistant Vice President, None
Controller & Assistant Treasurer
Luke P. Beausoleil Assistant Vice President None
Shelia 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
Simon R. Hoyle Assistant Vice President None
Mary C. Mangham Assistant Vice President None
Kim T. McAuliffe Assistant Vice President None
Kathryn A. Jordan 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>
(c) Not Applicable
Item 28. Location of Accounts and Records
- --------------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
C-10
<PAGE> 141
State the name and address of each person maintaining physical possession
of each such 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, maintains 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 Part B disclosing the parties to the
contract and the total amount paid and by whom for the Registrant's last three
fiscal years.
Not Applicable
Item 30. Undertakings
Not Applicable
C-11
<PAGE> 142
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and 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
September, 1999.
REGISTRANT: AIM SPECIAL OPPORTUNITIES 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:
SIGNATURES TITLE DATE
---------- ----- ----
/s/ CHARLES T. BAUER Chairman & Trustee September 27, 1999
- -------------------------------
(Charles T. Bauer)
/s/ ROBERT H. GRAHAM Trustee & President September 27, 1999
- ------------------------------- (Principal Executive
(Robert H. Graham) Officer)
/s/ BRUCE L. CROCKETT Trustee September 27, 1999
- -------------------------------
(Bruce L. Crockett)
/s/ OWEN DALY II Trustee September 27, 1999
- -------------------------------
(Owen Daly II)
/s/ EDWARD K. DUNN, JR. Trustee September 27, 1999
- -------------------------------
(Edward K. Dunn, Jr.)
/s/ JACK FIELDS Trustee September 27, 1999
- -------------------------------
(Jack Fields)
/s/ CARL FRISCHLING Trustee September 27, 1999
- -------------------------------
(Carl Frischling)
/s/ PREMA MATHAI-DAVIS Trustee September 27, 1999
- -------------------------------
(Prema Mathai-Davis)
/s/ LEWIS F. PENNOCK Trustee September 27, 1999
- -------------------------------
(Lewis F. Pennock)
/s/ LOUIS S. SKLAR Trustee September 27, 1999
- -------------------------------
(Louis S. Sklar)
/s/ DANA R. SUTTON Vice President & September 27, 1999
- ------------------------------- Treasurer (Principal
(Dana R. Sutton) Financial and
Accounting Officer)
<PAGE> 143
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
a(1)(d) Third Amendment to Agreement and Declaration of Trust of
Registrant, dated September 26, 1998
h(1)(b) Amendment No. 1 to the Transfer Agency and Service Agreement,
dated January 1, 1999, between Registrant and A I M Fund
Services, Inc.
h(2)(j) Amendment No. 6, dated August 30, 1999, to the Remote Access
and Related Services Agreement for IMPRESSNet(TM) Services,
dated December 23, 1994
h(5) Form of Memorandum of Agreement dated September 24, 1999
between Registrant and A I M Advisors, Inc.
i(2) Consent of Ballard Spahr Andrews & Ingersoll, LLP
j Consent of KPMG LLP
n(2) Third Amended and Restated Multiple Class Plan (Rule 18f-3)
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.
o(2) Code of Ethics of AIM Special Opportunities Funds, effective
as of March 10, 1998
</TABLE>
<PAGE> 1
EXHIBIT a(1)(d)
THIRD AMENDMENT
TO
AGREEMENT AND DECLARATION OF TRUST
OF
AIM SPECIAL OPPORTUNITIES FUNDS
THIS THIRD AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST OF AIM
SPECIAL OPPORTUNITIES FUNDS (the "Amendment") is entered into as of the 26th day
of September, 1998, among Charles T. Bauer, Bruce L. Crockett, Owen Daly II,
Edward K. Dunn, Jr., Jack Fields, Carl Frischling, Robert H. Graham, Prema
Mathai-Davis, Lewis F. Pennock, Ian W. Robinson and Louis S. Sklar, as Trustees,
and each person who became or becomes a Shareholder in accordance with the terms
set forth in that certain Agreement and Declaration of Trust of AIM Special
Opportunities Funds entered into as of February 4, 1998, as amended (the
"Agreement").
WHEREAS, Section 9.7 of the Agreement authorizes the Trustees without
Shareholder vote to amend or otherwise supplement the Agreement by making an
amendment; and
WHEREAS, at a meeting duly called and held on the 26th day of September
1998, the Trustees have resolved to amend the Agreement as hereinafter set
forth.
NOW, THEREFORE, the Trustees hereby amend the Agreement as hereinafter
set forth:
1. Capitalized terms not specifically defined in this Amendment shall
have the meanings ascribed to them in the Agreement.
2. Section 3.6 of the Agreement is hereby amended to read in its
entirety as follows:
"Section 3.6 Number of Trustees. The number of Trustees shall initially
be three (3), and thereafter shall be such number as shall be fixed from time to
time by resolution adopted by the Board of Trustees; provided, however, that the
number of Trustees shall in no event be less than three (3) nor more than
fifteen (15)."
3. With the exception of the amendment in the preceding paragraph 2 of
this Amendment, the Agreement shall in all other respects remain in full force
and effect.
4. This Amendment may be executed in multiple counterparts, each of
which shall be deemed to be an original and all of which taken together shall
constitute one and the same Amendment.
<PAGE> 2
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the
Trust, have executed this Third Amendment to Agreement and Declaration of Trust
of AIM Special Opportunities Funds as of the day first above written.
/s/ CHARLES T. BAUER /s/ BRUCE L. CROCKETT
- -------------------------------------- --------------------------------------
Charles T. Bauer, Trustee Bruce L. Crockett, Trustee
/s/ OWEN DALY II /s/ EDWARD K. DUNN, JR.
- -------------------------------------- --------------------------------------
Owen Daly II, Trustee Edward K. Dunn, Jr., Trustee
/s/ JACK FIELDS /s/ CARL FRISCHLING
- -------------------------------------- --------------------------------------
Jack Fields, Trustee Carl Frischling, Trustee
/s/ ROBERT H. GRAHAM /s/ PREMA MATHAI-DAVIS
- -------------------------------------- --------------------------------------
Robert H. Graham, Trustee Prema Mathai-Davis, Trustee
/s/ LEWIS F. PENNOCK /s/ IAN W. ROBINSON
- -------------------------------------- --------------------------------------
Lewis F. Pennock, Trustee Ian W. Robinson, Trustee
/s/ LOUIS S. SKLAR
--------------------------------------
Louis S. Sklar, Trustee
THIS IS THE SIGNATURE PAGE FOR
THE THIRD AMENDMENT TO AGREEMENT AND DECLARATION OF TRUST
OF AIM SPECIAL OPPORTUNITIES FUNDS
2
<PAGE> 1
EXHIBIT h(1)(b)
AMENDMENT NUMBER 1 TO THE TRANSFER AGENCY
AND SERVICE AGREEMENT
This Amendment, dated as of January 1, 1999 is made to the Transfer Agency and
Service Agreement dated June 24, 1998 (the "Agreement") between AIM Special
Opportunities Funds (the "Fund") and A I M Fund Services, Inc. ("AFS") pursuant
to Article 10 of the Agreement.
A fee calculated by multiplying the number of shareholder accounts in the Fund
by $.20 shall be paid by the Fund to AFS concurrently with the fees payable by
the Fund to AFS under Article 2 of the Agreement.
Upon a vote of the Board of Trustees of the Fund terminating this Amendment,
this Amendment shall cease to apply, and the Transfer Agency and Service
Agreement shall be complete without reference hereto.
AIM SPECIAL OPPORTUNITIES FUNDS
By: /s/ROBERT H. GRAHAM
-----------------------------
President
ATTEST:
/s/LISA A. MOSS
- --------------------------
Assistant Secretary
A I M FUND SERVICES, INC.
By: /s/JOHN CALDWELL
-----------------------------
President
ATTEST:
/s/LISA A. MOSS
- --------------------------
Assistant Secretary
<PAGE> 1
EXHIBIT (h)(2)(j)
AMENDMENT NO. 6 TO THE REMOTE ACCESS
AND RELATED SERVICES AGREEMENT
FOR IMPRESSNET(TM) SERVICES
THIS AMENDMENT, dated as of the 30th day of August, 1999 is made to the
Remote Access and Related Services Agreement dated as of December 23, 1994, as
amended (the "Agreement") between each registered investment company listed on
Exhibit 1 of the Agreement (the "Fund") and FIRST DATA INVESTOR SERVICES GROUP,
INC. ("Investor Services Group").
WITNESSETH
WHEREAS, the Fund desires to enable Shareholders and Financial
Planners to conduct certain account transactions through the use of the
Internet and Investor Services Group desires to allow such access and provide
certain services as more fully described below in connection therewith;
NOW THEREFORE, the Fund and Investor Services Group agree that as of
the date first referenced above, Investor Services Group Agreement shall be
amended as follows:
1. Definitions. Terms not otherwise defined herein shall have the same
meanings as ascribed them in the Agreement. In addition, the following
definitions are hereby incorporated into Agreement:
(a) "End-User" shall mean any Shareholder or Financial Planner that
accesses the Investor Services Group recordkeeping system via
IMPRESSNet--Registered Trademark--.
(b) "Financial Planner" shall mean any investment advisor,
broker-dealer, financial planner or any other person authorized to act
on behalf of a Shareholder.
(c) "Financial Transaction" shall mean purchase, redemption, exchange
or any other transaction involving the movement of Shares initiated by
an End-User.
(d) "Fund Home Page" shall mean the Fund's proprietary web site on the
Internet used by the Fund to provide information to its shareholders
and potential shareholders.
(e) "IMPRESSNet--Registered Trademark--" shall mean the Investor
Services Group proprietary system consisting of the Investor Services
Group Secure Net Gateway and the Investor Services Group Web
Transaction Engine and shall also be deemed to be part of, and
included within the definition of "FDISG System" and "FDISG
Facilities", as those terms are defined in the Agreement.
(f) "Investor Services Group Secure Net Gateway" shall mean the system
of computer hardware and software and network established by Investor
Services Group to provide access between Investor Services Group
recordkeeping system and the Internet.
<PAGE> 2
(g) "Investor Services Group Web Transaction Engine" shall mean the
system of computer hardware and software created and established by
Investor Services Group in order to enable Shareholders of the Fund to
perform the transactions contemplated hereunder.
(h) "Internet" shall mean the communications network comprised of
multiple communications networks linking education, government,
industrial and private computer networks.
(i) "Shares" refers collectively to such shares of capital stock or
beneficial interest, as the case may be, or class thereof, of a Fund
as may be issued from time to time.
(j) "Shareholder" shall mean a record owner of Shares of the Fund.
2. Responsibilities of Investor Services Group. In addition to the
services rendered by Investor Services Group as set forth in the
Agreement, Investor Services Group agrees to provide the following
services for the fees set forth in the Schedule of
IMPRESSNet--Registered Trademark-- Fees attached hereto as Schedule A
of this Amendment:
(a) In accordance with the written IMPRESSNet--Registered Trademark--
procedures and product functionality documentation provided to the
Fund by Investor Services Group, Investor Services Group shall,
through the use of the Investor Services Group Web Transaction Engine
and Secure Net Gateway enable End-Users to utilize the Internet to
access the Investor Services Group System in order to perform
transactions in Shareholder accounts. IMPRESSNet--Registered
Trademark-- shall be accessible by End-Users in order to perform
transactions in Shareholder accounts via the Internet at least 95% of
the time during any 24 hour period, excluding a) the standard Initial
Program Loads (IPL) which shall be scheduled from 9:00 p.m. Saturday
through 7:00 a.m. Sunday Central Time, and b) the software change
windows which shall be scheduled from 12:00 a.m. Friday through 4:00
a.m. Friday Central Time and 12:00 a.m. Monday through 4:00 a.m.
Monday Central Time.
(b) (i) With respect to Shareholders, process the set up of personal
identification numbers ("PIN") which shall include verification of
initial identification numbers issued, reset and activate personalized
PIN's and reissue new PIN's in connection with lost PIN's; and (ii)
with respect to Financial Planners process the set up of digital
certificates which shall include verification of initial digital
certificates issued, reset and activate digital certificates and
reissue digital certificates in connection with expired or terminated
certificates.
(c) Installation services which shall include, review and sign off on
the Fund's network requirements, recommending method of linking to the
FDISG Web Transaction Engine, installing network hardware and
software, implementing the network connectivity, and testing the
network connectivity and performance;
2
<PAGE> 3
(d) Maintenance and support of the Investor Services Group Secure Net
Gateway and the Investor Services Group Web Transaction Engine, which
includes the following:
(i) error corrections, minor enhancements and interim upgrades to
IMPRESSNet--Registered Trademark-- which are made generally
available by FDISG to IMPRESSNet--Registered Trademark--
customers;
(ii) help desk support to provide assistance to Fund employees
with the Fund's use of IMPRESSNet--Registered Trademark--.
Maintenance and support shall not include (i) access to or use of any
substantial added functionality, new interfaces, new architecture, new
platforms, new versions or major development efforts, unless made
generally available by FDISG to IMPRESSNet--Registered Trademark--
clients, as determined solely by FDISG; or (ii) development of
customized features.
(e) Maintenance and upkeep of the security infrastructure and
capabilities described in the procedures and product functionality
documentation.
(f) Prepare and forward monthly usage reports to the Fund which shall
provide the Fund with a summary of activity and functionality used by
End-Users. In addition, the Fund will be provided web-site access for
determination of daily usage activity.
3. Responsibility of the Fund. In connection with the services provided
by Investor Services Group hereunder, the Fund shall be responsible
for the following:
(a) establishment and maintenance of the Fund Home Page on the
Internet;
(b) services and relationships between the Fund and any third party
on-line service providers to enable End-Users to access the Fund Home
Page and/or the Investor Services System via the Internet;
(c) provide Investor Services Group with access to and information
regarding the Fund Home Page in order to enable Investor Services
Group to provide the services contemplated hereunder.
4 Software Exclusivity. The Fund may choose to have exclusive use of
enhancement software paid for by the Fund. Such exclusivity would
extend for a period of nine (9) months from the date the enhancement
is placed into the production libraries. Software exclusivity would be
waived if the Fund accepts either of the following conditions:
a). If prior to implementation, Investor Services Group or other
Investor Services Group clients agree to share in the expense of
the enhancements.
b). At any time during the 9 months following implementation, Investor
Services Group or other Investor Services Group clients agree to
share the expense for the enhancements.
3
<PAGE> 4
The Agreement, as previously amended and as amended by this Amendment,
("Modified Agreement") constitutes the entire agreement between the parties
with respect to the subject matter hereof. The Modified Agreement supersedes
all prior and contemporaneous agreements between the parties in connection with
the subject matter hereof. No officer, employee, servant or other agent of
either party is authorized to make any representation, warranty, or other
promises not expressly contained herein with respect to the subject matter
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their duly authorized officers, as of the day and year first
above written.
On behalf of the Funds and respective FIRST DATA INVESTOR SERVICES
Portfolios and Classes set forth in GROUP, INC.
Exhibit 1 of the Agreement which may
be amended from time to time.
<TABLE>
<S> <C>
By: /s/ROBERT H. GRAHAM By: /s/DEBRLEE G. GOLDBERG
-------------------------------- -------------------------------
Name: Robert H. Graham Name: Debrlee G. Goldberg
------------------------------- ----------------------------
Title: President Title: SVP
------------------------------ ---------------------------
</TABLE>
4
<PAGE> 5
SCHEDULE A
IMPRESSNET(TM) Fees
WEB TRANSACTION ENGINE
SET UP FEE: $150.00 PER HOUR
o Reviewing client network requirements and signing off on the
requirements
o Recommending method of linking to the Web Transaction Engine
o Installing the network hardware and software
o Implementing the network connectivity
o Testing the network connectivity and performance
FINANCIAL TRANSACTION COST:
<TABLE>
<CAPTION>
NUMBER OF TRANSACTIONS PER MONTH FEE PER TRANSACTION
-------------------------------- -------------------
<S> <C>
0-10,000 $.50
10,001-20,000 $.40
20,001+ $.25
</TABLE>
SOFTWARE MAINTENANCE FEE: $25,000 PER ANNUM
o Releases of new versions of Web Transaction Engine (does not include
customization)
o Maintain security infrastructure with auditing function for the
purpose of Fund and Shareholder protection
o Monthly Usage Reports and web access as described in Paragraph 2(f) of
this Amendment No. 6
o Help Desk Support (contact and escalation procedures set forth in
Exhibit 1)
HARDWARE MAINTENANCE FEE: $25,000 PER ANNUM
o Does not include client hardware and software requirements.
o Installation of hardware is billed as time and materials
o Does not include third party hardware and software maintenance
agreements
The Software Maintenance Fee and Hardware Maintenance Fee shall remain
unchanged until December 31, 2002. During each one year term of the agreement
after December 31, 2002, the Software Maintenance Fee and Hardware Maintenance
Fee may be changed no more than 5% than the then-current Software Maintenance
Fee and Hardware Maintenance Fee upon 90 days' prior written notice to the
Funds. Such change to the Software Maintenance Fee and Hardware Maintenance Fee
shall be effective at the beginning of the next one year term of the Agreement.
5
<PAGE> 6
CUSTOMIZED DEVELOPMENT: $150 PER HOUR
The above referenced fees do not include fees associated with third party
software products which may be required to utilize future releases of
IMPRESSNet(TM) .
6
<PAGE> 7
EXHIBIT 1 OF SCHEDULE A
IMPRESSNET HELP DESK AND ESCALATION PROCEDURES
This is directed to the IMPRESSNet staff as well as the customer base to ensure
a common understanding of the expectations surrounding help desk support.
It is assumed that each site has a front line of technical support which
filters out calls and determines that the issue is IMPRESSNet related and is
severe enough to justify immediate attention. It is requested that off-hour
calls be reserved for major production or data integrity issues.
Once an issue is determined to be IMPRESSNet related, the client representative
(either the user or a point of contact) should call the First Data Help Desk at
(508) 871-8550.
The Help Desk has a list of primary and secondary developers on call by
product. It is advantageous to provide a clear and concise problem statement to
the Help Desk personnel along with a telephone number and point of contact. The
caller should be sure to obtain a ticket number to facilitate progress tracking
if necessary.
o The Help Desk will call and/or page the primary on-call developer and
allow 15 minutes for a return call.
o If no response is received, the Help Desk will call and/or page the
secondary on call and wait 10 minutes for a return call.
o If no response is received, the manager on call will be called and/or
paged.
o If no response is received, the Help Desk personnel will contact the
Vice President of Corporate Systems and then the Manager of the
Environmental Support Group.
o Finally, if no response is received the Help Desk personnel has access
to SCONCALL (special procedures utilized by help desk personnel)
Once the developer or manager is assigned the call, they are responsible for
seeing that the issue is satisfactorily addressed. They are not necessarily
responsible for physically addressing the issue.
The assigned person will contact the designated client personnel to inform them
the issue is being addressed and to collect any relevant information.
If an issue will take more than an hour to resolve, the assigned person will
periodically update the Help Desk with a progress status.
Once the issue has been addressed it is the responsibility of the assigned
person to notify the Help Desk that the issue can be marked as "resolved".
7
<PAGE> 8
The Help Desk will contact the client to obtain confirmation of resolution
prior to closing the ticket.
If there has been a lack of response on a particular issue after the specified
time period, please contact your Client Service or IMPRESSNet Manager.
8
<PAGE> 1
EXHIBIT h(5)
MEMORANDUM OF AGREEMENT
This Memorandum of Agreement is entered into as of this [27th day of
September], 1999 between AIM Special Opportunities Funds (the "Company"), on
behalf of the funds listed on Exhibit "A" to this Memorandum of Agreement (the
"Funds"), and A I M Advisors, Inc. ("AIM").
For and in consideration of the mutual terms and agreements set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and AIM agree as
follows:
The Company and AIM agree until the date set forth on the attached
Exhibit "A" that AIM will waive its fees or reimburse expenses to the extent
that the expenses (excluding management fees, 12b-1 fees, interest expense, tax
expense, dividend expense on short sales and extraordinary expenses) of a class
of a Fund exceed the rate set forth on Exhibit "A" of the average daily net
assets allocable to such class. Neither the Company nor AIM may remove or amend
the expense limitations to the Company's detriment prior to the date set forth
on Exhibit "A." AIM will not have any right to reimbursement of any amount so
waived or reimbursed.
The Company and AIM agree to review the then-current expense
limitations for each class of each Fund listed on Exhibit "A" on a date prior
to the date listed on that Exhibit to determine whether such limitations should
be amended, continued or terminated. Unless the Company, by vote of its Board
of Trustees, or AIM terminates the limitations, or the Company and AIM are
unable to reach an agreement on the amount of the limitations to which the
Company and AIM desire to be bound, the limitations will continue for
additional one-year terms at the rate to which the Company and AIM mutually
agree. Exhibit "A" will be amended to reflect that rate and the new date
through which the Company and AIM agree to be bound.
It is expressly agreed that the obligations of the Company hereunder
shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the Company personally, but shall only bind
the assets and property of the Funds, as provided in the Company's Agreement
and Declaration of Trust. The execution and delivery of this Memorandum of
Agreement have been authorized by the Trustees of the Company, and this
Memorandum of Agreement has been executed and delivered by an authorized
officer of the Company acting as such; neither such authorization by such
Trustees nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the assets and property of the Funds, as
provided in the Company's Agreement and Declaration of Trust.
IN WITNESS WHEREOF, the Company and AIM have entered into this
Memorandum of Agreement as of the date first above written.
AIM Special Opportunities Funds,
on behalf of each Fund listed in
Exhibit "A" to this Memorandum of
Agreement
By:
--------------------------------
Title:
-----------------------------
A I M Advisors, Inc.
By:
--------------------------------
Title:
-----------------------------
<PAGE> 2
EXHIBIT "A"
AIM SPECIAL OPPORTUNITIES FUNDS
AIM Mid Cap Opportunities Fund
Class Expense Cap First Potential Termination Date
----- ----------- --------------------------------
Class A [0.50%] June 30, 2000
Class B [0.52%] June 30, 2000
Class C [0.52%] June 30, 2000
<PAGE> 1
EXHIBIT i(2)
CONSENT OF COUNSEL
AIM SPECIAL OPPORTUNITIES FUNDS
-------------------------------
We hereby consent to the use of our name and to the reference to
our firm under the caption "Miscellaneous Information - Legal Matters" in the
Statement of Additional Information for AIM Large Cap Opportunities Fund, AIM
Mid Cap Opportunities Fund and AIM Small Cap Opportunities Fund, which is
included in Post-Effective Amendment No. 4 to the Registration Statement under
the Securities Act of 1933, as amended (No. 333-47949) and Amendment No. 5 to
the Registration Statement under the Investment Company Act of 1940, as amended
(No. 811-08697) on Form N-1A of AIM Special Opportunities Funds.
/s/BALLARD SPAHR ANDREWS & INGERSOLL, LLP
-----------------------------------------
Ballard Spahr Andrews & Ingersoll, LLP
Philadelphia, Pennsylvania
September 16, 1999
<PAGE> 1
EXHIBIT j
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees and Shareholders
AIM Special Opportunities Funds:
We consent to the use of our reports on the AIM Small Cap Opportunities Fund and
AIM Mid Cap Opportunities Fund (series of AIM Special Opportunities Funds) dated
September 3, 1999 included herein and the references to our firm under the
headings "Financial Highlights" in the Prospectuses and "Audit Reports" in the
Statement of Additional Information.
/s/ KPMG LLP
KPMG LLP
Houston, Texas
September 24, 1999
<PAGE> 1
EXHIBIT n(2)
THIRD AMENDED AND RESTATED MULTIPLE CLASS PLAN
OF
THE AIM FAMILY OF FUNDS--Registered Trademark--
1. This Third Amended and Restated Multiple Class Plan (the "Plan")
adopted in accordance with Rule 18f-3 under the Act shall govern the
terms and conditions under which the Funds may issue separate
Classes of Shares representing interests in one or more Portfolios
of each Fund.
2. Definitions. As used herein, the terms set forth below shall have
the meanings ascribed to them below.
(a) Act - Investment Company Act of 1940, as amended.
(b) AIM Cash Reserve Shares - shall mean the AIM Cash Reserve
Shares Class of AIM Money Market Fund, a Portfolio of AIM
Funds Group.
(c) CDSC - contingent deferred sales charge.
(d) CDSC Period - the period of years following acquisition of
Shares during which such Shares may be assessed a CDSC
upon redemption.
(e) Class - a class of Shares of a Fund representing an interest in
a Portfolio.
(f) Class A Shares - shall mean those Shares designated as Class A
Shares in the Fund's organizing documents.
(g) Class B Shares - shall mean those Shares designated as Class B
Shares in the Fund's organizing documents.
(h) Class C Shares - shall mean those Shares designated as Class C
Shares in the Fund's organizing documents.
(i) Directors - the directors or trustees of a Fund.
(j) Distribution Expenses - expenses incurred in activities
which are primarily intended to result in the distribution
and sale of Shares as defined in a Plan of Distribution
and/or agreements relating thereto.
(k) Distribution Fee - a fee paid by a Fund to the Distributor to
compensate the Distributor for Distribution Expenses.
(l) Distributor - A I M Distributors, Inc. or Fund Management
Company, as applicable.
(m) Fund - those investment companies advised by A I M Advisors,
Inc. which have adopted this Plan.
1
<PAGE> 2
(n) Institutional Shares - shall mean Shares of a Fund
representing an interest in a Portfolio offered for sale
to institutional customers as may be approved by the
Directors from time to time and as set forth in the Fund's
prospectus.
(o) Plan of Distribution - Any plan adopted under Rule 12b-1
under the Act with respect to payment of a Distribution
Fee and/or Service Fee.
(p) Portfolio - a series of the Shares of a Fund constituting a
separate investment portfolio of the Fund.
(q) Service Fee - a fee paid to financial intermediaries for
the ongoing provision of personal services to Fund
shareholders and/or the maintenance of shareholder
accounts.
(r) Share - a share of common stock of or beneficial interest in a
Fund, as applicable.
3. Allocation of Income and Expenses.
(a) Distribution Fees and Service Fees - Each Class shall bear
directly any and all Distribution Fees and/or Service Fees
payable by such Class pursuant to a Plan of Distribution
adopted by the Fund with respect to such Class.
(b) Transfer Agency and Shareholder Recordkeeping Fees - Each
Class shall bear directly the transfer agency fees and
expenses and other shareholder recordkeeping fees and
expenses specifically attributable to that Class;
provided, however, that where two or more Classes of a
Portfolio pay such fees and/or expenses at the same rate
or in the same amount, those Classes shall bear
proportionately such fees and expenses based on the
relative net assets attributable to each such Class.
(c) Allocation of Other Expenses - Each Class shall bear
proportionately all other expenses incurred by a Fund
based on the relative net assets attributable to each such
Class.
(d) Allocation of Income, Gains and Losses - Except to the
extent provided in the following sentence, each Portfolio
will allocate income and realized and unrealized capital
gains and losses to a Class based on the relative net
assets of each Class. Notwithstanding the foregoing, each
Portfolio that declares dividends on a daily basis will
allocate income on the basis of settled shares.
(e) Waiver and Reimbursement of Expenses - A Portfolio's
adviser, underwriter or any other provider of services to
the Portfolio may waive or reimburse the expenses of a
particular Class or Classes.
4. Distribution and Servicing Arrangements. The distribution and
servicing arrangements identified below will apply for the following
Classes offered by a Fund with respect to a Portfolio. The
provisions of the Fund's prospectus describing the distribution and
servicing arrangements in detail are incorporated herein by this
reference.
2
<PAGE> 3
(a) Class A Shares. Class A Shares shall be offered at net asset
value plus a front-end sales charge as approved from time to
time by the Directors and set forth in the Fund's
prospectus, which sales charge may be reduced or eliminated
for certain money market fund shares, for larger purchases,
under a combined purchase privilege, under a right of
accumulation, under a letter of intent or for certain
categories of purchasers as permitted by Section 22(d) of
the Act and as set forth in the Fund's prospectus. Class A
Shares that are not subject to a front-end sales charge as a
result of the foregoing shall be subject to a CDSC for the
CDSC Period set forth in Section 5(a) of this Plan if so
provided in the Fund's prospectus. The offering price of
Shares subject to a front-end sales charge shall be computed
in accordance with Rule 22c-1 and Section 22(d) of the Act
and the rules and regulations thereunder. Class A Shares
shall be subject to ongoing Service Fees and/or Distribution
Fees approved from time to time by the Directors and set
forth in the Fund's prospectus.
(b) Class B Shares. Class B Shares shall be (i) offered at net
asset value, (ii) subject to a CDSC for the CDSC Period
set forth in Section 5(b), (iii) subject to ongoing
Service Fees and Distribution Fees approved from time to
time by the Directors and set forth in the Fund's
prospectus, and (iv) converted to Class A Shares eight
years from the end of the calendar month in which the
shareholder's order to purchase was accepted, as set forth
in the Fund's prospectus.
(c) Class C Shares. Class C Shares shall be (i) offered at net
asset value, (ii) subject to a CDSC for the CDSC Period
set forth in Section 5(c), and (iii) subject to ongoing
Service Fees and Distribution Fees approved from time to
time by the Directors and set forth in the Fund's
prospectus.
(d) Institutional Shares. Institutional Shares shall be (i)
offered at net asset value, (ii) offered only to certain
categories of institutional customers as approved from
time to time by the Directors and as set forth in the
Fund's prospectus and (iii) may be subject to ongoing
Service Fees and/or Distribution Fees as approved from
time to time by the Directors and set forth in the Fund's
prospectus.
(e) AIM Cash Reserve Shares. AIM Cash Reserve Shares shall be
(i) offered at net asset value and (ii) subject to ongoing
Service Fees and/or Distribution Fees approved from time
to time by the Directors and set forth in the Fund's
prospectus. AIM Cash Reserve Shares acquired through
exchange of Class A Shares of another Portfolio may be
subject to a CDSC for the CDSC Period set forth in Section
5(a) of this Plan if so provided in the Fund's prospectus.
5. CDSC. A CDSC shall be imposed upon redemptions of Class A Shares
that do not incur a front-end sales charge and of Class B Shares and
Class C Shares as follows:
(a) Class A Shares. The CDSC Period for Class A Shares shall
be 18 months. The CDSC Rate shall be as set forth in the
Fund's prospectus, the relevant portions of which are
incorporated herein by this reference. No CDSC shall be
imposed on Class A Shares unless so provided in a Fund's
prospectus.
3
<PAGE> 4
(b) Class B Shares. The CDSC Period for the Class B Shares
shall be six years. The CDSC Rate for the Class B Shares
shall be as set forth in the Fund's prospectus, the
relevant portions of which are incorporated herein by this
reference.
(c) Class C Shares. The CDSC Period for the Class C Shares
shall be one year. The CDSC Rate for the Class C Shares
shall be as set forth in the Fund's prospectus, the
relevant portions of which are incorporated herein by
reference.
(d) Method of Calculation. The CDSC shall be assessed on an
amount equal to the lesser of the then current market
value or the cost of the Shares being redeemed. No sales
charge shall be imposed on increases in the net asset
value of the Shares being redeemed above the initial
purchase price. No CDSC shall be assessed on Shares
derived from reinvestment of dividends or capital gains
distributions. The order in which Shares are to be
redeemed when not all of such Shares would be subject to a
CDSC shall be determined by the Distributor in accordance
with the provisions of Rule 6c-10 under the Act.
(e) Waiver. The Distributor may in its discretion waive a CDSC
otherwise due upon the redemption of Shares on terms
disclosed in the Fund's prospectus or statement of
additional information and, for the Class A Shares and AIM
Cash Reserve Shares, as allowed under Rule 6c-10 under the
Act.
6. Exchange Privileges. Exchanges of Shares shall be permitted between
Funds as follows:
(a) Class A Shares may be exchanged for Class A Shares of
another Portfolio or AIM Cash Reserve Shares, subject to
certain limitations set forth in the Fund's prospectus as
it may be amended from time to time, relevant portions of
which are incorporated herein by this reference.
(b) Class B Shares may be exchanged for Class B Shares of another
Portfolio at their relative net asset value.
(c) Class C Shares may be exchanged for Class C Shares of any other
Portfolio at their relative net asset value.
(d) AIM Cash Reserve Shares may be exchanged for Class A
Shares, Class B Shares or Class C Shares of another
Portfolio, subject to certain limitations set forth in the
Fund's prospectus as it may be amended from time to time,
relevant portions of which are incorporated herein by this
reference.
(e) Depending upon the Portfolio from which and into which an
exchange is being made and when the shares were purchased,
shares being acquired in an exchange may be acquired at
their offering price, at their net asset value or by
paying the difference in sales charges, as disclosed in
the Fund's prospectus and statement of additional
information.
4
<PAGE> 5
(f) CDSC Computation. The CDSC payable upon redemption of
Class A Shares, Class B Shares, Class C Shares and AIM
Cash Reserve Shares subject to a CDSC shall be computed in
the manner described in the Fund's prospectus.
7. Service and Distribution Fees. The Service Fee and Distribution Fee
applicable to any Class shall be those set forth in the Fund's
prospectus, relevant portions of which are incorporated herein by
this reference. All other terms and conditions with respect to
Service Fees and Distribution Fees shall be governed by the Plan of
Distribution adopted by the Fund with respect to such fees and Rule
12b-1 of the Act.
8. Conversion of Class B Shares.
(a) Shares Received upon Reinvestment of Dividends and
Distributions - Shares purchased through the reinvestment
of dividends and distributions paid on Shares subject to
conversion shall be treated as if held in a separate
sub-account. Each time any Shares in a Shareholder's
account (other than Shares held in the sub-account)
convert to Class A Shares, a proportionate number of
Shares held in the sub-account shall also convert to Class
A Shares.
(b) Conversions on Basis of Relative Net Asset Value - All
conversions shall be effected on the basis of the relative
net asset values of the two Classes without the imposition
of any sales load or other charge.
(c) Amendments to Plan of Distribution for Class A Shares - If any
amendment is proposed to the Plan of Distribution under
which Service Fees and Distribution Fees are paid with
respect to Class A Shares of a Fund that would increase
materially the amount to be borne by those Class A Shares,
then no Class B Shares shall convert into Class A Shares of
that Fund until the holders of Class B Shares of that Fund
have also approved the proposed amendment. If the holders of
such Class B Shares do not approve the proposed amendment,
the Directors of the Fund and the Distributor shall take
such action as is necessary to ensure that the Class voting
against the amendment shall convert into another Class
identical in all material respects to Class A Shares of the
Fund as constituted prior to the amendment.
9. Effective Date. This Plan shall not take effect until a majority of
the Directors of a Fund, including a majority of the Directors who
are not interested persons of the Fund, shall find that the Plan, as
proposed and including the expense allocations, is in the best
interests of each Class individually and the Fund as a whole.
10. Amendments. This Plan may not be amended to materially change the
provisions of this Plan unless such amendment is approved in the
manner specified in Section 9 above.
5
<PAGE> 1
EXHIBIT o(1)
THE AIM MANAGEMENT GROUP
CODE OF ETHICS
(ADOPTED MAY 1, 1981)
(AS LAST AMENDED AUGUST 17, 1999)
WHEREAS, the members of the AIM Management Group are A I M Management
Group Inc. ("AIM Management") and A I M Advisors, Inc. ("AIM Advisors") and
its wholly owned and indirect subsidiaries (individually and collectively
referred to as "AIM"); and
WHEREAS, certain members of AIM provide investment advisory services to
AIM's investment companies and other clients; and
WHEREAS, certain members of AIM provide distribution services as
principal underwriters for AIM's investment company clients; and
WHEREAS, certain members of AIM provide shareholder services as the
transfer agent, dividend disbursing agent and shareholder processing agent for
AIM's investment company clients; and
WHEREAS, the investment advisory business involves decisions and
information which may have at least a temporary impact on the market price of
securities, thus creating a potential for conflicts of interest between the
persons engaged in such business and their clients; and
WHEREAS, the members of AIM have a fiduciary relationship with respect
to each portfolio under management and the interests of the client accounts and
of the shareholders of AIM's investment company clients must take precedence
over the personal interests of the employees of AIM, thus requiring a rigid
adherence to the highest standards of conduct by such employees; and
WHEREAS, every practical step must be taken to ensure that no
intentional or inadvertent action is taken by an employee of AIM which is, or
appears to be, adverse to the interests of AIM or any of its client accounts,
including the defining of standards of behavior for such employees, while at
the same time avoiding unnecessary interference with the privacy or personal
freedom of such employees; and
WHEREAS, the members of AIM originally adopted a Code of Ethics ("the
Code") on May 1, 1981, and adopted amendments thereto in January 1989, October
1989, April 1991, December 6, 1994 and December 5, 1995, December 10, 1996, and
now deem it advisable to update and revise said Code in light of new investment
company products developed by AIM and changing circumstances in the securities
markets in which AIM conducts business; and
NOW, THEREFORE, the Boards of Directors of AIM Management and AIM
Advisors hereby adopt the following revised Code pursuant to the provisions of
Rule 17j-1 under the Investment Company Act of 1940 ("1940 Act"), with the
intention that certain provisions of the Code shall become applicable to the
officers, directors and employees of AIM.
I. Applicability
A. The provisions of AIM's Code shall apply to certain officers,
directors and employees (as hereinafter designated) of AIM. Unless
otherwise indicated, the term "employee" as used herein means: (i)
all officers, directors and employees of AIM Advisors and its
wholly owned and indirect subsidiaries and (ii) officers,
directors and employees of AIM Management who
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have an active part in the management, portfolio selection,
underwriting or shareholder functions with respect to
AIM's investment company clients or provide one or more similar
services for AIM's non-investment company clients. The term
"employee" does not include directors of AIM Management who do not
maintain an office at the home office of AIM Management and who do
not regularly obtain information concerning the investment
recommendations or decisions made by AIM on behalf of client
accounts ("independent directors").
B. The Code shall also apply to any person or entity appointed as a
sub-advisor for an AIM investment company client account unless
such person or entity has adopted a code of ethics in compliance
with Section 17(j) of the 1940 Act; or, in the event that such
person or entity is domiciled outside of the United States, has
adopted employee standards of conduct that provide equivalent
protections to AIM's client accounts. In performing sub-advisory
services, such person or entity will be subject to the direction
and supervision of AIM, and subject to the policies and control of
the Boards of Directors/Trustees of the respective AIM investment
company client(s).
II. Interpretation and Enforcement
A. The Chief Executive Officer of AIM Management shall appoint a
Code of Ethics Committee ("Committee"). The Committee shall have
the responsibility for interpreting the provisions of the Code, for
adopting and implementing Procedures for the enforcement of the
provisions of the Code, and for determining whether a violation of
the provisions of the Code, or of any such related Procedures has
occurred. The Committee will appoint an officer to monitor
personal investment activity by "Covered Persons" (as defined in
the Procedures adopted hereunder), both before and after any trade
occurs and to prepare periodic and annual reports, conduct
education seminars and obtain employee certifications as deemed
appropriate. In the event of a finding that a violation has
occurred requiring significant remedial action, the Committee
shall take such action as it deems appropriate on the imposition
of sanctions or initiation of disgorgement proceedings. The
Committee shall also make recommendations and submit reports to
the Boards of Directors/Trustees of AIM's investment company
clients.
B. If a sub-advisor has adopted a code of ethics in accordance with
Section 17(j) of the 1940 Act, then pursuant to a sub-advisory
agreement with AIM, it shall be the duty of such sub-advisor to
furnish AIM with a copy of the following:
o code of ethics and related procedures of the sub-advisor,
and a statement as to its employees' compliance therewith;
o any statement or policy on insider trading adopted pursuant
to Section 204A under the 1940 Act; and the procedures
designed to prevent the misuse of material non-public
information by any person associated with such sub-advisor;
and
o such other information as may reasonably be necessary for
AIM to report to the Boards of Directors/Trustees of its
investment company client account(s) as to such
sub-advisor's adherence to the Boards' policies and controls
referenced in Section I.B. above.
III. Procedures Adopted Under the Code
From time to time, AIM's Committee shall adopt Procedures to carry out
the intent of the Code. Among other things, the Procedures require
certain new employees to complete an Asset Disclosure Form, a Brokerage
Accounts Listing Form and such other forms as deemed appropriate by the
Committee. Such Procedures are hereby incorporated into the Code and are
made a part of the Code. Therefore, a violation of the Procedures shall
be deemed a violation of the Code itself.
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<PAGE> 3
IV. Compliance with Governing Laws, Regulations and Procedures
A. Each employee shall have and maintain knowledge of and shall
comply strictly with all applicable federal and state laws and all
rules and regulations of any governmental agency or
self-regulatory organization governing his/her actions as an
employee.
B. Each employee shall comply with all laws and regulations, and
AIM's prohibition against insider trading. Trading on or
communicating material non-public information, or "inside
information", of any sort, whether obtained in the course of
research activities, through a client relationship or otherwise,
is strictly prohibited.
C. Each employee shall comply with the procedures and guidelines
established by AIM to ensure compliance with applicable federal
and state laws and regulations of governmental agencies and
self-regulatory organizations. No employee shall knowingly
participate in, assist, or condone any act in violation of any
statute or regulation governing AIM or any act that would violate
any provision of this Code, or of the Procedures adopted
hereunder.
D. Each employee shall have and maintain knowledge of and shall
comply with the provisions of this Code and any Procedures adopted
hereunder.
E. Each employee having supervisory responsibility shall exercise
reasonable supervision over employees subject to his/her control,
with a view to preventing any violation by such persons of
applicable statutes or regulations, AIM's corporate procedures, or
the provisions of the Code, or the Procedures adopted hereunder.
F. Any employee obtaining evidence that an act in violation of
applicable statutes, regulations or provisions of the Code or of
any Procedures adopted hereunder has occurred shall immediately
report such evidence to the Chief Compliance Officer of AIM. Such
action by the employee will remain confidential, unless the
employee waives confidentiality or federal or state authorities
compel disclosure. Failure to report such evidence may result in
disciplinary proceedings and may include sanctions as set forth in
Section VI hereof.
V. Ethical Standards
A. Employees shall conduct themselves in a manner consistent with the
highest ethical and fiduciary standards. They shall avoid any
action, whether for personal profit or otherwise, that results in
an actual or potential conflict of interest with AIM or its client
accounts, or which may be otherwise detrimental to the interests
of the members of AIM or its client accounts.(1)
B. Employees shall act in a manner consistent with their fiduciary
obligation to clients of AIM, and shall not deprive any client
account of an investment opportunity in order to personally
benefit from that opportunity.
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(1) Conflicts of interest generally result from a situation in which an
individual has a personal interest in a matter that is or may be competitive
with his or her responsibilities to other persons or entities (such as AIM or
its client accounts) or where an individual has or may have competing
obligations or responsibilities to two or more persons or entities. In the case
of the relationship between a client account on the one hand, and AIM, its
officers, directors and employees, on the other hand, such conflict may result
from the purchase or sale of securities for a client account and for the
personal account of the individual involved or the account of any "affiliate"
of such individual, as such term is defined in the 1940 Act. Such conflict may
also arise from the purchase or sale for a client account of securities in
which an officer, director or employee of AIM has an economic interest.
Moreover, such conflict may arise in connection with vendor relationships in
which such employee has any direct or indirect financial interest, family
interests or other personal interest. To the extent of conflicts of interest
between AIM and a vendor, such conflicts must be resolved in a manner that is
not disadvantageous to AIM. In any such case, potential or actual conflicts
must be disclosed to AIM and the first preference and priority must be to avoid
such conflicts of interest wherever possible and, where they unavoidably occur,
to resolve them in a manner that is not disadvantageous to a client.
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<PAGE> 4
C. Without the knowledge and approval of the Chief Executive Officer
of AIM Management, employees shall not engage in a
business activity or practice for compensation in competition with
the members of AIM. Each employee, who is deemed to be a "Covered
Person" as defined in the Procedures adopted hereunder, shall
obtain the written approval of AIM Management's Chief Executive
Officer to participate on a board of directors/trustees of any of
the following organizations:
o publicly traded company, partnership or trust;
o hospital or philanthropic institution;*
o local or state municipal authority;* and/or
o charitable organization.*
* These restrictions relate to organizations that have or intend
to raise proceeds in a public securities offering.
In the relatively small number of instances in which board
approval is authorized, investment personnel serving as directors
shall be isolated from those making investment decisions through
AIM's "Chinese Wall" Procedures.
D. Each employee, in making an investment recommendation or taking
any investment action, shall exercise diligence and thoroughness,
and shall have a reasonable and adequate basis for any such
recommendation or action.
E. Each employee shall not attempt to improperly influence for such
person's personal benefit any investment strategy to be followed
or investment action to be taken by the members of AIM for its
client accounts.
F. Each employee shall not improperly use for such person's personal
benefit any knowledge, whether obtained through such person's
relationship with AIM or otherwise, of any investment
recommendation made or to be made, or of any investment action
taken or to be taken by AIM for its client accounts.
G. Employees shall not disclose any non-public information relating
to a client account's portfolio or transactions or to the
investment recommendations of AIM, nor shall any employee disclose
any non-public information relating to the business or operations
of the members of AIM, unless properly authorized to do so.
H. Employees shall not accept, directly or indirectly, from a
broker/dealer or other vendor who transacts business with AIM or
its client accounts, any gifts, gratuities or other things of more
than de minimis value or significance that their acceptance might
reasonably be expected to interfere with or influence the exercise
of independent and objective judgment in carrying out such
person's duties or otherwise gives the appearance of a possible
impropriety. For this purpose, gifts, gratuities and other things
of value shall not include unsolicited entertainment so long as
such unsolicited entertainment is not so frequent or extensive as
to raise any question of impropriety.
I. Employees who are registered representatives and/or principals of
AIM shall not acquire securities for an account for which he/she
has a direct or indirect beneficial interest in an initial public
offering ("IPO") or on behalf of any person, entity or
organization that is not an AIM client. All other employees shall
not acquire securities for an account for which he/she has a
direct or indirect beneficial interest offered in an IPO or on
behalf of any person, entity or organization that is not an AIM
client account except in those circumstances where different
amounts of such offerings are specified for different investor
types (e.g., private investors and institutional investors) and
such transaction has been pre-cleared by the Compliance Office.
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J. All personal securities transactions by employees must be
conducted consistent with this Code and the Procedures adopted
hereunder, and in such a manner as to avoid any actual or
potential conflicts of interest or any abuse of such employee's
position of trust and responsibility. Unless an exemption is
available, employees who are deemed to be "Covered Persons" as
defined in the Procedures adopted hereunder, shall pre-clear all
personal securities transactions in securities in accordance with
the Procedures adopted hereunder.
K. Each employee, who is deemed to be a "Covered Person" as defined
in the Procedures adopted hereunder, (or registered representative
and/or principal of AIM), shall refrain from engaging in personal
securities transactions in connection with a security that is not
registered under Section 12 of the Securities Act of 1933 (i.e., a
private placement security) unless such transaction has been
pre-approved by the Chief Compliance Officer or the Director of
Investments (or their designees).
L. Employees, who are deemed to be "Covered Persons" as defined in
the Procedures adopted hereunder, may not engage in a transaction
in connection with the purchase or sale of a security within seven
calendar days before and after an AIM investment company client
trades in that same (or equivalent) security unless the de minimis
exemption is available.
M. Each employee, who is deemed to be a "Covered Person" as defined
in the Procedures adopted hereunder, may not purchase and
voluntarily sell, or sell and voluntarily purchase the same (or
equivalent) securities of the same issuer within 60 calendar days
unless such employee complies with the disgorgement procedures
adopted by the Code of Ethics Committee. Subject to certain
limited exceptions set forth in the related Procedures, any
transaction under this provision may result in disgorgement
proceedings for any profits received in connection with such
transaction by such employee.
VI. Sanctions
Employees violating the provisions of AIM's Code or any Procedures
adopted hereunder may be subject to sanctions, which may include, among
other things, restrictions on such person's personal securities
transactions; a letter of admonition, education or formal censure;
fines, suspension, re-assignment, demotion or termination of employment;
or other significant remedial action. Employees may also be subject to
disgorgement proceedings for transactions in securities that are
inconsistent with Sections V.L. and V.M. above.
VII. Additional Disclosure
This Code and the related Procedures cannot, and do not, cover every
situation in which choices and decisions must be made, because other
company policies, practices and procedures (as well as good common
sense) and good business judgment also apply. Every person subject to
this Code should read and understand these documents thoroughly. They
present important rules of conduct and operating controls for all
employees. Employees are also expected to present questions to the
attention of their supervisors and to the Chief Compliance Officer (or
designee) and to report suspected violations as specified in these
documents.
For the Boards of Directors:
The AIM Management Group
by: /s/CHARLES T. BAUER
-------------------------------------------------
Charles T. Bauer
AUGUST 17, 1999
-------------------------------------------------
Date
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EXHIBIT o(2)
CODE OF ETHICS
OF
AIM SPECIAL OPPORTUNITIES FUNDS
WHEREAS, AIM Special Opportunities Funds (the "Company") is a
registered investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, Rule 17j-1 under the 1940 Act requires the Company to adopt a
Code of Ethics ("the Code"); and
NOW, THEREFORE, the Company hereby adopts the following Code,
effective as of March 10, 1998.
I. DEFINITIONS
For the purpose of the Code the following terms shall have the meanings
set forth below:
A. "ACCESS PERSON" means any director, trustee, officer, or advisory
person of the Company; provided, however, that any person who is
an access person of any investment advisor of, or principal
underwriter for, any registered investment company and who is
required by Rule 17j-1 of the 1940 Act to report his or her
securities transactions to such investment advisor or principal
underwriter, shall not be deemed an access person of the Company.
B. "ADVISORY PERSON" means
1. any employee of the Company, its investment advisor or
administrator (or of any entity in a control relationship
with the Company, its investment advisor or administrator,
as defined in Section I.D. hereof), who, in connection with
his or her regular functions or duties, makes, participates
in, or obtains information (other than publicly available
information) regarding the purchase or sale of a security by
the Company, or whose functions relate to the making of any
recommendations with respect to such purchases or sales; and
2. any natural person directly or indirectly owning,
controlling, or holding with power to vote, 25% or more of
the outstanding voting securities of any of the Company, its
investment advisor or administrator, who obtains information
(other than publicly available information) concerning
recommendations made by the Company, its investment advisor
or administrator with regard to the purchase or sale of a
security.
C. "AFFILIATED PERSONS" or "AFFILIATES" means
1. any employee or access person of the Company, and any member
of the immediate family (defined as spouse, child, mother,
father, brother, sister, in-law or any other relative) of
any such person who lives in the same household as such
person or who is financially dependent upon such person;
2. any account for which any of the persons described in
Section I.C.1. hereof is a custodian, trustee or otherwise
acting in a fiduciary capacity, or with respect to which any
such person either has the authority to make investment
decisions or from time to time give investment advice; and
3. any partnership, corporation, joint venture, trust or other
entity in which any employee of the Company or access person
of the Company directly or indirectly, in the aggregate, has
a 10% or more beneficial interest or for which any such
person is a general partner or an executive officer.
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<PAGE> 2
D. "CONTROL" means the power to exercise a controlling influence over
the management or policies of a corporation. Any person who owns
beneficially, either directly or through one or more controlled
corporations, more than 25% of the voting securities of a
corporation shall be presumed to control such corporation.
E. "SECURITY" means any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or
participation in any profit-sharing agreement, collateral-trust
certificate, pre-organization certificate or subscription,
transferable share, investment contract, voting-trust
certificate, certificate of deposit for a security, fractional
undivided interest in oil, gas, or other mineral rights, or, in
general, any interest or instrument commonly known as a
"security", or any certificate of interest or participation in,
temporary or interim certificate for, receipt of, guarantee of,
or warrant or right to subscribe to or purchase, any of the
foregoing; provided, however, that "security" shall not mean
securities issued or guaranteed by the Government of the United
States, its agencies or instrumentalities, bankers' acceptances,
bank certificates of deposit, commercial paper and shares of
registered open-end investment companies.
F. "PURCHASE OR SALE OF A SECURITY" includes the writing of an option to
purchase or sell a security.
G. "SECURITY HELD OR TO BE ACQUIRED" by the Company means any security
that, within the most recent fifteen (15) days:
1. is or has been held by the Company, or
2. is being or has been considered by the Company for purchase by
the Company.
H. "BENEFICIAL OWNERSHIP OF A SECURITY" by any person includes
securities held by:
1. a spouse, minor children or relatives who share the same
home with such person;
2. an estate for such person's benefit;
3. a trust, of which
a. such person is a trustee or such person or members of
such person's immediate family have a vested interest
in the income or corpus of the trust, or
b. such person owns a vested beneficial interest, or
c. such person is the settlor and such person has the
power to revoke the trust without the consent of all
the beneficiaries;
4. a partnership in which such person is a partner;
5. a corporation (other than with respect to treasury shares of
the corporation) of which such person is an officer,
director or 10% stockholder;
6. any other person if, by reason of contract, understanding,
relationship, agreement or other arrangement, such person
obtains therefrom benefits substantially equivalent to those
of ownership; or
7. such person's spouse or minor children or any other person,
if, even though such person does not obtain therefrom the
above-mentioned benefits of ownership, such person can vest
or re-vest title in himself at once or at some future time.
A beneficial owner of a security also includes any person who,
directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares voting
power and/or investment power with respect to such security.
Voting power includes the power to vote, or to direct the voting
of such security, and investment power includes the power to
dispose, or to direct the disposition of such security. A person
is the beneficial owner of a
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<PAGE> 3
security if he has the right to acquire beneficial ownership of
such security at any time within sixty (60) days.
II. IDENTIFICATION OF ACCESS PERSONS
A. The Company will maintain a list of all access persons and will
notify each access person in writing that such person is an access
person. Once a person has been so identified, he/she shall
continue to be an access person until otherwise notified in
writing by the Company; PROVIDED, HOWEVER, if such person is an
access person solely because he/she is a director/trustee of the
Company, such person shall cease to be an access person at the
time such person ceases to be a director/trustee.
B. Each access person will be given a copy of the Code at the time
such person becomes an access person.
III. COMPLIANCE WITH GOVERNING LAWS, REGULATIONS AND PROCEDURES
A. Each access person shall comply strictly with all applicable
federal and state laws and all rules and regulations of any
governmental agency or self-regulatory organization governing his
or her activities.
B. Each access person shall comply strictly with procedures
established by the Company to ensure compliance with applicable
federal and state laws and regulations of governmental agencies
and self-regulatory organizations.
C. Access persons shall not knowingly participate in, assist, or
condone any acts in violation of any statute or regulation
governing securities matters, nor any act that would violate any
provision of this Code or any rules adopted thereunder.
IV. CONFIDENTIALITY OF TRANSACTIONS
A. Information relating to the Company's portfolio and research and
studies activities is confidential until publicly available.
Whenever statistical information or research is supplied to or
requested by the Company, such information must not be disclosed
to any persons other than as duly authorized by the President or
the Board of Directors/Trustees of the Company. If the Company is
considering a particular purchase or sale of a security, this must
not be disclosed except to such duly authorized persons.
B. If any access person should obtain information concerning the
Company's portfolio (including the consideration by the Company of
acquiring or recommending any security for the Company's
portfolio), whether in the course of such person's duties or
otherwise, such person shall respect the confidential nature of
this information and shall not divulge it to anyone unless it is
properly part of such person's services to the Company to do so or
such person is specifically authorized to do so by the President
of the Company.
V. ETHICAL STANDARDS
A. Access persons shall conduct themselves in a manner consistent
with the highest ethical standards. They shall avoid any action,
whether for personal profit or otherwise, that results in an
actual or potential conflict of interest, or the appearance of a
conflict of interest, with the Company or which may be otherwise
detrimental to the interests of the Company.
B. Conflicts of interest generally result from a situation in which
an individual has personal interests in a matter that is or may be
competitive with his responsibilities to another person or entity
(such as the Company) or where an individual has or may have
competing obligations or responsibilities to two or more persons
or entities. In the case of the relationship between the
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<PAGE> 4
Company on the one hand, and its employees and access persons and
their respective affiliates on the other hand, such conflicts may
result from the purchase or sale of securities for the account of
the Company and for the personal account of the individual
involved or the account of any affiliate of such person. Such
conflict may also arise from the purchase or sale for the account
of the Company of securities in which an access person or
employee of the Company (or an affiliate of such person) has an
interest. In any such case, potential or actual conflicts must be
disclosed to the Company, and the first preference and priority
must be to avoid such conflicts of interest wherever possible and,
where they unavoidably occur, to resolve them in a manner not
disadvantageous to the Company.
VI. ACTIVITIES AND TRANSACTIONS OF ACCESS PERSONS
A. No access person shall recommend to, or cause or attempt to cause,
the Company to acquire, dispose of, or hold any security
(including, any option, warrant or other right or interest
relating to such security) which such access person or an
affiliate of such access person has direct or indirect beneficial
ownership, unless the access person shall first disclose to the
Board of Directors/Trustees all facts reasonably necessary to
identify the nature of the ownership of such access person or his
or her affiliate in such security.
B. No access person or affiliate of such access person shall engage
in a purchase or sale of a security (including, any option,
warrant or other right or interest relating to such security),
other than on behalf of the Company, with respect to any security,
which, to the actual knowledge of such access person at the time
of such purchase or sale, is (i) being considered for purchase or
sale by the Company; or (ii) being purchased or sold by the
Company.
C. The prohibitions of Section VI.B. above shall not apply to:
1. Purchases or sales effected in any account over which the
access person has no direct or indirect influence or
control.
2. Purchases or sales which are non-volitional on the part of
either the access person or the Company.
3. Purchases that are part of an automatic dividend
reinvestment plan.
4. Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities,
to the extent such rights were acquired from such issuer,
and sales of such rights so acquired.
5. Purchases or sales which receive the prior approval of the
President of the Company because they are only remotely
potentially harmful to the Company because they would be
very unlikely to affect trading in or the market value of
the security, or because they clearly are not related
economically to the securities to be purchased, sold or held
by the Company.
D. If, in compliance with the limitations and procedures set forth in
this Section VI, any access person or an affiliate of such person
shall engage in a purchase or sale of a security held or to be
acquired by the Company, first preference and priority must be
given to any transactions that involve the Company, and the
Company must have the benefit of the best price obtainable on
acquisition and the best price obtainable on disposition of such
securities.
E. If, as a result of fiduciary obligations to other persons or
entities, an access person believes that such person or an
affiliate of such person is unable to comply with certain
provisions of the Code, such access person shall so advise
the Board of Directors/Trustees in writing, setting forth with
reasonable specificity the nature of such fiduciary obligations
and the reasons why such access person believes such person is
unable to comply with any such provisions. The
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Board of Directors/Trustees may, in its discretion, exempt such
access person or an affiliate of such person from any
such provisions, if the Board of Directors/Trustees shall
determine that the services of such access person are valuable to
the Company and the failure to grant such exemption is likely to
cause such access person to be unable to render services to the
Company. Any access person granted an exemption (including, an
exception for an affiliate of such person) pursuant to this
Section VI.E. shall, within three business days after engaging in
a purchase or sale of a security held or to be acquired by a
client, furnish the Board of Directors/Trustees with a written
report concerning such transaction, setting forth the information
specified in Section VII.B. hereof.
VII. REPORTING PROCEDURES
A. Except as provided by Sections VII.C. and VII.D. hereof, every
access person shall report to the Board of Directors/Trustees the
information described in Section VII.B. hereof with respect to
transactions in any security in which such access person has, or
by reason of such transaction acquires, any direct or indirect
beneficial ownership in the security (whether or not such security
is a security held or to be acquired by a client); provided,
however, that any such report may contain a statement that the
report shall not be construed as an admission by the person making
such report that he has any direct or indirect beneficial
ownership in the security to which the report relates.
B. Every report required to be made pursuant to Section VII.A. hereof
shall be made not later than ten days after the end of the
calendar quarter in which the transaction to which the report
relates was effected and shall contain the following information:
1. The date of the transaction, the title and the number of
shares, and the principal amount of each security involved;
2. The nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
3. The price at which the transaction was effected; and
4. The name of the broker, dealer or bank with or through whom
the transaction was effected.
C. Notwithstanding the provisions of Section VII.A. and VII.B.
hereof, no person shall be required to make a report with respect
to transactions effected for any account over which such person
does not have any direct or indirect influence or control.
D. Notwithstanding the provisions of Section VII.A. and VII.B.
hereof, an access person who is not an "interested person" of the
Company within the meaning of Section 2(a)(19) of the 1940 Act,
and who would be required to make a report solely by reason of
being a director/trustee of the Company, need only report a
transaction in a security if such director/trustee, at the time of
the transaction, knew or, in the ordinary course of fulfilling his
official duties as a director/trustee of the Company, should have
known, that, during the 15-day period immediately preceding or
after the date of the transaction by the director/trustee, such
security is or was purchased or sold, or considered by the Company
or its investment advisor for purchase or sale by the Company.
E. Every access person who beneficially owns, directly or indirectly,
1/2% or more of the stock of any company the securities of which
are eligible for purchase by the Company shall report such
holdings to the Company.
VIII. REVIEW PROCEDURES
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A. The reports submitted by access persons pursuant to Section VII.B.
hereof shall be reviewed at least quarterly by the Board of
Directors/Trustees or such other persons or committees as shall be
designated by the Board of Directors/Trustees, in order to monitor
compliance with this Code.
B. If it is determined by the Board of Directors/Trustees that a
violation of this Code has occurred and that the person violating
this Code has purchased or sold a security at a more advantageous
price than that obtained by the Company, such person shall be
required to offer to sell to or purchase from the Company, as the
case may be, such security at the more advantageous price. If
this cannot be consummated, then the Board of Directors/Trustees
shall take such other course of action as it may deem appropriate.
With respect to any violation of this Code, the Board of
Directors/Trustees may take any preventive, remedial or other
action that it may deem appropriate. In determining whether or
not there has been, or may be, a conflict of interest between the
Company and any person subject to this Code, the Board of
Directors/Trustees shall consider all of the relevant facts and
circumstances.
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