<PAGE> 1
As filed with the Securities and Exchange Commission on November 17, 2000
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
-----
Pre-Effective Amendment No.
------- -----
Post-Effective Amendment No. 6 X
------ -----
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
-----
Amendment No. 7 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
--------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (713) 626-1919
------------------
Robert H. Graham
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
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this
Registration Statement
It is proposed that this filing will become effective (check appropriate box)
___ immediately upon filing pursuant to paragraph (b)
_X_ on November 28, 2000, pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ on (date), pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on (date), pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
___ this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest.
<PAGE> 2
AIM LARGE CAP
OPPORTUNITIES FUND
--------------------------------------------------------------------------
AIM Large Cap Opportunities Fund seeks long-term growth of capital.
PROSPECTUS
AIM--Registered Trademark--
NOVEMBER 28, 2000
This prospectus contains important
information about the Class A, B and C
shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
The fund has been closed to new
investors since September 29, 2000.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark-- --Registered Trademark--
<PAGE> 3
--------------------------------
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
Fund Closure 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-7
Taxes A-7
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 Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM Internet
Connect are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 4
--------------------------------
AIM 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:
- a technological advance or discovery, the offering of a new or unique
product or service, or changes in consumer demand or consumption forecasts;
- 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;
- new or changed management, or material changes in management policies or
corporate structure;
- significant economic or political occurrences, including changes in foreign
or domestic import and tax laws or other regulations; or
- 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 S&P 500--Registered Trademark--
Index. The S&P 500--Registered Trademark-- Index measures the performance of the
stocks of the largest 500 U.S. companies. 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. One method of covering a call option is for the
fund to own the shares it would have to deliver if the holder of the call option
exercised the option. The fund may invest in options for hedging purposes, i.e.,
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. This means that with respect to 50% of its
assets, it is permitted to invest more than 5% of its assets in the securities
of any one issuer.
In anticipation of or in response to adverse market conditions, for cash
management purposes or for defensive purposes, the fund may temporarily hold all
or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, the
fund may not achieve its investment objective.
The fund may engage in active or frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment. Active trading may also increase
short-term capital gains and losses, which may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
--------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. 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
1
<PAGE> 5
--------------------------------
AIM LARGE CAP OPPORTUNITIES FUND
--------------------------------
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 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.
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> 6
--------------------------------
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(2) 1.50% 1.50% 1.50%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses 0.57 0.61 0.61
Dividend Expenses
Attributable to
Securities Sold
Short 0.05 0.05 0.05
Interest 0.02 0.02 0.02
Total Other Expenses 0.64 0.68 0.68
Total Annual Fund
Operating Expenses(3) 2.49 3.18 3.18
Fee Waiver(4) 0.10 -- --
Net Expenses 2.39 3.18 3.18
-------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) The fund's base management fee is 1.50%. Effective January 1, 2001, this fee
is subject to a maximum 1.00% performance adjustment upward or downward. As
a result, beginning January 1, 2001, the fund could pay a management fee
that ranges from 0.50% to 2.50% of average daily net assets based on its
performance.
(3) During the year the advisor voluntarily waived advisory fees. Total annual
fund operating expenses net of this waiver were 2.41%, 3.10%, and 3.10% for
Class A, Class B and Class C respectively.
(4) The distributor has contractually agreed to limit Class A shares' Rule 12b-1
distribution plan payments to 0.25%. Waiver has been restated to reflect
this agreement.
You may also be charged a transaction or other fee by the financial institution
managing your account.
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 fund expenses are
waived 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 $788 $1,283 $1,803 $3,221
Class B 821 1,280 1,864 3,327
Class C 421 980 1,664 3,485
----------------------------------------------
</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 $788 $1,283 $1,803 $3,221
Class B 321 980 1,664 3,327
Class C 321 980 1,664 3,485
----------------------------------------------
</TABLE>
3
<PAGE> 7
--------------------------------
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 120
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
The advisor receives a management fee from the fund that is comprised of two
components. The first component is an annual base fee equal to 1.50% of the
fund's average daily net assets. The second component is a performance
adjustment that either increases or decreases the base fee, depending on how the
fund has performed relative to the S&P 500--Registered Trademark-- Index.
Performance adjustments will begin on January 1, 2001.
As a result, beginning January 1, 2001, the maximum performance adjustment
upward or downward is 1.00% annually. Depending on the performance of the fund,
during any fiscal year the advisor may receive as much as 2.50% or as little as
0.50% in management fees.
During the fiscal period ended July 31, 2000 the advisor received compensation
of 1.50% 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 are
- Steven A. Brase, Portfolio Manager, who has been responsible for the fund
since 2000 and has been associated with the advisor and/or its affiliates
since 1998. From 1995 to 1998, he was Associate Portfolio Manager and Partner
for Bricoleur Capital Management, Inc.
- Brant H. DeMuth, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1996. From 1992 to 1996, he was Portfolio Manager for Colorado Public
Employee's Retirement Association.
- Robert C. Leslie, Portfolio Manager, who has been responsible for the fund
since 2000 and has been associated with the advisor and/or its affiliates
since 1998. From 1995 to 1996, he ran his own investment firm, Gamma
Investment Management, until it merged with Darien Capital Management where he
served as Portfolio Manager and Partner until 1998.
- 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
The fund expects that its distributions, if any, will consist primarily of
capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
FUND CLOSURE
Due to the sometimes limited size of the market for large-capitalized common
stocks available for hedging purposes and that meet the investment criteria for
the fund, the fund discontinued public sales of its shares to new investors on
September 29, 2000. Existing shareholders of the fund who maintain open accounts
will be permitted to continue to make additional investments in the fund.
During this closed period, the fund may impose different standards for
additional investments. Also, during this closed period the fund will continue
to pay Rule 12b-1 fees, however, the Rule 12b-1 fees for Class A shares will be
reduced from 0.35% to 0.25% of the fund's average daily net assets attributable
to Class A shares. The Rule 12b-1 fees for Class B and Class C shares will not
be reduced during this closed period.
The fund may resume sales of shares to new investors at some future date if
the Board of Trustees determines that it would be in the best interest of
shareholders.
4
<PAGE> 8
--------------------------------
AIM LARGE 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 has been affected by special market
factors, including the fund's investments in initial public offerings (IPOs),
which had a magnified impact on the fund due to its small asset base. There is
no guarantee that, as the fund's assets grow, it will continue to experience
substantially similar performance.
<TABLE>
<CAPTION>
CLASS A
-----------------
DECEMBER 30,
1999
THROUGH
JULY 31, 2000
-----------------
<S> <C>
Net asset value, beginning of year $ 10.00
------------------------------------------------------------ --------
Income from investment operations:
Net investment income (loss) (0.01)
------------------------------------------------------------ --------
Net gains on securities (both realized and unrealized) 3.13
============================================================ ========
Total from investment operations 3.12
============================================================ ========
Net asset value, end of year $ 13.12
============================================================ ========
------------------------------------------------------------ --------
Total return(a) 31.20%
============================================================ ========
------------------------------------------------------------ --------
Ratios/supplemental data:
Net assets, end of year (000s omitted) $138,205
============================================================ ========
------------------------------------------------------------ --------
Ratio of expenses to average net assets (including interest
expense and dividends on short sales expense):
With fee waivers 2.41%(b)
------------------------------------------------------------ --------
Without fee waivers 2.49%(b)
============================================================ ========
------------------------------------------------------------ --------
Ratio of expenses to average net assets (excluding interest
expense and dividends on short sales expense):
With fee waivers 2.34%(b)
------------------------------------------------------------ --------
Without fee waivers 2.42%(b)
============================================================ ========
------------------------------------------------------------ --------
Ratio of net investment income (loss) to average net assets (0.20)%(b)
============================================================ ========
------------------------------------------------------------ --------
Ratio of interest expense and dividends on short sales
expense to average net assets 0.07%(b)
============================================================ ========
------------------------------------------------------------ --------
Portfolio turnover rate 125%
============================================================ ========
------------------------------------------------------------ --------
</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 $47,989,902.
5
<PAGE> 9
--------------------------------
AIM LARGE CAP OPPORTUNITIES FUND
--------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B CLASS C
-------------- --------------
MARCH 31, 2000 MARCH 31, 2000
THROUGH THROUGH
JULY 31, 2000 JULY 31, 2000
-------------- --------------
<S> <C> <C>
Net asset value, beginning of year $ 12.81 $ 12.81
------------------------------------------------------------ -------- --------
Income from investment operations:
Net investment income (loss) (0.02) (0.02)
------------------------------------------------------------ -------- --------
Net gains on securities (both realized and unrealized) 0.31 0.30
============================================================ ======== ========
Total from investment operations 0.29 0.28
============================================================ ======== ========
Net asset value, end of year $ 13.10 $ 13.09
============================================================ ======== ========
------------------------------------------------------------ -------- --------
Total return(a) 2.26% 2.19%
============================================================ ======== ========
------------------------------------------------------------ -------- --------
Ratios/supplemental data:
Net assets, end of year (000s omitted) $102,795 $ 34,972
============================================================ ======== ========
------------------------------------------------------------ -------- --------
Ratio of expenses to average net assets (including interest
expense and dividends on short sales expense) 3.10%(b) 3.10%(b)
============================================================ ======== ========
------------------------------------------------------------ -------- --------
Ratio of expenses to average net assets (excluding interest
expense and dividends on short sales expense) 3.03%(b) 3.03%(b)
============================================================ ======== ========
------------------------------------------------------------ -------- --------
Ratio of net investment income (loss) to average net assets (0.89)%(b) (0.89)%(b)
============================================================ ======== ========
------------------------------------------------------------ -------- --------
Ratio of interest expense and dividends on short sales
expense to average net assets 0.07%(b) 0.07%(b)
============================================================ ======== ========
------------------------------------------------------------ -------- --------
Portfolio turnover rate 125% 125%
============================================================ ======== ========
------------------------------------------------------------ -------- --------
</TABLE>
(a) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(b) Ratios are annualized and based on average net assets of $48,326,013 and
$16,408,451 for Class B and Class C, respectively.
6
<PAGE> 10
-------------------------------
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 at - Does not convert to Class A
the end of the month which is shares
eight years after the date on
which shares were purchased
along with a 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--11/00
<PAGE> 11
-------------------------------
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--11/00 A-2
<PAGE> 12
-------------------------------
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 Connection
methods described above. form to the transfer agent. Once the
transfer agent has received the form,
call the transfer agent to place your
purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization Form.
Mail the application or form to the
transfer agent. Once your request for
this option has been processed (which
may take up to 10 days), you may
place your purchase order at
www.aimfunds.com. The maximum
purchase amount per transaction is
$100,000. You may not purchase shares
in AIM prototype retirement accounts
on the internet.
-----------------------------------------------------------------------------------------------------------
</TABLE>
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.
A-3 SOF--11/00
<PAGE> 13
-------------------------------
AIM SPECIAL OPPORTUNITIES FUNDS
-------------------------------
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM Funds-sponsored retirement plans,
which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans,
SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or
another sponsor's retirement plan. The plan custodian of the AIM Funds-sponsored
retirement plan assesses an annual maintenance fee of $10. Contact your
financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares; however, your
broker or financial consultant may charge service fees for handling redemption
transactions. Your shares also may be subject to a contingent deferred sales
charge (CDSC).
REDEMPTION OF 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.
SOF--11/00 A-4
<PAGE> 14
-------------------------------
AIM SPECIAL OPPORTUNITIES FUNDS
-------------------------------
HOW TO REDEEM SHARES
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet. The
transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
--------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
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.
A-5 SOF--11/00
<PAGE> 15
-------------------------------
AIM SPECIAL OPPORTUNITIES FUNDS
-------------------------------
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 not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You may
be required to pay an initial sales charge when exchanging from a Fund with a
lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares 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 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.
SOF--11/00 A-6
<PAGE> 16
-------------------------------
AIM SPECIAL OPPORTUNITIES FUNDS
-------------------------------
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
--------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
--------------------------------------------------------------------------------
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
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' 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 on each day the
NYSE is open for business, as of the close of the customary trading session, or
any earlier NYSE closing time that day.
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
generally taxable to you at different rates depending on the length of time the
fund holds its assets. Different tax rates may 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.
A-7 SOF--11/00
<PAGE> 17
--------------------------------
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] INVEST WITH DISCIPLINE
--Registered Trademark-- www.aimfunds.com LCO-PRO-1 --Registered Trademark--
<PAGE> 18
AIM MID CAP
OPPORTUNITIES FUND
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
AIM Mid Cap Opportunities Fund seeks long-term growth of capital.
AIM
--Registered Trademark--
PROSPECTUS
NOVEMBER 28, 2000
This prospectus contains important
information about the Class A, B and C
shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
The fund has been closed to new
investors since March 21, 2000.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered trademark-- --Registered trademark--
<PAGE> 19
------------------------------
AIM MID CAP OPPORTUNITIES FUND
------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Return 3
Performance Table 3
- - - - - - - - - - - - - - - - - - - - - - - -
FEE TABLE AND EXPENSE EXAMPLE 4
- - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 4
Expense Example 4
FUND MANAGEMENT 5
- - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 5
Advisor Compensation 5
Portfolio Managers 5
OTHER INFORMATION 5
- - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 5
Dividends and Distributions 5
Fund Closure 5
FINANCIAL HIGHLIGHTS 6
- - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-7
Taxes A-7
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 Funds, AIM Funds and Design, AIM Investors, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection, and AIM
Internet Connect are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 20
------------------------------
AIM MID 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:
- a technological advance or discovery, the offering of a new or unique
product or service, or changes in consumer demand or consumption forecasts;
- 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;
- new or changed management, or material changes in management policies or
corporate structure;
- significant economic or political occurrences, including changes in foreign
or domestic import and tax laws or other regulations; or
- 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 S&P MidCap 400 Index. The S&P
MidCap 400 Index is an unmanaged index of common stocks that measures the
performance of the mid-size company segment of the U.S. market. 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. One method of covering a call option is for the
fund to own the shares it would have to deliver if the holder of the call option
exercised the option. The fund may invest in options for hedging purposes, i.e.,
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. This means that with respect to 50% of its
assets, it is permitted to invest more than 5% of its assets in the securities
of any one issuer.
In anticipation of or in response to adverse market conditions, for cash
management purposes or for defensive purposes, the fund may temporarily hold all
or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, the
fund may not achieve its investment objective.
The fund may engage in active or frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment. Active trading may also increase
short-term capital gains and losses, which may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
--------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. 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 securi-
1
<PAGE> 21
------------------------------
AIM MID CAP OPPORTUNITIES FUND
------------------------------
ties, 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 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.
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> 22
------------------------------
AIM MID CAP OPPORTUNITIES FUND
------------------------------
PERFORMANCE INFORMATION
--------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance. Total return information in this table has
been affected by special market factors, including the fund's investments in
initial public offerings (IPOs), which had a magnified impact on the fund due to
its small asset base.
ANNUAL TOTAL RETURN
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows the performance of the fund's Class A shares. The
bar chart does not reflect sales loads. If it did, the annual total return shown
would be lower.
[GRAPH]
<TABLE>
<CAPTION>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURN
----------- ------
<S> <C>
1999.................................... 125.55%
</TABLE>
The Class A shares' year-to-date total return as of September 30, 2000 was
19.81%.
During the period shown in the bar chart, the highest quarterly return was
31.44% (quarter ended December 31, 1999) and the lowest quarterly return was
17.78% (quarter ended September 30, 1999).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR INCEPTION DATE
---------------------------------------------------------------------
<S> <C> <C> <C>
Class A 113.19% 112.75% 12/30/98
Class B -- 9.44 11/12/99
Class C -- 9.39 11/12/99
Standard & Poor's MidCap 400
Index(1) 14.72 14.72(2) 12/31/98(2)
---------------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's MidCap 400 Index is an unmanaged index of common
stocks that measures the performance of the mid-size company segment of the
U.S. market.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
3
<PAGE> 23
------------------------------
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 CLASS C
--------------------------------------------------------
<S> <C> <C> <C>
Management Fees(2) 1.50% 1.50% 1.50%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses 0.32 0.35 0.35
Dividend Expenses
Attributable to
Securities Sold
Short 0.08 0.08 0.08
Interest 0.17 0.17 0.17
Total Other Expenses 0.57 0.60 0.60
Total Annual Fund
Operating Expenses 2.42 3.10 3.10
Fee Waiver and
Expense
Reimbursement(3) 0.10 -- --
Net Expenses 2.32 3.10 3.10
--------------------------------------------------------
</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) Has been restated to reflect current agreement. The fund's base management
fee is 1.50%. Effective January 1, 2001, this fee is subject to a maximum
1.00% performance adjustment upward or downward. As a result, beginning
January 1, 2001, the fund could pay a management fee that ranges from 0.50%
to 2.50% of average daily net assets based on its performance.
(3)The distributor has contractually agreed to limit Class A shares' Rule 12b-1
distribution plan payments to 0.25%. Waiver has been restated to reflect this
agreement.
You may also be charged a transaction or other fee by the financial institution
managing your account.
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 $782 $1,263 $1,770 $3,155
Class B 813 1,257 1,825 3,254
Class C 413 957 1,625 3,411
----------------------------------------------
</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 $782 $1,263 $1,770 $3,155
Class B 313 957 1,625 3,254
Class C 313 957 1,625 3,411
----------------------------------------------
</TABLE>
4
<PAGE> 24
------------------------------
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 120
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
The advisor receives a management fee from the fund that is comprised of two
components. The first component is an annual base fee equal to 1.50% of the
fund's average daily net assets. The second component is a performance
adjustment that either increases or decreases the base fee, depending on how the
fund has performed relative to the S&P MidCap 400 Index. Performance adjustments
will begin on January 1, 2001.
As a result, beginning January 1, 2001, the maximum performance adjustment
upward or downward is 1.00% annually. Depending on the performance of the fund,
during any fiscal year the advisor may receive as much as 2.50% or as little as
0.50% in management fees.
During the fiscal year ended July 21, 2000 the advisor received compensation
of 1.48% 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 are
-Steven A. Brase, Portfolio Manager, who has been responsible for the fund since
2000 and has been associated with the advisor and/or its affiliates since 1998.
From 1995 to 1998, he was Associate Portfolio Manager and Partner for Bricoleur
Capital Management, Inc.
- Brant H. DeMuth, 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 1992 to 1996, he was Portfolio Manager for Colorado Public
Employee's Retirement Association.
-Robert C. Leslie, Portfolio Manager, who has been responsible for the fund
since 2000 and has been associated with the advisor and/or its affiliates since
1998. From 1995 to 1996, he ran his own investment firm, Gamma Investment
Management, until it merged with Darien Capital Management where he served as
Portfolio Manager and Partner until 1998.
- 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
The fund expects that its distributions, if any, will consist primarily of
capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
FUND CLOSURE
Due to the sometimes limited availability of medium-capitalized common stocks
available for hedging purposes and that meet the investment criteria for the
fund, the fund discontinued public sales of its shares to new investors on March
21, 2000, after assets reached $750 million. Existing shareholders of the fund
who maintain open accounts will be permitted to continue to make additional
investments in the fund.
During this closed period, the fund may impose different standards for
additional investments. Also, during this closed period the fund will continue
to pay Rule 12b-1 fees, however, the Rule 12b-1 fees for Class A shares will be
reduced from 0.35% to 0.25% of the fund's average daily net assets attributable
to Class A shares. The Rule 12b-1 fees for Class B and Class C shares will not
be reduced during this closed period.
The fund may resume sales of shares to new investors at some future date if
the Board of Trustees determines that it would be in the best interest of
shareholders.
5
<PAGE> 25
------------------------------
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 has been affected by special market
factors, including the fund's investments in initial public offerings (IPOs),
which had a magnified impact on the fund due to its small asset base. There is
no guarantee that, as the fund's assets grow, it will continue to experience
substantially similar performance. Prior to November 12, 1999, the fund had not
engaged in a broad continuous public offering and had not been subject to
significant redemptions.
<TABLE>
<CAPTION>
CLASS A
------------------------------------
DECEMBER 30,
YEAR ENDED 1998
JULY 31, THROUGH
2000(a) JULY 31, 1999
--------------- -----------------
<S> <C> <C>
Net asset value, beginning of period $ 15.78 $10.00
------------------------------------------------------------ -------- ------
Income from investment operations:
Net investment income (loss) (0.18) (0.04)
------------------------------------------------------------ -------- ------
Net gains on securities (both realized and unrealized) 9.92 5.82
============================================================ ======== ======
Total from investment operations 9.74 5.78
============================================================ ======== ======
Less distributions:
Dividends from net investment income (0.02) --
------------------------------------------------------------ -------- ------
Distributions from net realized gains (1.88) --
============================================================ ======== ======
Total distributions (1.90) --
============================================================ ======== ======
Net asset value, end of period $ 23.62 $15.78
============================================================ ======== ======
------------------------------------------------------------ -------- ------
Total return(b) 65.58% 57.80%
============================================================ ======== ======
------------------------------------------------------------ -------- ------
Ratios/supplemental data:
Net assets, end of year (000s omitted) $336,203 $4,790
============================================================ ======== ======
------------------------------------------------------------ -------- ------
Ratio of expenses to average net assets (including interest
expense and dividends on short sales expense):
With fee waivers 2.33%(c) 2.28%(d)
------------------------------------------------------------ -------- ------
Without fee waivers 2.40%(c) 7.55%(d)
============================================================ ======== ======
------------------------------------------------------------ -------- ------
Ratio of expenses to average net assets (excluding interest
expense and dividends on short sales expense):
With fee waivers 2.08%(c) 2.19%(d)
------------------------------------------------------------ -------- ------
Without fee waivers 2.15%(c) 7.46%(d)
============================================================ ======== ======
------------------------------------------------------------ -------- ------
Ratio of net investment income (loss) to average net assets (0.80)%(c) (0.79)%(d)
============================================================ ======== ======
------------------------------------------------------------ -------- ------
Ratio of interest expense and dividends on short sales
expense to average net assets 0.25%(c) 0.09%(d)
============================================================ ======== ======
------------------------------------------------------------ -------- ------
Portfolio turnover rate 196% 135%
============================================================ ======== ======
------------------------------------------------------------ -------- ------
</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 based on average net assets of $170,296,714.
(d) Annualized.
6
<PAGE> 26
------------------------------
AIM MID CAP OPPORTUNITIES FUND
------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------- -----------------
NOVEMBER 12, NOVEMBER 12,
1999 1999
THROUGH THROUGH
JULY 31, 2000(a) JULY 31, 2000(a)
----------------- -----------------
<S> <C> <C>
Net asset value, beginning of period $ 17.83 $ 17.83
------------------------------------------------------------ -------- --------
Income from investment operations:
Net investment income (loss) (0.28) (0.28)
------------------------------------------------------------ -------- --------
Net gains on securities (both realized and unrealized) 5.97 5.97
============================================================ ======== ========
Total from investment operations 5.69 5.69
============================================================ ======== ========
Less distributions:
Dividends from net investment income (0.01) (0.01)
============================================================ ======== ========
Total distributions (0.01) (0.01)
============================================================ ======== ========
Net asset value, end of period $ 23.51 $ 23.51
============================================================ ======= ========
------------------------------------------------------------ ------- --------
Total return(b) 31.95% 31.95%
============================================================ ======= ========
------------------------------------------------------------ ------- --------
Ratios/supplemental data:
Net assets, end of year (000s omitted) $255,439 $100,452
============================================================ ======= ========
------------------------------------------------------------ ------- --------
Ratio of expenses to average net assets (including interest
expense and dividends on short sales expense) 3.08%(c) 3.08%(c)
============================================================ ======= ========
------------------------------------------------------------ ------- --------
Ratio of expenses to average net assets (excluding interest
expense and dividends on short sales expense) 2.83%(c) 2.83%(c)
============================================================ ======= ========
------------------------------------------------------------ ------- --------
Ratio of net investment income (loss) to average net assets (1.55)%(c) (1.55)%(c)
============================================================ ======= ========
------------------------------------------------------------ ------- --------
Ratio of interest expense and dividends on short sales
expense to average net assets 0.25%(c) 0.25%(c)
============================================================ ======= ========
------------------------------------------------------------ ------- --------
Portfolio turnover rate 196% 196%
============================================================ ======= ========
------------------------------------------------------------ ------- --------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average net assets of $179,224,846 and
$67,613,477 for Class B and Class C, respectively.
7
<PAGE> 27
-------------------------------
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 at - Does not convert to Class A
the end of the month which is shares
eight years after the date on
which shares were purchased
along with a 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--11/00
<PAGE> 28
-------------------------------
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--11/00 A-2
<PAGE> 29
-------------------------------
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>
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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 Connection
methods described above. form to the transfer agent. Once the
transfer agent has received the form,
call the transfer agent to place your
purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization Form.
Mail the application or form to the
transfer agent. Once your request for
this option has been processed (which
may take up to 10 days), you may
place your purchase order at
www.aimfunds.com. The maximum
purchase amount per transaction is
$100,000. You may not purchase shares
in AIM prototype retirement accounts
on the internet.
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</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.
A-3 SOF--11/00
<PAGE> 30
-------------------------------
AIM SPECIAL OPPORTUNITIES FUNDS
-------------------------------
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM Funds-sponsored retirement plans,
which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans,
SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or
another sponsor's retirement plan. The plan custodian of the AIM Funds-sponsored
retirement plan assesses an annual maintenance fee of $10. Contact your
financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares; however, your
broker or financial consultant may charge service fees for handling redemption
transactions. Your shares also may be subject to a contingent deferred sales
charge (CDSC).
REDEMPTION OF 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.
SOF--11/00 A-4
<PAGE> 31
-------------------------------
AIM SPECIAL OPPORTUNITIES FUNDS
-------------------------------
HOW TO REDEEM SHARES
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet. The
transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
--------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
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.
A-5 SOF--11/00
<PAGE> 32
-------------------------------
AIM SPECIAL OPPORTUNITIES FUNDS
-------------------------------
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 not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You may
be required to pay an initial sales charge when exchanging from a Fund with a
lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares 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 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.
SOF--11/00 A-6
<PAGE> 33
-------------------------------
AIM SPECIAL OPPORTUNITIES FUNDS
-------------------------------
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
--------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
--------------------------------------------------------------------------------
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
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' 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 on each day the
NYSE is open for business, as of the close of the customary trading session, or
any earlier NYSE closing time that day.
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
generally taxable to you at different rates depending on the length of time the
fund holds its assets. Different tax rates may 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.
A-7 SOF--11/00
<PAGE> 34
------------------------------
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] INVEST WITH DISCIPLINE
--Registered Trademark-- www.aimfunds.com MCO-PRO-1 --Registered Trademark--
<PAGE> 35
AIM SMALL CAP
OPPORTUNITIES FUND
--------------------------------------------------------------------------------
AIM Small Cap Opportunities Fund seeks long-term growth of capital.
PROSPECTUS AIM--Registered Trademark--
NOVEMBER 28, 2000
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
The fund has been closed to new
investors since November 4, 1999.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark-- --Registered trademark--
<PAGE> 36
--------------------------------
AIM SMALL CAP OPPORTUNITIES FUND
--------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Return 3
Performance Table 3
FEE TABLE AND EXPENSE EXAMPLE 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 4
Expense Example 4
FUND MANAGEMENT 5
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 5
Advisor Compensation 5
Portfolio Managers 5
OTHER INFORMATION 5
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 5
Dividends and Distributions 5
Fund Closure 5
FINANCIAL HIGHLIGHTS 6
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-7
Taxes A-7
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 Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection, and AIM
Internet Connect are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 37
--------------------------------
AIM SMALL 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:
- a technological advance or discovery, the offering of a new or unique
product or service, or changes in consumer demand or consumption forecasts;
- 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;
- new or changed management, or material changes in management policies or
corporate structure;
- significant economic or political occurrences, including changes in foreign
or domestic import and tax laws or other regulations; or
- 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 2000--Registered
Trademark-- 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. One method of covering a call option is for the
fund to own the shares it would have to deliver if the holder of the call option
exercised the option. The fund may invest in options for hedging purposes, i.e.,
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. This means that with respect to 50% of its
assets, it is permitted to invest more than 5% of its assets in the securities
of any one issuer.
In anticipation of or in response to adverse market conditions, for cash
management purposes or for defensive purposes, the fund may temporarily hold all
or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, the
fund may not achieve its investment objective.
The fund may engage in active or frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment. Active trading may also increase
short-term capital gains and losses, which may affect the taxes you have to pay.
PRINCIPAL RISKS OF INVESTING IN THE FUND
--------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. 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
1
<PAGE> 38
--------------------------------
AIM SMALL CAP OPPORTUNITIES FUND
--------------------------------
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 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.
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> 39
--------------------------------
AIM SMALL CAP OPPORTUNITIES FUND
--------------------------------
PERFORMANCE INFORMATION
--------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURN
--------------------------------------------------------------------------------
The following bar chart shows the performance of the fund's Class A shares. The
bar chart does not reflect sales loads. If it did, the annual total return
shown would be lower.
<TABLE>
<CAPTION>
ANNUAL TOTAL
YEAR ENDED RETURN
---------- ------------
<S> <C>
12/31/99 84.18%
</TABLE>
The Class A shares' year-to-date total return as of September 30, 2000 was
35.87%.
During the period shown in the bar chart, the highest quarterly return was
37.99% (quarter ended December 31, 1999) and the lowest quarterly return was
0.34% (quarter ended March 31, 1999).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
--------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR INCEPTION DATE
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A 74.09% 60.77% 06/29/98
Class B 77.93 65.00 07/13/98
Class C 82.19 87.19 12/30/98
Russell 2000--Registered Trademark-- Index(1) 21.26 12.62(2) 06/30/98(2)
--------------------------------------------------------------------------------
</TABLE>
(1)The Russell 2000--Registered Trademark-- Index is a widely recognized,
unmanaged index of common stocks that measures the performance of the 2,000
smallest companies in the Russell 3000--Registered Trademark-- Index, which
measures the performance of the 3,000 largest companies based on total market
capitalization.
(2)The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
3
<PAGE> 40
--------------------------------
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(2) 1.00% 1.00% 1.00%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses 0.20 0.22 0.22
Dividend Expenses
Attributable to
Securities Sold
Short 0.06 0.06 0.06
Interest 0.20 0.20 0.20
Total Other Expenses 0.46 0.48 0.48
Total Annual Fund
Operating Expenses 1.81 2.48 2.48
Fee Waiver(3) 0.10 -- --
Net Expenses 1.71 2.48 2.48
-------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) The fund's base management fee is 1.00%. Effective January 1, 2001, this fee
is subject to a maximum 0.75% performance adjustment upward or downward. As
a result, beginning January 1, 2001, the fund could pay a management fee
that ranges from 0.25% to 1.75% of average daily net assets based on its
performance.
(3) The distributor has contractually agreed to limit Class A shares' Rule 12b-1
distribution plan payments to 0.25%. Waiver has been restated to reflect
this agreement.
You may also be charged a transaction or other fee by the financial institution
managing your account.
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 fund expenses are
waived 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 $724 $1,088 $1,476 $2,560
Class B 751 1,073 1,521 2,651
Class C 351 773 1,321 2,816
----------------------------------------------
</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 $724 $1,088 $1,476 $2,560
Class B 251 773 1,321 2,651
Class C 251 773 1,321 2,816
----------------------------------------------
</TABLE>
4
<PAGE> 41
--------------------------------
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 120
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
The advisor receives a management fee from the fund that is comprised of two
components. The first component is an annual base fee equal to 1.00% of the
fund's average daily net assets. The second component is a performance
adjustment that either increases or decreases the base fee, depending on how the
fund has performed relative to the Russell 2000--Registered Trademark-- Index.
Performance adjustments will begin on January 1, 2001.
As a result, beginning January 1, 2001, the maximum performance adjustment
upward or downward is 0.75% annually. Depending on the performance of the fund,
during any fiscal year the advisor may receive as much as 1.75% or as little as
0.25% in management fees.
During the fiscal year ended July 31, 2000 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 are
- Steven A. Brase, Portfolio Manager, who has been responsible for the fund
since 2000 and has been associated with the advisor and/or its affiliates
since 1998. From 1995 to 1998, he was Associate Portfolio Manager and Partner
for Bricoleur Capital Management, Inc.
- Brant H. DeMuth, 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 1992 to 1996, he was Portfolio Manager for Colorado Public
Employee's Retirement Association.
- Robert C. Leslie, Portfolio Manager, who has been responsible for the fund
since 2000 and has been associated with the advisor and/or its affiliates
since 1998. From 1995 to 1996, he ran his own investment firm, Gamma
Investment Management, until it merged with Darien Capital Management where he
served as Portfolio Manager and Partner until 1998.
- 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
The fund expects that its distributions, if any, will consist primarily of
capital gains.
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any,
annually.
FUND CLOSURE
Due to the sometimes limited availability of common stocks of smaller companies
that meet the investment criteria for the fund, the fund discontinued public
sales of its shares to new investors on November 4, 1999, after assets reached
$500 million. Existing shareholders of the fund who maintain open accounts will
be permitted to continue to make additional investments in the fund.
During this closed period, the fund may impose different standards for
additional investments. Also, during this closed period the fund will continue
to pay Rule 12b-1 fees, however, the Rule 12b-1 fees for Class A shares will be
reduced from 0.35% to 0.25% of the fund's average daily net assets attributable
to Class A shares. The Rule 12b-1 fees for Class B and Class C shares will not
be reduced during this closed period.
The fund may resume sales of shares to new investors at some future date if
the Board of Trustees determines that it would be in the best interest of
shareholders.
5
<PAGE> 42
--------------------------------
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 has been affected by special market
factors, including the fund's investments in initial public offerings (IPOs),
which had a magnified impact on the fund due to its small asset base. There is
no guarantee that, as the fund's assets grow, it will continue to experience
substantially similar performance.
<TABLE>
<CAPTION>
CLASS A
------------------------------------------
YEAR ENDED JUNE 29, 1998
JULY 31, THROUGH
---------------------- JULY 31,
2000(a) 1999(a) 1998(a)
--------- --------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 14.86 $ 9.76 $ 10.00
------------------------------------------------------------ -------- -------- --------
Income from investment operations:
Net investment income (loss) (0.14) (0.09) 0.02
------------------------------------------------------------ -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 11.97 5.20 (0.26)
============================================================ ======== ======== ========
Total from investment operations 11.83 5.11 (0.24)
============================================================ ======== ======== ========
Less distributions:
Dividends from net investment income -- (0.01) --
------------------------------------------------------------ -------- -------- --------
Distributions from net realized gains (0.90) -- --
============================================================ ======== ======== ========
Net asset value, end of period $ 25.79 $ 14.86 $ 9.76
___________________________________________________________ ________ ________ ________
============================================================ ======== ======== ========
Total return(b) 81.64% 52.36% (2.40)%
___________________________________________________________ ________ ________ ________
============================================================ ======== ======== ========
Ratios/supplemental data:
Net assets, end of year (000s omitted) $449,044 $205,721 $107,540
___________________________________________________________ ________ ________ ________
============================================================ ======== ======== ========
Ratio of expenses to average net assets (including interest
expense and dividends on short sales expense):
With fee waivers 1.73%(c) 2.35% 1.59%(d)
------------------------------------------------------------ -------- -------- --------
Without fee waivers 1.81%(c) 2.35% 1.59%(d)
============================================================ ======== ======== ========
Ratio of expenses to average net assets (excluding interest
expense and dividends on short sales expense):
With fee waivers 1.47%(c) 1.74% 1.59%(d)
------------------------------------------------------------ -------- -------- --------
Without fee waivers 1.55%(c) 1.74% 1.59%(d)
============================================================ ======== ======== ========
Ratio of net investment income (loss) to average net assets (0.63)%(c) (1.44)% 2.00%(d)
============================================================ ======== ======== ========
Ratio of interest expense and dividends on short sales
expense to average net assets 0.26%(c) 0.61% --
___________________________________________________________ ________ ________ ________
============================================================ ======== ======== ========
Portfolio turnover rate 198% 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 based on average net assets of $377,841,908.
(d) Annualized.
6
<PAGE> 43
--------------------------------
AIM SMALL CAP OPPORTUNITIES FUND
--------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
------------------------------------------
YEAR ENDED JULY 31, JULY 13, 1998
---------------------- THROUGH
2000(a) 1999(a) JULY 31, 1998(a)
--------- --------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 14.75 $ 9.76 $ 10.07
------------------------------------------------------------ -------- -------- -------
Income from investment operations:
Net investment income (loss) (0.30) (0.17) 0.01
------------------------------------------------------------ -------- -------- -------
Net gains (losses) on securities (both realized and
unrealized) 11.86 5.17 (0.32)
============================================================ ======== ======== =======
Total from investment operations 11.56 5.00 (0.31)
============================================================ ======== ======== =======
Less distributions:
Dividends from net investment income -- (0.01) --
------------------------------------------------------------ -------- -------- -------
Distributions from net realized gains (0.90) -- --
============================================================ ======== ======== =======
Net asset value, end of period $ 25.41 $ 14.75 $ 9.76
____________________________________________________________ ________ ________ _______
============================================================ ======== ======== =======
Total return(b) 80.38% 51.30% (3.08)%
____________________________________________________________ ________ ________ _______
============================================================ ======== ======== =======
Ratios/supplemental data:
Net assets, end of year (000s omitted) $326,571 $153,793 $84,285
____________________________________________________________ ________ ________ _______
============================================================ ======== ======== =======
Ratio of expenses to average net assets (including interest
expense and dividends on short sales expense): 2.48%(c) 3.03% 2.30%(d)
============================================================ ======== ======== =======
Ratio of expenses to average net assets (excluding interest
expense and dividends on short sales expense): 2.22%(c) 2.42% 2.30%(d)
============================================================ ======== ======== =======
Ratio of net investment income (loss) to average net assets (1.38)%(c) (2.12)% 1.29%(d)
============================================================ ======== ======== =======
Ratio of interest expense and dividends on short sales
expense to average net assets 0.26%(c) 0.61% --
____________________________________________________________ ________ ________ _______
============================================================ ======== ======== =======
Portfolio turnover rate 198% 220% 13%
____________________________________________________________ ________ ________ _______
============================================================ ======== ======== =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average net assets of $276,242,462.
(d) Annualized.
7
<PAGE> 44
--------------------------------
AIM SMALL CAP OPPORTUNITIES FUND
--------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
--------------------------------------
DECEMBER 30, 1998
YEAR ENDED THROUGH
JULY 31, 2000(a) JULY 31, 1999(a)
---------------- ------------------
<S> <C> <C>
Net asset value, beginning of period $ 14.78 $11.70
------------------------------------------------------------ ------- ------
Income from investment operations:
Net investment income (loss) (0.32) (0.11)
------------------------------------------------------------ ------- ------
Net gains on securities (both realized and unrealized) 11.87 3.19
============================================================ ======= ======
Total from investment operations 11.55 3.08
============================================================ ======= ======
Less distributions from net realized gains (0.90) --
============================================================ ======= ======
Net asset value, end of period $ 25.43 $14.78
____________________________________________________________ _______ ______
============================================================ ======= ======
Total return(b) 80.15% 29.31%
____________________________________________________________ _______ ______
============================================================ ======= ======
Ratios/supplemental data:
Net assets, end of year (000s omitted) $44,557 $5,977
____________________________________________________________ _______ ______
============================================================ ======= ======
Ratio of expenses to average net assets (including interest
expense and dividends on short sales expense): 2.48%(c) 3.03%(d)
============================================================ ======= ======
Ratio of expenses to average net assets (excluding interest
expense and dividends on short sales expense): 2.22%(c) 2.42%(d)
============================================================ ======= ======
Ratio of net investment income (loss) to average net assets (1.38)%(c) (2.12)%(d)
============================================================ ======= ======
Ratio of interest expense and dividends on short sales
expense to average net assets 0.26%(c) 0.61%(d)
____________________________________________________________ _______ ______
============================================================ ======= ======
Portfolio turnover rate 198% 220%
____________________________________________________________ _______ ______
============================================================ ======= ======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average net assets of $30,651,089.
(d) Annualized.
8
<PAGE> 45
-------------------------------
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 at - Does not convert to Class A
the end of the month which is shares
eight years after the date on
which shares were purchased
along with a 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--11/00
<PAGE> 46
-------------------------------
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--11/00 A-2
<PAGE> 47
-------------------------------
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 Connection
methods described above. form to the transfer agent. Once the
transfer agent has received the form,
call the transfer agent to place your
purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect
methods described above. option on your completed account
application or complete an AIM
Internet Connect Authorization Form.
Mail the application or form to the
transfer agent. Once your request for
this option has been processed (which
may take up to 10 days), you may
place your purchase order at
www.aimfunds.com. The maximum
purchase amount per transaction is
$100,000. You may not purchase shares
in AIM prototype retirement accounts
on the internet.
-----------------------------------------------------------------------------------------------------------
</TABLE>
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.
A-3 SOF--11/00
<PAGE> 48
-------------------------------
AIM SPECIAL OPPORTUNITIES FUNDS
-------------------------------
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted to
establish a retirement plan. You may use AIM Funds-sponsored retirement plans,
which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k) plans,
SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing plans, or
another sponsor's retirement plan. The plan custodian of the AIM Funds-sponsored
retirement plan assesses an annual maintenance fee of $10. Contact your
financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares; however, your
broker or financial consultant may charge service fees for handling redemption
transactions. Your shares also may be subject to a contingent deferred sales
charge (CDSC).
REDEMPTION OF 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.
SOF--11/00 A-4
<PAGE> 49
-------------------------------
AIM SPECIAL OPPORTUNITIES FUNDS
-------------------------------
HOW TO REDEEM SHARES
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours of the customary
trading session of the New York Stock Exchange (NYSE) in
order to effect the redemption at that day's closing price.
By AIM Internet Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet. The
transfer agent must confirm your transaction during the
hours of the customary trading session of the NYSE in order
to effect the redemption at that day's closing price.
</TABLE>
--------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
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.
A-5 SOF--11/00
<PAGE> 50
-------------------------------
AIM SPECIAL OPPORTUNITIES FUNDS
-------------------------------
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 not provided a correct Social Security
or other tax ID number on your account application, the AIM Fund may, at its
discretion, redeem the account and distribute the proceeds to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You may
be required to pay an initial sales charge when exchanging from a Fund with a
lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares 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 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.
SOF--11/00 A-6
<PAGE> 51
-------------------------------
AIM SPECIAL OPPORTUNITIES FUNDS
-------------------------------
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours of the customary trading session of the NYSE; however, you
still will be allowed to exchange by telephone even if you have changed your
address of record within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
--------------------------------------------------------------------------------
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
--------------------------------------------------------------------------------
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
customary trading session of the NYSE, events occur that materially affect the
value of the security, the AIM Funds may value the security at its fair value as
determined in good faith by or under the supervision of the Board of Directors
or Trustees of the AIM Fund. The effect of using fair value pricing is that an
AIM Fund's net asset value will be subject to the judgment of the Board of
Directors or Trustees or its designee instead of being determined by the market.
Because some of the AIM Funds may invest in securities that are primarily listed
on foreign exchanges, the value of those funds' 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 on each day the
NYSE is open for business, as of the close of the customary trading session, or
any earlier NYSE closing time that day.
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
generally taxable to you at different rates depending on the length of time the
fund holds its assets. Different tax rates may 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.
A-7 SOF--11/00
<PAGE> 52
--------------------------------
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-- --Registered Trademark--
<PAGE> 53
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
AIM DISTRIBUTORS, INC.,
P.O. BOX 4739, HOUSTON, TX 77210-4739
OR BY CALLING (800) 347-4246.
STATEMENT OF ADDITIONAL INFORMATION DATED NOVEMBER 28, 2000,
RELATING TO THE AIM LARGE CAP OPPORTUNITIES FUND PROSPECTUS
DATED NOVEMBER 28, 2000,
THE AIM MID CAP OPPORTUNITIES FUND PROSPECTUS DATED NOVEMBER 28, 2000
AND THE AIM SMALL CAP OPPORTUNITIES FUND PROSPECTUS DATED NOVEMBER 28, 2000
<PAGE> 54
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
Historical Portfolio Results.............................................................................5
PORTFOLIO TRANSACTIONS AND BROKERAGE..............................................................................6
General Brokerage Policy.................................................................................6
Allocation of Portfolio Transactions.....................................................................7
Allocation of IPO Securities Transactions................................................................7
Section 28(e) Standards..................................................................................8
Transactions with Regular Brokers........................................................................9
Brokerage Commissions Paid...............................................................................9
Portfolio Turnover.......................................................................................9
INVESTMENT STRATEGIES AND RISKS...................................................................................9
Equity Securities.......................................................................................10
Common Stocks...........................................................................................10
Preferred Stocks........................................................................................10
Convertible Securities..................................................................................10
Foreign Securities......................................................................................11
Risk Factors Regarding Foreign Securities...............................................................11
Foreign Exchange Transactions...........................................................................12
Illiquid Securities.....................................................................................13
Rule 144A Securities....................................................................................13
Lending of Portfolio Securities.........................................................................13
Interfund Loans.........................................................................................14
Equity-Linked Derivatives...............................................................................14
Repurchase Agreements...................................................................................14
Reverse Repurchase Agreements...........................................................................14
Real Estate Investment Trusts ("REITs").................................................................15
Borrowings and Leverage.................................................................................15
Special Situations......................................................................................16
Warrants................................................................................................16
Investment in Unseasoned Issuers........................................................................16
Investment in Other Investment Companies................................................................16
Temporary Defensive Investments.........................................................................17
HEDGING AND OTHER INVESTMENT TECHNIQUES..........................................................................17
Short Sales.............................................................................................21
INVESTMENT RESTRICTIONS..........................................................................................22
Fundamental Restrictions................................................................................22
Non-Fundamental Restrictions............................................................................23
</TABLE>
i
<PAGE> 55
<TABLE>
<S> <C>
MANAGEMENT.......................................................................................................24
Trustees and Officers...................................................................................24
Remuneration of Trustees.......................................................................27
AIM Funds Retirement Plan for Eligible Directors/Trustees......................................29
Deferred Compensation Agreements...............................................................30
INVESTMENT ADVISORY AND OTHER SERVICES...........................................................................30
THE DISTRIBUTION PLANS...........................................................................................35
The Class A and C Plan..................................................................................35
The Class B Plan........................................................................................35
Both Plans..............................................................................................35
THE DISTRIBUTOR..................................................................................................40
SALES CHARGES AND DEALER CONCESSIONS.............................................................................42
REDUCTIONS IN INITIAL SALES CHARGES..............................................................................45
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS......................................................................48
HOW TO PURCHASE AND REDEEM SHARES................................................................................50
Backup Withholding......................................................................................51
NET ASSET VALUE DETERMINATION....................................................................................53
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.........................................................................54
Reinvestment of Dividends and Distributions.............................................................54
Tax Matters.............................................................................................54
Qualification as a Regulated Investment Company.........................................................54
Investment in Foreign Financial Instruments.............................................................55
Hedging Transactions....................................................................................56
Excise Tax on Regulated Investment Companies............................................................57
Fund Distributions......................................................................................57
Sale or Redemption of Shares............................................................................59
Foreign Shareholders....................................................................................59
Effect of Future Legislation; Local Tax Considerations..................................................60
SHAREHOLDER INFORMATION..........................................................................................60
MISCELLANEOUS INFORMATION........................................................................................63
Audit Reports...........................................................................................63
Legal Matters...........................................................................................63
Custodian and Transfer Agent............................................................................63
Control Persons and Principal Holders of Securities.....................................................63
Other Information.......................................................................................65
APPENDIX.........................................................................................................66
Description of Commercial Paper Ratings.................................................................66
Description of Corporate Bond Ratings...................................................................66
FINANCIAL STATEMENTS.............................................................................................FS
</TABLE>
ii
<PAGE> 56
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 November 28, 2000, which relates
to AIM Large Cap Opportunities Fund ("Large Cap"), a separate prospectus, dated
November 28, 2000, which relates to AIM Mid Cap Opportunities Fund ("Mid Cap"),
and a separate prospectus, dated November 28, 2000, 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, AIM
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. Large Cap, Mid Cap and Small Cap closed to new investors as of
September 29, 2000, March 21, 2000 and November 4, 1999, respectively. 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
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<PAGE> 57
follows: Class A shares, Class B shares and Class C shares. Each such class
represents interests in the same portfolio of investments but, as further
described in the Prospectuses, each such class is subject to differing sales
charges and expenses, which differences will result in differing net asset
values and dividends and distributions. Upon any liquidation of the Trust,
shareholders of each class are entitled to share pro rata in the net assets
belonging to the applicable Fund allocable to such class available for
distribution after satisfaction of outstanding liabilities of the Fund allocable
to such class.
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' distribution plan (although
Class A shareholders 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).
Class B shares automatically convert to Class A shares at the end of
the month which is eight years after the date of purchase. A pro rata portion of
shares from reinvested dividends and distributions convert at the same time. No
other shares have conversion rights. Because Class B shares convert into Class A
shares, the holders of Class B shares (as well as the holders of Class A shares)
of each Fund must approve any material increase in fees payable with respect to
that Fund under the Class A and C Plan or a new class of shares into which the
Class B shares will convert must be created which will be identical in all
material respects to the Class A shares prior to the material increase in fees.
Except as specifically noted above, shareholders of 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 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 and 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 retired by a written instrument
signed by a majority of the trustees and specifying the date of his or her
retirement.
Under Delaware law, shareholders of a Delaware business trust shall be
entitled to the same limitations 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
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<PAGE> 58
Trust or the trustees to all parties, and each party thereto must expressly
waive all rights of action directly against shareholders of the Trust. The Trust
Agreement provides for indemnification out of the property of a Fund for all
losses and expenses of any shareholder of such Fund held liable on account of
being or having been a shareholder. Thus, the risk of a shareholder incurring
financial loss due to shareholder liability is limited to circumstances in which
a Fund would be unable to meet its obligations and wherein the complaining party
was held not to be bound by the disclaimer.
The Trust Agreement further provides that the trustees and officers
will not be liable for any act, omission or obligation of the Trust or any
trustee or officer. However, nothing in the Trust Agreement protects a trustee
or officer against any liability to the Trust or to the shareholders to which a
trustee or officer would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his or her office with the Trust. The Trust Agreement provides for
indemnification by the Trust of the trustees, 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,
if any (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
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<PAGE> 59
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.
From time to time, AIM 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.
A Fund may participate in the Initial Public Offering ("IPO") market,
and a significant portion of the Funds' returns may be attributable to its
investment in IPOs. Investment in IPOs could have a magnified impact on a Fund
with a small asset base. There is no guarantee that as a Fund's assets grow, it
will continue to experience substantially similar performance by investing in
IPOs.
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.
The S&P 500 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> 60
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return is as follows:
n
P(1+T) = ERV
where P = a hypothetical initial payment of $1,000.
T = average annual total return (assuming the applicable
maximum sales load is deducted at the beginning of the 1, 5
or 10 year periods).
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment
at the end of the 1, 5 or 10 year periods (or fractional
portion of such period).
HISTORICAL PORTFOLIO RESULTS
Total returns for each of the named Funds with respect to Class A
shares for the periods ended July 31, 2000 (or since inception) (which include
the maximum sales charge of 5.50% and reinvestment of all dividends and
distributions) were as follows:
CLASS A AVERAGE ANNUAL RETURNS
<TABLE>
<CAPTION>
Since
One Year Inception*
---------- ----------
<S> <C> <C>
Large Cap N/A N/A
Mid Cap 56.46% 76.99%
Small Cap 71.70% 56.67%
</TABLE>
* The inception dates for Class A shares of the Funds are December 30,
1999, December 30, 1998 and June 29, 1998, respectively.
CLASS A CUMULATIVE RETURNS
<TABLE>
<CAPTION>
Since
One Year Inception*
---------- ----------
<S> <C> <C>
Large Cap N/A 24.01%
Mid Cap 56.46% 146.96%
Small Cap 71.70% 155.30%
</TABLE>
Total returns for each of the named Funds with respect to its Class B
shares (which deduct the maximum contingent deferred sales charge of 5% and
include reinvestment of all dividends and distributions), for the period ended
July 31, 2000 (or since inception) were as follows:
CLASS B AVERAGE ANNUAL RETURNS
<TABLE>
<CAPTION>
Since
One Year Inception*
---------- ----------
<S> <C> <C>
Large Cap N/A N/A
Mid Cap N/A N/A
Small Cap 75.26% 59.80%
</TABLE>
* The inception dates for Class B shares of the Funds are March 31,
2000, November 12, 1999 and July 13, 1998, respectively.
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<PAGE> 61
CLASS B CUMULATIVE RETURNS
<TABLE>
<CAPTION>
Since
One Year Inception*
---------- ----------
<S> <C> <C>
Large Cap N/A (2.74)%
Mid Cap N/A 26.95%
Small Cap 75.26% 161.33%
</TABLE>
Total returns for each of the named Funds with respect to its Class C
shares for the period ended July 31, 2000 (or since inception), were as follows:
CLASS C AVERAGE ANNUAL RETURNS
<TABLE>
<CAPTION>
Since
One Year Inception*
---------- ----------
<S> <C> <C>
Large Cap N/A N/A
Mid Cap N/A N/A
Small Cap 79.15% 70.58%
</TABLE>
CLASS C CUMULATIVE RETURNS
<TABLE>
<CAPTION>
Since
One Year Inception*
---------- ----------
<S> <C> <C>
Large Cap N/A 1.19%
Mid Cap N/A 30.90%
Small Cap 79.15% 132.95%
</TABLE>
* The inception dates for Class C shares of the Funds are March 31,
2000, November 12, 1999 and December 30, 1998, respectively.
PORTFOLIO TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
AIM makes decisions to buy and sell securities for each Fund, selects
broker-dealers, effects the Funds' investment portfolio transactions, allocates
brokerage fees in such transactions, and where applicable, negotiates
commissions and spreads on transactions. AIM's primary consideration in
effecting a security transaction is to obtain the most favorable execution of
the order, which includes the best price on the security and a low commission
rate. While AIM seeks reasonably competitive commission rates, the Funds may not
pay the lowest commission or spread available. See "Section 28(e) Standards"
below.
Some of the securities in which the Funds invest are traded in
over-the-counter markets. In such transactions, a Fund deals directly with
dealers who make markets in the securities involved, except when better prices
are available elsewhere. Portfolio transactions placed through dealers who are
primary market makers are effected at net prices without commissions, but which
include compensation in the form of a mark up or mark down.
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<PAGE> 62
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.
The Funds may engage in certain principal and agency transactions with
banks and their affiliates that own 5% or more of the outstanding voting
securities of an AIM Fund, provided the conditions of an exemptive order
received by the Funds from the SEC are met. In addition, a Fund may purchase or
sell a security from or to another AIM Fund or account and may invest in
affiliated money market funds, provided the Funds follow procedures adopted by
the Board of Directors/Trustees of the various AIM Funds, including the Trust.
These inter-fund transactions do not generate brokerage commissions but may
result in custodial fees or taxes or other related expenses.
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage numerous other investment accounts. Some
of these accounts may have investment objectives similar to the Funds.
Occasionally, identical securities will be appropriate for investment by one of
the Funds and by another 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 obtain the
most favorable execution. Simultaneous transactions could, however, adversely
affect a Fund's ability to obtain or dispose of the full amount of a security
which it seeks to purchase or sell.
Sometimes the procedure for allocating portfolio transactions among the
various investment accounts advised by AIM could have an adverse effect on the
price or amount of securities available to a Fund. In making such allocations,
AIM considers the investment objectives and policies of its advisory clients,
the relative size of portfolio holdings of the same or comparable securities,
the availability of cash for investment, the size of investment commitments
generally held, and the judgments of the persons responsible for recommending
the investment.
ALLOCATION OF IPO SECURITIES TRANSACTIONS
From time to time, certain of the AIM Funds or other accounts managed
by AIM may become interested in participating in security distributions that are
available in an IPO, and occasions may arise when purchases of such securities
by one AIM Fund or account may also be considered for purchase by one or more
other AIM Funds or accounts. In such cases, it shall be AIM's practice to
specifically combine or otherwise bunch indications of interest for IPO
securities for all AIM Funds and accounts participating in purchase transactions
for that security, and to allocate such transactions in accordance with the
following procedures:
AIM will determine the eligibility of each AIM Fund and account that
seeks to participate in a particular IPO by reviewing a number of factors,
including suitability of the investment with the AIM
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<PAGE> 63
Fund's or account's investment objective, policies and strategies, the liquidity
of the AIM Fund or account if such investment is purchased, and whether the
portfolio manager intends to hold the security as a long-term investment. The
allocation of limited supply securities issued in IPOs will be made to eligible
AIM Funds and accounts in a manner designed to be fair and equitable for the
eligible AIM Funds and accounts, and so that there is equal allocation of IPOs
over the longer term. Where multiple funds or accounts are eligible, rotational
participation may occur, based on the extent to which an AIM Fund or account has
participated in previous IPOs as well as the size of the AIM Fund or account.
Each eligible AIM Fund or account with an asset level of less that $500 million
will be placed in one of three tiers, depending upon its asset level. The AIM
Funds and accounts in the tier containing funds and accounts with the smallest
asset levels will participate first, each receiving a 40 basis point allocation
(rounded to the nearest share round lot that approximates 40 basis points) (the
"Allocation"), based on that AIM Fund's or account's net assets. This process
continues until all of the AIM Funds and accounts in the three tiers receive
their Allocations, or until the shares are all allocated. Should securities
remain after this process, eligible AIM Funds and accounts will receive their
Allocations on a straight pro rata basis. For the tier of AIM Funds and accounts
not receiving a full Allocation, the Allocation may be made only to certain AIM
Funds or accounts so that each may receive close to or exactly 40 basis points.
When any AIM Fund and/or account with substantially identical
investment objectives and policies participates in syndicates, they will do so
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. If
no AIM Fund is participating, then the net assets of the largest account will be
used to determine tier placement. The price per share of securities purchased in
such syndicate transactions will be the same for each AIM Fund and account.
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
8
<PAGE> 64
AIM by broker-dealers are available for the benefit of all accounts managed or
advised by AIM or by its affiliates. Some broker-dealers may indicate that the
provision of research services is dependent upon the generation of certain
specified levels of commissions and underwriting concessions by AIM's clients,
including the Funds. However, the Funds are not under any obligation to deal
with any broker-dealer in the execution of transactions in portfolio securities.
In some cases, the research services are available only from the
broker-dealer providing them. In other cases, the research services may be
obtainable from alternative sources in return for cash payments. AIM believes
that the research services are beneficial in supplementing AIM's research and
analysis and that they improve the quality of AIM's investment advice. The
advisory fee paid by the Funds is not reduced because AIM receives such
services. However, to the extent that AIM would have purchased research services
had they not been provided by broker-dealers, the expenses to AIM could be
considered to have been reduced accordingly.
TRANSACTIONS WITH REGULAR BROKERS
As of July 31, 2000, Large Cap held an amount of common stock issued by
the following regular brokers, as that term is defined in Rule 10b-1 under the
1940 Act, Goldman Sachs Group, Inc., Morgan Stanley Dean Witter & Co. and
Charles Schwab Corp., having a market value of $4,452,188, $2,965,625 and
$2,133,181, respectively. As of July 31, 2000, Small Cap held an amount of
common stock issued by Raymond James Financial, Inc., a regular broker, as that
term is defined in Rule 10b-1 under the 1940 Act, having a market value of
$6,250,000.
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, 2000, Large Cap, Mid
Cap and Small Cap paid brokerage commissions of $544,223, $3,485,495 and
$4,525,859, respectively. For the fiscal period or year ended July 31, 2000, AIM
allocated certain of Large Cap, 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 $14,258,869, $213,102,903
and $340,946,689, respectively, and the related brokerage commissions were
$10,768, $237,468 and $501,728, 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. The
portfolio turnover rate of Large Cap, Mid Cap and Small Cap is shown under
"Financial Highlights" in the applicable Prospectus. 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 objective of each
fund 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"
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<PAGE> 65
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 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
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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.
FOREIGN SECURITIES
Each of the Funds may hold foreign securities. Such investments may
include American Depository Receipts ("ADRs"), European Depository Receipts
("EDRs") and other securities representing underlying securities of foreign
issuers. 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
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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.
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
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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 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
Consistent with applicable regulatory requirements, the Funds may each
lend their portfolio securities (principally to broker-dealers) to the extent of
one-third of their respective total assets. Such loans would be callable at any
time and would be continuously secured by collateral equal to no less than
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the market value, determined daily, of the loaned securities. Such collateral
will be cash, letters of credit or debt securities issued or guaranteed by the
U.S. Government or any of its agencies. Each Fund would continue to receive the
income on loaned securities and would, at the same time, earn interest on the
loan collateral or on the investment of the loan collateral if it were cash. Any
cash collateral pursuant to these loans would be invested in short-term money
market instruments or affiliated money market funds. Where voting or consent
rights with respect to loaned securities pass to the borrower, the Funds will
follow the policy of calling the loan, in whole or in part as may be
appropriate, to permit the exercise of such voting or consent rights if the
matters involved are expected to have a material effect on each Fund's
investment in the loaned securities. Lending securities entails a risk of loss
to the Funds if and to the extent that the market value of the securities loaned
were to increase and the lender did not increase the collateral accordingly.
INTERFUND LOANS
Each Fund may lend up to 33 1/3% of its total assets to another AIM
Fund, on such terms and conditions as the SEC may require in an exemptive order.
An application for exemptive relief has been filed with the SEC on behalf of the
Funds and others. Each Fund may also borrow from another AIM Fund to satisfy
redemption requests or to cover unanticipated cash shortfalls due to a delay in
the delivery of cash to the Fund's custodian or improper delivery instructions
by a broker effectuating a transaction.
EQUITY-LINKED DERIVATIVES
Each of the Funds may invest in equity-linked derivative products
designed to replicate the composition and performance of particular indices.
Examples of such products include S&P Depositary Receipts ("SPDRs"), World
Equity Benchmark Series ("WEBs"), NASDAQ 100 tracking shares ("QQQs"), Dow Jones
Industrial Average Instruments ("DIAMONDS") and Optomised Portfolios as Listed
Securities ("OPALS"). Investments in equity-linked derivatives involve the same
risks associated with a direct investment in the types of securities included in
the indices such products are designed to track. There can be no assurance that
the trading price of the equity-linked derivatives will equal the underlying
value of the basket of securities purchased to replicate a particular index or
that such basket will replicate the index. Investments in equity-linked
derivatives may constitute investments in other investment companies. See
"Investment in Other Investment Companies."
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
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
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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 ("REITS")
To the extent consistent with its investment objectives and policies,
each Fund may invest in equity and/or debt securities issued by 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.
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
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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 following restrictions
apply to investments in other investment companies other than Affiliated Money
Market Funds (defined below): (i) a Fund may not purchase more than 3% of the
total outstanding voting stock of another investment company; (ii) a Fund may
not invest more than 5% of its total assets in securities issued by another
investment company; and (iii) a Fund may not invest more than 10% of its total
assets in securities issued by other investment companies other than Affiliated
Money Market Funds. With respect to a Fund's purchase of shares of another
investment company, including Affiliated Money Market Funds, the Fund will
indirectly bear its proportionate share of the advisory fees and other operating
expenses of such investment company. The Funds have obtained an exemptive order
from the SEC allowing them to invest in money market funds that have AIM or an
affiliate of AIM as an investment advisor (the "Affiliated Money Market Funds"),
provided that investments in Affiliated Money Market Funds do not exceed 25% of
the total assets of the investing Fund.
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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 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.
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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 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.
18
<PAGE> 74
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 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
19
<PAGE> 75
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.
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
20
<PAGE> 76
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."
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
21
<PAGE> 77
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 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
Each Fund is subject to the following investment restrictions, which
may be changed only by a vote of a majority of each Fund's outstanding shares.
Fundamental restrictions may be changed only by a vote of the lesser of (i) 67%
or more of the Fund's shares present at a meeting if the holders of more than
50% of the outstanding shares are present in person or represented by proxy, or
(ii) more than 50% of the Fund's outstanding shares. Any investment restriction
that involves a maximum or minimum percentage of securities or assets shall not
be considered to be violated unless an excess over or a deficiency under the
percentage occurs immediately after, and is caused by, an acquisition or
disposition of securities or utilization of assets by the Fund.
(a) each 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) each Fund may not issue senior securities, except as may
be permitted by the 1940 Act Laws, Interpretations and Exemptions.
(c) each Fund may not underwrite the securities of other
issuers. This restriction does not prevent a Fund from engaging in
transactions involving the acquisition, disposition or resale of its
portfolio securities, regardless of whether a Fund may be considered to
be an underwriter under the Securities Act of 1933.
(d) each 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 each 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
22
<PAGE> 78
Funds will not consider a bank-issued guaranty or financial guaranty
insurance as a separate security.
(e) each 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 each 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) each 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 a
Fund from engaging in transactions such as futures contracts and
options thereon or investing in securities that are secured by physical
commodities.
(g) each 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 a 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) each 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 the Funds with the
ability to operate under new interpretations of the 1940 Act or pursuant to
exemptive relief from the SEC without receiving prior shareholder approval of
the change. Even though the Funds have this flexibility, the Board of Trustees
of the Trust has adopted non-fundamental restrictions for the Funds relating to
certain of these restrictions which the adviser must follow in managing the
Funds. Any changes to these non-fundamental restrictions, which are set forth
below, require the approval of the Board of Trustees.
NON-FUNDAMENTAL RESTRICTIONS
The following non-fundamental restrictions apply to each of the Funds.
They may be changed for any Fund without approval of that Fund's voting
securities.
1. In complying with the borrowing restriction set forth in (a), each 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). Each 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,
each 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, each
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, each 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.
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<PAGE> 79
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.
MANAGEMENT
The overall management of the business and affairs of the Funds and the
Trust is vested with the Trust's Board of Trustees. The Board of Trustees
approves all significant agreements between the Trust, on behalf of the Funds,
and persons or companies furnishing services to the Funds. The day-to-day
operations of 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.
24
<PAGE> 80
<TABLE>
<CAPTION>
POSITIONS HELD WITH
NAME, ADDRESS AND AGE REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
*ROBERT H. GRAHAM (53) Trustee, Chairman Director, President and Chief Executive Officer,
and President AIM Management Group Inc.; Director and
President, AIM Advisors, Inc.; Director and
Senior Vice President, A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund
Services, Inc. and Fund Management Company; and
Director and Chief Executive Officer, Managed
Products, AMVESCAP PLC.
BRUCE L. CROCKETT (56) 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 (76) Trustee Formerly, Director, Cortland Trust Inc.
Six Blythewood Road (investment company), CF & I Steel Corp.,
Baltimore, MD 21210 Monumental Life Insurance Company and Monumental
General Insurance Company; and Chairman of the
Board of Equitable Bancorporation.
EDWARD K. DUNN, JR. (65) Trustee Formerly, Chairman of the Board of Directors,
2 Hopkins Plaza, 8th Floor Mercantile Mortgage Corp; Vice Chairman of the
Suite 805 Board of Directors, President and Chief Operating
Baltimore, MD 21201 Officer, Mercantile-Safe Deposit & Trust Co.; and
President, Mercantile Bankshares.
JACK FIELDS (48) Trustee Chief Executive Officer, Texana Global, Inc.
434 New Jersey Avenue, S.E. (foreign trading company) and Twenty First
Washington, DC 20003 Century Group, Inc. (governmental affairs
company). Formerly, Member of the U.S. House of
Representatives.
</TABLE>
----------
* A trustee who is an "interested person" of AIM Advisors, Inc. and the
Trust as defined in the 1940 Act.
25
<PAGE> 81
<TABLE>
<CAPTION>
POSITIONS HELD WITH
NAME, ADDRESS AND AGE REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
**CARL FRISCHLING (63) Trustee Partner, Kramer Levin Naftalis & Frankel LLP (law
919 Third Avenue firm).
New York, NY 10022
PREMA MATHAI-DAVIS (50) Trustee Formerly, Chief Executive Officer, YWCA of the
370 East 76th Street U.S.A.
New York, NY 10021
LEWIS F. PENNOCK (58) Trustee Partner, Pennock & Cooper (law firm).
6363 Woodway, Suite 825
Houston, TX 77057
LOUIS S. SKLAR (61) Trustee Executive Vice President, Development and
The Williams Tower, 50th Floor Operations, Hines Interests Limited Partnership
2800 Post Oak Blvd. (real estate development).
Houston, TX 77056
GARY T. CRUM (53) Senior Vice President Director and President, A I M Capital Management,
Inc.; Director and Executive Vice President,
A I M Management Group Inc.; Director and Senior
Vice President, A I M Advisors, Inc.; and
Director, A I M Distributors, Inc. and AMVESCAP
PLC.
EDGAR M. LARSEN (60) Senior Vice President Vice President, A I M Capital Management, Inc.
CAROL F. RELIHAN (46) 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 (41) Vice President and Vice President and Fund Controller,
Treasurer A I M Advisors, Inc.; and Assistant Vice
President and Assistant Treasurer, Fund
Management Company.
</TABLE>
----------
** A trustee who is an "interested person" of the Trust as defined in the
1940 Act.
26
<PAGE> 82
<TABLE>
<CAPTION>
POSITIONS HELD WITH
NAME, ADDRESS AND AGE REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- ------------------- ----------------------------------------
<S> <C> <C>
MELVILLE B. COX (57) 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 Dr. Mathai-Davis. The Audit
Committee is responsible for: (i) considering management's recommendations of
independent accountants for each Fund and evaluating such accountants'
performance, costs and financial stability; (ii) with AIM, reviewing and
coordinating audit plans prepared by the Funds' independent accountants and
management's internal audit staff; and (iii) reviewing financial statements
contained in periodic reports to shareholders with the Funds' independent
accountants and management.
The members of the Investments Committee are Messrs. Crockett, Daly,
Dunn, Fields, Frischling, Pennock, Sklar (Chairman) and Dr. Mathai-Davis. The
Investments Committee is responsible for: (i) overseeing AIM's
investment-related compliance systems and procedures to ensure their continued
adequacy; and (ii) considering and acting, on an interim basis between meetings
of the full Board, on investment-related matters requiring Board consideration,
including dividends and distributions, brokerage policy and pricing matters.
The members of the Nominating and Compensation Committee are Messrs.
Crockett (Chairman), Daly, Dunn, Fields, Pennock, Sklar and Dr. Mathai-Davis.
The Nominating and Compensation Committee is responsible for: (i) considering
and nominating individuals to stand for election as independent trustees as long
as the Trust maintains a distribution plan pursuant to Rule 12b-1 under the 1940
Act; (ii) reviewing from time to time the compensation payable to the
independent trustees; and (iii) making recommendations to the Board regarding
matters related to compensation, including deferred compensation plans and
retirement plans for the independent trustees.
The Nominating and Compensation Committee will consider nominees
recommended by a shareholder to serve as trustees, provided (i) that such person
was a shareholder of record at the time they submit such names and is entitled
to vote at the meeting of shareholders at which trustees will be elected, and
(ii) that the Nominating and Compensation Committee or the Board, as applicable,
shall make the final determination of persons to be nominated.
All of the Trust's Trustees also serve as directors or trustees of some
or all of the other investment companies managed or advised by AIM. All of the
Trust's executive officers hold similar offices with some or all of the other
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,
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<PAGE> 83
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
BENEFITS
AGGREGATE COMPENSATION ACCRUED TOTAL
AGGREGATE COMPENSATION BY ALL AIM COMPENSATION
TRUSTEE FROM THE TRUST(1) FUNDS(2) FROM ALL AIM FUNDS(3)
------- ---------------------- ---------- ---------------------
<S> <C> <C> <C>
Charles T. Bauer(4) $ 0 $ 0 $ 0
Bruce L. Crockett 2,578 37,485 103,500
Owen Daly II 2,578 122,898 103,500
Edward K. Dunn Jr. 2,578 55,565 103,500
Jack Fields 2,540 15,826 101,500
Carl Frischling(5) 2,578 97,971 103,500
Robert H. Graham 0 0 0
John F. Kroeger(6) 0 40,461 0
Prema Mathai-Davis 2,540 11,870 101,500
Lewis F. Pennock 2,578 45,766 103,500
Ian Robinson(7) 0 94,442 25,000
Louis S. Sklar 2,540 90,232 101,500
</TABLE>
(1) The total amount of compensation deferred by all Trustees of the Trust
during the fiscal year ended July 31, 2000, including interest earned
thereon, was $16,156.
(2) During the fiscal year ended July 31, 2000, the total amount of expenses
allocated to the Trust in respect of such retirement benefits was $4,211.
Data reflects compensation for the calendar year ended December 31, 1999.
(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, 1999.
(4) Mr. Bauer was a Trustee and officer until September 30, 2000, when he
retired.
(5) During the fiscal year ended July 31, 2000, Large Cap, Mid Cap and Small
Cap, each paid $2,270, $3,273 and $3,722, respectively, in legal fees to
Mr. Frischling's law firm, Kramer Levin Naftalis & Frankel LLP for services
rendered to the disinterested trustees of the Trust. Mr. Frischling, a
Trustee of the Trust, is a partner in such firm.
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<PAGE> 84
(6) Mr. Kroeger was a Trustee until June 11, 1998. 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."
(7) 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 Dr. Mathai-Davis are [13, 13, 2, 3, 23, 20, 19, 11, 11
and 2] years, respectively.
ESTIMATED BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
Number of
Years of Estimated
Service With Annual Benefits
The AIM Funds Upon Retirement
------------- ---------------
<S> <C>
10 $75,000
9 $67,500
8 $60,000
7 $52,500
6 $45,000
5 $37,500
</TABLE>
29
<PAGE> 85
Deferred Compensation Agreements
Messrs. Daly, Dunn, Fields, Frischling, Sklar and Dr. Mathai-Davis (for
purposes of this paragraph only, the "Deferring Trustees") have each executed a
Deferred Compensation Agreement (collectively, the "Compensation Agreements").
Pursuant to the Compensation Agreements, the Deferring Trustees may elect to
defer receipt of up to 100% of their compensation payable by the Trust, and such
amounts are placed into a deferral account. Currently, the Deferring Trustees
may select various AIM Funds in which all or part of their deferral accounts
shall be deemed to be invested. Distributions from the Deferring Trustees'
deferral accounts will be paid in cash, in generally equal quarterly
installments over a period of five (5) or ten (10) years (depending on the
Compensation Agreement) beginning on the date the Deferring Trustee's retirement
benefits commence under the Plan. The Trust's Board of Trustees, in its sole
discretion, may accelerate or extend the distribution of such deferral accounts
after the Deferring Trustee's termination of service as a trustee of the Trust.
If a Deferring Trustee dies prior to the distribution of amounts in his or her
deferral account, the balance of the deferral account will be distributed to his
or her designated beneficiary in a single lump sum payment as soon as
practicable after such Deferring Trustee's death. The Compensation Agreements
are not funded and, with respect to the payments of amounts held in the deferral
accounts, the Deferring Trustees have the status of unsecured creditors of the
Trust and of each other AIM Fund from which they are deferring compensation.
INVESTMENT ADVISORY AND OTHER SERVICES
AIM serves as the investment advisor to each Fund pursuant to a Master
Investment Advisory Agreement (the "Master Advisory Agreement"). AIM was
organized in 1976, and, together with its subsidiaries, advises or manages
approximately 120 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".
AIM and the Trust have adopted a Code of Ethics which requires
investment personnel and certain other employees (a) to pre-clear all personal
securities transactions subject to the Code of Ethics; (b) to file reports
regarding such transactions; (c) to refrain from personally engaging in (i)
short-term trading of a security, (ii) transactions involving a security within
seven days of an AIM Fund transaction involving the same security (subject to a
de minimus exception), and (iii) transactions involving securities being
considered for investment by an AIM Fund (subject to a de minimus exception),
and (d) to abide by certain other provisions under the Code of Ethics. The de
minimus exception under the Code of Ethics covers situations where there is no
material conflict of interest because of the large market capitalization of a
security and the relative small number of shares involved in a personal
transaction. The Code of Ethics also generally prohibits AIM employees from
purchasing securities in initial public offerings. Personal trading reports are
periodically reviewed by AIM, and the Board of Trustees reviews quarterly and
annual reports (which summarize any significant violations of the Code of
Ethics). Sanctions for violating the Code of Ethics may include censure,
monetary penalties, suspension or termination of employment.
The Trust 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
30
<PAGE> 86
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.
For the advisory services it provides to Large Cap, AIM is entitled to
receive a base management fee calculated at the annual rate of 1.50% of Large
Cap's average daily net assets (the "Large Cap Base Fee"). This Large Cap Base
Fee will be adjusted, on a monthly basis starting January 1, 2001, (i) upward at
the rate of 0.20%, on a pro rata basis, for each percentage point the investment
performance of Class A shares of Large Cap exceeds the sum of 2.00% and the
investment record of the S&P 500--Registered Trademark-- Index (the "Large Cap
Index"), or (ii) downward at the rate of 0.20%, on a pro rata basis, for each
percentage point the investment record of the Large Cap Index less 2.00% exceeds
the investment performance of the Class A shares of Large Cap (the "Large Cap
Fee Adjustment"). The maximum or minimum Large Cap Fee Adjustment, if any, will
be 1.00% annually.
The maximum annual fee payable to AIM will be 2.50% of average daily
net assets, and the minimum annual fee payable to AIM will be 0.50% of average
daily net assets.
In determining the Large Cap Fee Adjustment, if any, applicable during
any month, AIM will compare the investment performance of the Class A shares of
Large Cap for the twelve-month period ending on the last day of the prior month
(the "Large Cap Performance Period") to the investment record of the Large Cap
Index during the Large Cap Performance Period. The investment performance of
Large Cap will be determined by adding together (i) the change in the net asset
value of the Class A shares during the Large Cap Performance Period, (ii) the
value of cash distributions made by Large Cap to holders of Class A shares to
the end of the Large Cap Performance Period, and (iii) the value of capital
gains taxes per share, if any, paid or payable on undistributed realized
long-term capital gains accumulated to the end of the Large Cap Performance
Period, and will be expressed as a percentage of its net asset value per share
at the beginning of the Large Cap Performance Period. The investment record of
the Large Cap Index will be determined by adding together (i) the change in the
level of the Large Cap Index during the Large Cap Performance Period and (ii)
the value, computed consistently with
31
<PAGE> 87
the Large Cap Index, of cash distributions made by companies whose securities
comprise the Large Cap Index accumulated to the end of the Large Cap Performance
Period, and will be expressed as a percentage of the Large Cap Index level at
the beginning of such Period.
After it determines any Large Cap Fee Adjustment, AIM will determine
the dollar amount of additional fees or fee reductions to be accrued for each
day of a month by multiplying the Large Cap Fee Adjustment by the average daily
net assets of Large Cap during the Large Cap Performance Period and dividing
that number by the number of days in the Large Cap Performance Period. The
management fee, as adjusted, is accrued daily and paid monthly.
If the Trustees determine at some future date that another securities
index is a better representative of the composition of Large Cap than is the
Large Cap Index, the Trustees may change the securities index used to compute
the Large Cap Fee Adjustment. If the Trustees do so, the new securities index
(the "New Large Cap Index") will be applied prospectively to determine the
amount of the Large Cap Fee Adjustment. The Large Cap Index will continue to be
used to determine the amount of the Large Cap Fee Adjustment for that part of
the Large Cap Performance Period prior to the effective date of the New Large
Cap Index. A change in the Large Cap Index will be submitted to shareholders for
their approval unless the SEC determines that shareholder approval is not
required.
The amount Large Cap will pay to the Advisor in performance fees is not
susceptible to estimation, since it depends upon the future relative performance
of Large Cap and the Large Cap Index.
For the advisory services it provides to Mid Cap, AIM is entitled to
receive a base management fee calculated at the annual rate of 1.50% of Mid
Cap's average daily net assets (the "Mid Cap Base Fee"). This Mid Cap Base Fee
will be adjusted, on a monthly basis starting January 1, 2001, (i) upward at the
rate of 0.20%, on a pro rata basis, for each percentage point the investment
performance of Class A shares of Mid Cap exceeds the sum of 2.00% and the
investment record of the S&P MidCap 400 Index (the "Mid Cap Index"), or (ii)
downward at the rate of 0.20%, on a pro rata basis, for each percentage point
the investment record of the Mid Cap Index less 2.00% exceeds the investment
performance of the Class A shares of Mid Cap (the "Mid Cap Fee Adjustment"). The
maximum or minimum Mid Cap Fee Adjustment, if any, will be 1.00% annually.
The maximum annual fee payable to AIM will be 2.50% of average daily
net assets, and the minimum annual fee payable to AIM will be 0.50% of average
daily net assets.
In determining the Mid Cap Fee Adjustment, if any, applicable during
any month, AIM will compare the investment performance of the Class A shares of
Mid Cap for the twelve-month period ending on the last day of the prior month
(the "Mid Cap Performance Period") to the investment record of the Mid Cap Index
during the Mid Cap Performance Period. The investment performance of Mid Cap
will be determined by adding together (i) the change in the net asset value of
the Class A shares during the Mid Cap Performance Period, (ii) the value of cash
distributions made by Mid Cap to holders of Class A shares to the end of the Mid
Cap Performance Period, and (iii) the value of capital gains taxes per share, if
any, paid or payable on undistributed realized long-term capital gains
accumulated to the end of the Mid Cap Performance Period, and will be expressed
as a percentage of its net asset value per share at the beginning of the Mid Cap
Performance Period. The investment record of the Mid Cap Index will be
determined by adding together (i) the change in the level of the Mid Cap Index
during the Mid Cap Performance Period and (ii) the value, computed consistently
with the Mid Cap Index, of cash distributions made by companies whose securities
comprise the Mid Cap Index accumulated to the end of the Mid Cap Performance
Period, and will be expressed as a percentage of the Mid Cap Index level at the
beginning of such Period.
After it determines any Mid Cap Fee Adjustment, AIM will determine the
dollar amount of additional fees or fee reductions to be accrued for each day of
a month by multiplying the Mid Cap Fee Adjustment by the average daily net
assets of Mid Cap during the Mid Cap Performance Period and dividing that number
by the number of days in the Mid Cap Performance Period. The management fee, as
adjusted, is accrued daily and paid monthly.
32
<PAGE> 88
If the Trustees determine at some future date that another securities
index is a better representative of the composition of Mid Cap than is the Mid
Cap Index, the Trustees may change the securities index used to compute the Mid
Cap Fee Adjustment. If the Trustees do so, the new securities index (the "New
Mid Cap Index") will be applied prospectively to determine the amount of the Mid
Cap Fee Adjustment. The Mid Cap Index will continue to be used to determine the
amount of the Mid Cap Fee Adjustment for that part of the Mid Cap Performance
Period prior to the effective date of the New Mid Cap Index. A change in the Mid
Cap Index will be submitted to shareholders for their approval unless the SEC
determines that shareholder approval is not required.
The amount Mid Cap will pay to the Advisor in performance fees is not
susceptible to estimation, since it depends upon the future relative performance
of Mid Cap and the Mid Cap Index.
For the advisory services it provides to Small Cap, AIM is entitled to
receive a base management fee calculated at the annual rate of 1.00% of Small
Cap's average daily net assets (the "Small Cap Base Fee"). This Small Cap Base
Fee will be adjusted, on a monthly basis starting January 1, 2001, (i) upward at
the rate of 0.15%, on a pro rata basis, for each percentage point the investment
performance of Class A shares of Small Cap exceeds the sum of 2.00% and the
investment record of the Russell 2000--Registered Trademark-- Index (the "Small
Cap Index"), or (ii) downward at the rate of 0.15%, on a pro rata basis, for
each percentage point the investment record of the Small Cap Index less 2.00%
exceeds the investment performance of the Class A shares of Small Cap (the
"Small Cap Fee Adjustment"). The maximum or minimum Small Cap Fee Adjustment, if
any, will be 0.75% annually.
The maximum annual fee payable to AIM will be 1.75% of average daily
net assets, and the minimum annual fee payable to AIM will be 0.25% of average
daily net assets.
In determining the Small Cap Fee Adjustment, if any, applicable during
any month, AIM will compare the investment performance of the Class A shares of
Small Cap for the twelve-month period ending on the last day of the prior month
(the "Small Cap Performance Period") to the investment record of the Small Cap
Index during the Small Cap Performance Period. The investment performance of
Small Cap will be determined by adding together (i) the change in the net asset
value of the Class A shares during the Small Cap Performance Period, (ii) the
value of cash distributions made by Small Cap to holders of Class A shares to
the end of the Small Cap Performance Period, and (iii) the value of capital
gains taxes per share, if any, paid or payable on undistributed realized
long-term capital gains accumulated to the end of the Small Cap Performance
Period, and will be expressed as a percentage of its net asset value per share
at the beginning of the Small Cap Performance Period. The investment record of
the Small Cap Index will be determined by adding together (i) the change in the
level of the Small Cap Index during the Small Cap Performance Period and (ii)
the value, computed consistently with the Small Cap Index, of cash distributions
made by companies whose securities comprise the Small Cap Index accumulated to
the end of the Small Cap Performance Period, and will be expressed as a
percentage of the Small Cap Index level at the beginning of such Period.
After it determines any Small Cap Fee Adjustment, AIM will determine
the dollar amount of additional fees or fee reductions to be accrued for each
day of a month by multiplying the Small Cap Fee Adjustment by the average daily
net assets of Small Cap during the Small Cap Performance Period and dividing
that number by the number of days in the Small Cap Performance Period. The
management fee, as adjusted, is accrued daily and paid monthly.
If the Trustees determine at some future date that another securities
index is a better representative of the composition of Small Cap than is the
Small Cap Index, the Trustees may change the securities index used to compute
the Small Cap Fee Adjustment. If the Trustees do so, the new securities index
(the "New Small Cap Index") will be applied prospectively to determine the
amount of the Small Cap Fee Adjustment. The Small Cap Index will continue to be
used to determine the amount of the Small Cap Fee Adjustment for that part of
the Small Cap Performance Period prior to the effective date of the New Small
Cap Index. A change in the Small Cap Index will be submitted to shareholders for
their approval unless the SEC determines that shareholder approval is not
required.
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<PAGE> 89
The amount Small Cap will pay to the Advisor in performance fees is not
susceptible to estimation, since it depends upon the future relative performance
of Small Cap and the Small Cap Index.
Each Fund paid to AIM the following advisory fees net of any expense
limitations (fee waivers) for the fiscal periods or years ended July 31, 2000
and 1999:
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Large Cap ............... $ 709,316 N/A
Mid Cap ................. 5,153,525 N/A
Small Cap ............... 6,847,355 $ 2,594,463
</TABLE>
For the fiscal periods or years ended July 31, 2000 and 1999, AIM
waived advisory fees for each Fund as follows:
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Large Cap ............... $ 39,872 N/A
Mid Cap ................. N/A $ 16,036
Small Cap ............... N/A N/A
</TABLE>
The Master Administrative Services Agreement requires that AIM may
perform or arrange for the performance of certain accounting, and shareholder
services and other administrative services to the Funds. 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.
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.
Each Fund paid AIM the following amounts of administrative services
cost for the fiscal periods or years ended July 31, 2000 and 1999:
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Large Cap ............... $ 29,372 N/A
Mid Cap ................. 86,581 $ 50,801
Small Cap ............... 126,377 109,921
</TABLE>
34
<PAGE> 90
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.
During this period that Small Cap is closed to new investors, Small Cap will
reduce this payment for Class A shares from 0.35% to 0.25% per annum. 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 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 including AIM Distributors, acting
as principal, for providing 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 including AIM Distributors,
acting as principal, in excess of such amount 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
35
<PAGE> 91
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.
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.
Similar agreements may be permitted under the Plans for institutions
which provide record keeping for and administrative services to 401(k) plans.
In addition, Shareholder Service Agreements may be permitted under the
Plans for bank trust departments and brokers for bank trust departments which
provide shareholder services to their customers.
AIM Distributors, acting as principal, may also enter into Shareholder
Service Agreements with the Funds, substantially identical to those agreements
entered into with investment dealers or other financial institutions,
authorizing payments to AIM Distributors for providing continuing personal
shareholder services to those customers for which AIM Distributors serves as
dealer of record.
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
36
<PAGE> 92
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 to dealers and other
financial institutions 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, 2000, the various classes
of the Funds paid (net of any fee waivers) to AIM Distributors the following
amounts pursuant to the Plans:
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
-------------- -------------- --------------
<S> <C> <C> <C>
Large Cap $ 98,668 $ 162,407 $ 55,143
Mid Cap 472,973 1,287,873 485,856
Small Cap 1,007,663 2,762,425 306,511
</TABLE>
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,
2000, were allocated as follows:
37
<PAGE> 93
<TABLE>
<CAPTION>
LARGE CAP MID CAP SMALL CAP
--------- ------- ---------
<S> <C> <C> <C>
CLASS A
Advertising $ 10,102 $ 20,834 $ 53,434
Printing and mailing 966 2,441 5,037
prospectuses, semi-
annual reports and
annual reports
(other than to current
shareholders)
Seminars 3,689 7,488 11,494
Compensation to 0 0 0
Underwriters to partially
offset other marketing
expenses
Compensation to 83,911 442,211 937,699
Dealers including
finder's fees
Compensation to 0 0 0
Sales Personnel
Annual Report Total 98,668 472,974 1,007,664
</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, 2000,
were allocated at follows:
<TABLE>
<CAPTION>
LARGE CAP MID CAP SMALL CAP
--------- ------- ---------
<S> <C> <C> <C>
CLASS B
Advertising $ 844 $ 90,052 $ 116,252
Printing and mailing 77 10,546 10,912
prospectuses, semi-
annual reports and
annual reports
(other than to current
shareholders)
Seminars 296 32,058 25,137
Compensation to 121,805 965,904 2,071,818
Underwriters to partially
offset other marketing
expenses
Compensation to 39,385 189,313 538,306
Dealers
Compensation to 0 0 0
Sales Personnel
Annual Report Totals 162,407 1,287,873 2,762,425
</TABLE>
38
<PAGE> 94
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,
2000, were allocated as follows:
<TABLE>
<CAPTION>
LARGE CAP MID CAP SMALL CAP
--------- ------- ---------
<S> <C> <C> <C>
CLASS C
Advertising $ 4,141 $ 37,401 $ 31,017
Printing and mailing 360 4,659 2,668
prospectuses, semi-
annual reports and
annual reports
(other than to current
shareholders)
Seminars 1,500 15,099 6,737
Compensation to 33,003 339,721 186,352
Underwriters to partially
offset other marketing
expenses
Compensation to 16,139 88,976 79,737
Dealers including
finder's fees
Compensation to 0 0 0
Sales Personnel
Annual Report Totals 55,143 485,856 306,511
</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
39
<PAGE> 95
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
40
<PAGE> 96
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.
The following chart reflects the total sales charges paid in connection
with the sale of Class A shares of each Fund and the amount retained by AIM
Distributors for the fiscal periods or years ended July 31, 2000 and 1999:
41
<PAGE> 97
<TABLE>
<CAPTION>
2000 1999
------------------------- --------------------------
SALES AMOUNT SALES AMOUNT
CHARGES RETAINED CHARGES RETAINED
------- -------- ------- --------
<S> <C> <C> <C> <C>
Large Cap* $2,335,622 $ 355,159 N/A N/A
Mid Cap 5,980,413 894,229 $ 374 $ 15
Small Cap 1,732,710 280,701 1,454,296 212,220
</TABLE>
The following chart reflects the contingent deferred sales charges paid
by Class A, Class B and Class C shareholders of each Fund for the fiscal periods
or years ended July 31, 2000 and 1999:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Large Cap* $ 3,607 N/A
Mid Cap** 28,018 N/A
Small Cap 38,002 $ 6,932
</TABLE>
* Class A, Class B and Class C shares of Large Cap commenced operations
on December 30, 1999, March 31, 2000 and March 31, 2000, respectively.
** Class A, Class B and Class C shares of Mid Cap commenced operations
on December 30, 1998, November 12, 1999 and November 12, 1999,
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 Aggressive Growth Fund, AIM
Asian Growth Fund, AIM Basic Value Fund, AIM Blue Chip Fund, AIM Capital
Development Fund, AIM Charter Fund, AIM Constellation Fund, AIM Dent Demographic
Trends Fund, AIM Emerging Growth Fund, AIM European Development Fund, AIM
European Small Company Fund, AIM Euroland Growth Fund, AIM Global Utilities
Fund, AIM International Emerging Growth 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 Growth
Fund, AIM Mid Cap Opportunities Fund, AIM New Technology Fund, AIM Select
Growth Fund, AIM Small Cap Equity Fund, AIM Small Cap Growth Fund, AIM Small Cap
Opportunities Fund, AIM Value Fund, AIM Value II Fund and AIM Weingarten Fund.
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge ----------------
------------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction(1) Price Invested Price
--------------------------------- ------------- -------------- ----------------
<S> <C> <C> <C>
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.00
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
---------------
(1) AIM Small Cap Opportunities Fund will not accept any single purchase in
excess of $250,000.
42
<PAGE> 98
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 Global
Aggressive Growth Fund, AIM Global Consumer Products and Services Fund, AIM
Global Financial Services Fund, AIM Global Growth Fund, AIM Global Health Care
Fund, AIM Global Income Fund, AIM Global Infrastructure Fund, AIM Global
Resources Fund, AIM Global Telecommunications and Technology Fund, AIM Global
Trends Fund, AIM High Income Municipal Fund, AIM High Yield Fund, AIM High Yield
Fund II, AIM Income Fund, AIM Intermediate Government Fund, AIM Latin American
Growth Fund, AIM Municipal Bond Fund, AIM Strategic Income Fund and AIM
Tax-Exempt Bond Fund of Connecticut.
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge ----------------
------------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
--------------------------------- ------------- -------------- ----------------
<S> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.00%
$ 50,000 but less than $ 100,000 4.00 4.17 3.25
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 2.50 2.56 2.00
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
CATEGORY III. Certain AIM Funds are currently sold with a sales charge
ranging from 1.00% to 0.50% of the offering price on purchases of less than
$1,000,000. These AIM Funds are the Class A shares of each of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund.
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge ----------------
------------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
--------------------------------- ------------- -------------- ----------------
<S> <C> <C> <C>
Less than $ 100,000 1.00% 1.01% 0.75%
$100,000 but less than $ 250,000 0.75 0.76 0.50
$250,000 but less than $ 1,000,000 0.50 0.50 0.40
</TABLE>
There is no sales charge on purchases of $1,000,000 or more of Category
I, II or III funds; however, AIM Distributors may pay a dealer concession and/or
advance a service fee on such transactions as set forth below.
ALL GROUPS OF AIM FUNDS. AIM Distributors may elect to re-allow the
entire initial sales charge to dealers for all sales with respect to which
orders are placed with AIM Distributors during a particular period. Dealers to
whom substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
In addition to amounts paid to dealers as a dealer concession out of the
initial sales charge paid by investors, AIM Distributors may, from time to time,
at its expense or as an expense for which it may be compensated under a
distribution plan, if applicable, pay a bonus or other consideration or
incentive
43
<PAGE> 99
to dealers who sell a minimum dollar amount of the shares of the AIM Funds
during a specified period of time. At the option of the dealer, such incentives
may take the form of payment for travel expenses, including lodging, incurred in
connection with trips taken by qualifying registered representatives and their
families to places within or outside the United States. The total amount of such
additional bonus payments or other consideration shall not exceed 0.25% of the
public offering price of the shares sold. Any such bonus or incentive programs
will not change the price paid by investors for the purchase of the applicable
AIM Fund's shares or the amount that any particular AIM Fund will receive as
proceeds from such sales. Dealers may not use sales of the AIM Funds' shares to
qualify for any incentives to the extent that such incentives may be prohibited
by the laws of any state.
AIM Distributors may make payments to dealers and institutions who are
dealers of record for purchases of $1 million or more of Class A shares (or
shares which normally involve payment of initial sales charges), which are sold
at net asset value and are subject to a contingent deferred sales charge, for
all AIM Funds other than Class A shares of each of AIM Limited Maturity Treasury
Fund and AIM Tax-Free Intermediate Fund as follows: 1% of the first $2 million
of such purchases, plus 0.80% of the next $1 million of such purchases, plus
0.50% of the next $17 million of such purchases, plus 0.25% of amounts in excess
of $20 million of such purchases. AIM Distributors may make payments to dealers
and institutions who are dealers of record for purchases of $1 million or more
of Class A shares (or shares which normally involve payment of initial sales
charges), and which are sold at net asset value and are not subject to a
contingent deferred sales charge, in an amount up to 0.10% of such purchases of
Class A shares of AIM Limited Maturity Treasury Fund, and in an amount up to
0.25% of such purchases of Class A shares of AIM Tax-Free Intermediate Fund.
AIM Distributors may pay sales commissions to dealers and institutions
who sell Class B shares of the AIM Funds at the time of such sales. Payments
with respect to Class B shares will equal 4.00% of the purchase price of the
Class B shares sold by the dealer or institution, and will consist of a sales
commission equal to 3.75% of the purchase price of the Class B shares sold plus
an advance of the first year service fee of 0.25% with respect to such shares.
The portion of the payments to AIM Distributors under the Class B Plan which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
AIM Distributors to recoup a portion of such sales commissions plus financing
costs.
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
44
<PAGE> 100
in excess of $20 million of such purchases and up to 0.10% of the net asset
value of any Class A shares of AIM Limited Maturity Treasury Fund sold at net
asset value to an employee benefit plan in accordance with this paragraph.
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge tables
(quantity discounts) apply to purchases of shares of the AIM Funds that are
otherwise subject to an initial sales charge, provided that such purchases are
made by a "purchaser" as hereinafter defined. Purchases of Class A shares of AIM
Tax-Exempt Cash Fund, AIM Cash Reserve Shares of AIM Money Market Fund and Class
B and Class C shares of the AIM Funds will not be taken into account in
determining whether a purchase qualifies for a reduction in initial sales
charges.
The term "purchaser" means:
o an individual and his or her spouse and children, including
any trust established exclusively for the benefit of any such
person; or a pension, profit-sharing, or other benefit plan
established exclusively for the benefit of any such person,
such as an IRA, Roth IRA, a single-participant
money-purchase/profit-sharing plan or an individual
participant in a 403(b) Plan (unless such 403(b) plan
qualifies as the purchaser as defined below);
o a 403(b) plan, the employer/sponsor of which is an
organization described under Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended (the "Code"), if:
a. the employer/sponsor must submit contributions for
all participating employees in a single contribution
transmittal (i.e., the Funds will not accept
contributions submitted with respect to individual
participants);
b. each transmittal must be accompanied by a single
check or wire transfer; and
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
45
<PAGE> 101
Intent ("LOI"). The LOI privilege is also available to holders of the
Connecticut General Guaranteed Account, established for tax qualified group
annuities, for contracts purchased on or before June 30, 1992. The LOI confirms
such purchaser's intention as to the total investment to be made in shares of
the AIM Funds (except for (i) Class A shares of AIM Tax-Exempt Cash Fund and AIM
Cash Reserve Shares of AIM Money Market Fund, (ii) Class B and Class C shares of
the AIM Funds and (iii) shares of AIM Floating Rate Fund) within the following
13 consecutive months. By marking the LOI section on the account application and
by signing the account application, the purchaser indicates that he understands
and agrees to the terms of the LOI and is bound by the provisions described
below.
Each purchase of fund shares normally subject to an initial sales
charge made during the 13-month period will be made at the public offering price
applicable to a single transaction of the total dollar amount indicated by the
LOI, as described under "Sales Charges and Dealer Concessions." It is the
purchaser's responsibility at the time of purchase to specify the account
numbers that should be considered in determining the appropriate sales charge.
The offering price may be further reduced as described under "Rights of
Accumulation" if the Transfer Agent is advised of all other accounts at the time
of the investment. Shares acquired through reinvestment of dividends and capital
gains distributions will not be applied to the LOI. At any time during the
13-month period after meeting the original obligation, a purchaser may revise
his intended investment amount upward by submitting a written and signed
request. Such a revision will not change the original expiration date. By
signing an LOI, a purchaser is not making a binding commitment to purchase
additional shares, but if purchases made within the 13-month period do not total
the amount specified, the investor will pay the increased amount of sales charge
as described below. Purchases made within 90 days before signing an LOI will be
applied toward completion of the LOI. The LOI effective date will be the date of
the first purchase within the 90-day period. The Transfer Agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases made more than 90 days before signing an LOI will be applied toward
completion of the LOI based on the value of the shares purchased calculated at
the public offering price on the effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the
initial purchase (or subsequent purchases if necessary) the Transfer Agent will
escrow in the form of shares an appropriate 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
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invested upon such proposed purchase, but also the value of all shares of the
AIM Funds (except for (i) Class A shares of AIM Tax-Exempt Cash Fund and AIM
Cash Reserve Shares of AIM Money Market Fund, (ii) Class B and Class C shares of
the AIM Funds and (iii) shares of AIM Floating Rate Fund) owned by such
purchaser, calculated at their then current public offering price. If a
purchaser so qualifies for a reduced sales charge, the reduced sales charge
applies to the total amount of money then being invested by such purchaser and
not just to the portion that exceeds the breakpoint above which a reduced sales
charge applies. For example, if a purchaser already owns qualifying shares of
any AIM Fund with a value of $20,000 and wishes to invest an additional $20,000
in a fund, with a maximum initial sales charge of 5.50%, the reduced initial
sales charge of 5.25% will apply to the full $20,000 purchase and not just to
the $15,000 in excess of the $25,000 breakpoint. To qualify for obtaining the
discount applicable to a particular purchase, the purchaser or his dealer must
furnish AFS with a list of the account numbers and the names in which such
accounts of the purchaser are registered at the time the purchase is made.
PURCHASES AT NET ASSET VALUE. Purchases of shares of any of the AIM
Funds at net asset value (without payment of an initial sales charge) may be
made in connection with: (a) the reinvestment of dividends and distributions
from a fund; (b) exchanges of shares of certain funds; (c) use of the
reinstatement privilege; or (d) a merger, consolidation or acquisition of assets
of a fund.
The following purchasers will not pay initial sales charges on
purchases of Class A shares because there is a reduced sales effort involved in
sales to these purchasers:
o AIM Management and its affiliates, or their clients;
o Any current or retired officer, director or employee (and
members of their immediate family) of AIM Management, its
affiliates or The AIM Family of Funds,--Registered Trademark--
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;
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<PAGE> 103
o Shareholders of record of Advisor Class shares of AIM
International Growth Fund or AIM Worldwide Growth Fund on
February 12, 1999 who have continuously owned shares of the
AIM Funds.
o Unitholders of G/SET series unit investment trusts investing
proceeds from such trusts in shares of AIM Weingarten Fund or
AIM Constellation Fund; provided, however, prior to the
termination date of the trusts, a unitholder may invest
proceeds from the redemption or repurchase of his units only
when the investment in shares of AIM Weingarten Fund and AIM
Constellation Fund is effected within 30 days of the
redemption or repurchase;
o A shareholder of a fund that merges or consolidates with an
AIM Fund or that sells its assets to an AIM Fund in exchange
for shares of an AIM Fund;
o Shareholders of the GT Global funds as of April 30, 1987 who
since that date continually have owned shares of one or more
of these funds;
o Certain former AMA Investment Advisers' shareholders who
became shareholders of the AIM Global Health Care Fund in
October 1989, and who have continuously held shares in the GT
Global funds since that time; and
o Shareholders of record of Advisor Class shares of an AIM Fund
on February 2000 who have continuously owned shares of that
AIM Fund, and who purchase additional shares of that AIM Fund.
As used above, immediate family includes an individual and his or her
spouse, children, parents and parents of spouse.
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.
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<PAGE> 104
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 in addition to the waivers provided for
redemptions of currently issued Class B shares as described in a Prospectus: (1)
total or partial redemptions resulting from a distribution following retirement
in the case of a tax-qualified employer-sponsored retirement; (2) minimum
required distributions made in connection with an IRA, Keogh Plan or custodial
account under Section 403(b) of the Code or other retirement plan following
attainment of age 70 1/2; (3) redemptions pursuant to distributions from a
tax-qualified employer-sponsored retirement plan, which is invested in the
former GT Global funds, which are permitted to be made without penalty pursuant
to the Code, other than tax-free rollovers or transfers of assets, and the
proceeds of which are reinvested in the former GT Global funds; (4) redemptions
made in connection with participant-directed exchanges between options in an
employer-sponsored benefit plan; (5) redemptions made for the purpose of
providing cash to fund a loan to a participant in a tax-qualified retirement
plan; (6) redemptions made in connection with a distribution from any retirement
plan or account that is permitted in accordance with the provisions of Section
72(t)(2) of the Code, and the regulations promulgated thereunder; (7)
redemptions made in connection with a distribution from a qualified
profit-sharing or stock bonus plan described in Section 401(k) of the Code to a
participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code upon
hardship of the covered employee (determined pursuant to Treasury Regulation
Section 1.401(k)-1(d)(2)); and (8) redemptions made by or for the benefit of
certain states, counties or cities, or any instrumentalities, departments or
authorities thereof where such entities are prohibited or limited by applicable
law from paying a sales charge or commission.
CDSCs will not apply to the following:
o Additional purchases of Class C shares of AIM Advisor Flex
Fund, AIM Advisor International Value Fund 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;
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<PAGE> 105
o Investment account(s) of AIM; and
o Class C shares where the investor's dealer of record notifies
the distributor prior to the time of investment that the
dealer waives the payment otherwise payable to him.
Upon the redemption of shares of funds in sales charge Categories I and
II (see "Sales Charges and Dealer Concessions") purchased in amounts of $1
million or more, no CDSC will be applied in the following situations:
o Shares held more than 18 months;
o Redemptions from employee benefit plans designated as
qualified purchasers, as defined above, where the redemptions
are in connection with employee terminations or withdrawals,
provided the total amount invested in the plan is at least
$1,000,000; the sponsor signs a $1 million LOI; or the
employer-sponsored plan has at least 100 eligible employees;
provided, however, that 403(b) plans sponsored by public
educational institutions shall qualify for the CDSC waiver on
the basis of the value of each plan participant's aggregate
investment in the AIM Funds, and not on the aggregate
investment made by the plan or on the number of eligible
employees;
o Private foundations or endowment funds;
o Redemption of shares by the investor where the investor's
dealer waives the amounts otherwise payable to it by the
distributor and notifies the distributor prior to the time of
investment; and
o Shares acquired by exchange from Class A shares of funds in
sales charge Categories I and II unless the shares acquired by
exchange are redeemed within 18 months of the original
purchase of the Class A shares.
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". You may also be charged a
transaction or other fee by the financial institution managing your account.
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
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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 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.
BACKUP WITHHOLDING
Accounts submitted without a correct, certified taxpayer identification
number or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8
(for non-resident aliens) or Form W-9 (certifying exempt status) accompanying
the registration information will generally be subject to backup withholding.
Each AIM Fund, and other payers, must, according to IRS regulations,
withhold 31% of redemption payments and reportable dividends (whether paid or
accrued) in the case of any shareholder who fails to provide the Fund with a
taxpayer identification number ("TIN") and a certification that he is not
subject to backup withholding.
An investor is subject to backup withholding if:
(1) the investor fails to furnish a correct TIN to the Fund, or
(2) the IRS notifies the Fund that the investor furnished an
incorrect TIN, or
(3) the investor or the Fund is notified by the IRS that the
investor is subject to backup withholding because the investor
failed to report all of the interest and dividends on such
investor's tax return (for reportable interest and dividends
only), or
(4) the investor fails to certify to the Fund that the investor is
not subject to backup withholding under (3) above (for
reportable interest and dividend accounts opened after 1983
only), or
(5) the investor does not certify his TIN. This applies only to
non-exempt mutual fund accounts opened after 1983.
Interest and dividend payments are subject to back-up withholding in
all five situations discussed above. Redemption proceeds and long-term gain
distributions are subject to backup withholding only if (1) (2) or (5) above
applies.
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Certain payees and payments are exempt from backup withholding and
information reporting. A complete listing of such exempt entities appears in the
Instructions for the Requester of Form W-9 (which can be obtained from the IRS)
and includes, among others, the following:
o a corporation
o an organization exempt from tax under Section 501(a), an individual
retirement plan (IRA), or a custodial account under Section 403(b)(7)
o the United States or any of its agencies or instrumentalities
o a state, the District of Columbia, a possession of the United States,
or any of their political subdivisions or instrumentalities
o a foreign government or any of its political subdivisions, agencies or
instrumentalities
o an international organization or any of its agencies or
instrumentalities
o a foreign central bank of issue
o a dealer in securities or commodities required to register in the U.S.
or a possession of the U.S.
o a futures commission merchant registered with the Commodity Futures
Trading Commission
o a real estate investment trust
o an entity registered at all times during the tax year under the 1940
Act
o a common trust fund operated by a bank under Section 584(a)
o a financial institution
o a middleman known in the investment community as a nominee or listed
in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List
o a trust exempt from tax under Section 664 or described in Section 4947
Investors should contact the IRS if they have any questions concerning
entitlement to an exemption from backup withholding.
NOTE: Section references are to sections of the Code.
IRS PENALTIES -- Investors who do not supply the AIM Funds with a
correct TIN will be subject to a $50 penalty imposed by the IRS unless such
failure is due to reasonable cause and not willful neglect. If an investor
falsifies information on this form or makes any other false statement resulting
in no backup withholding on an account which should be subject to backup
withholding, such investor may be subject to a $500 penalty imposed by the IRS
and to certain criminal penalties including fines and/or imprisonment.
NONRESIDENT ALIENS -- Nonresident alien individuals and foreign
entities are not subject to the backup withholding previously discussed, but
must certify their foreign status by attaching IRS Form W-8 to their
application. Form W-8 remains in effect for three calendar years beginning with
the calendar year in which it is received by the Fund. Such shareholders may,
however, be subject to federal income tax withholding at a 30% rate on ordinary
income dividends and distributions and return of capital
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distributions. Under applicable treaty law, residents of treaty countries may
qualify for a reduced rate of withholding or a withholding exemption.
NET ASSET VALUE DETERMINATION
In accordance with the current rules and regulations of the SEC, the
net asset value of a share of each Fund is normally determined once daily as of
the close of the customary trading session of the NYSE (generally 4:00 p.m.
Eastern Time), on each business day of the Fund. In the event the NYSE closes
early (i.e., before 4:00 p.m. Eastern Time) on a particular day, the net asset
value of a Fund is determined as of the close of the NYSE on such day. For
purposes of determining net asset value per share, futures and options contract
closing prices which are available fifteen (15) minutes after the close of the
customary trading session 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, prior to the determination of net
asset value. Each security traded in the over-the-counter market (but not
including securities reported on the NASDAQ National Market System) is valued on
the basis of prices provided by independent pricing services. Each security
reported on the NASDAQ National Market System is valued at the last sales price
at the time of pricing on the valuation date, or lacking a last sale, at the
closing bid price as of the close of regular trading 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 customary trading
session 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 customary trading session 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 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.
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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 their 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 their 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.
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
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<PAGE> 110
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.
Legislation enacted in 1997 lowers the maximum capital gain tax rate
from 20% to 18% with respect to certain assets (including readily tradable
stock) which are held for five years and for which the holding period begins
after December 31, 2000. In connection with this new legislation, a Fund may
make an election to treat any readily tradable stock it holds on January 1, 2001
as being sold on January 2, 2001 at its closing market price on that date and
reacquired on that date for the same amount. If a Fund makes this election, it
will recognize any gain, but not loss, on the deemed sale, which may cause a
Fund to increase the amount of distributions that the Fund would make for its
taxable year that includes January 2, 2001. The Funds have not yet determined
whether they will make this election with respect to any shares in their
respective portfolios.
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
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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 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
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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 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 withholding 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.
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In the case of foreign non-corporate shareholders, a Fund may be
required to withhold U.S. federal income tax at a rate of 31% on distributions
that are otherwise exempt from withholding tax (or taxable at a reduced treaty
rate) unless such shareholders furnish the Fund with proper notification of
their foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a Fund,
including the applicability of foreign taxes.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS
The foregoing general discussion of U.S. federal income tax
consequences is based on the Code and the regulations issued thereunder as in
effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court decisions may significantly
change the conclusions expressed herein, and any such changes or decisions may
have a retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation for ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are urged
to consult their tax advisers as to the consequences of these and other state
and local tax rules affecting investment in the Funds.
SHAREHOLDER INFORMATION
This information supplements the discussion in 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. The 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,
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determined on the date that such request is received, but under unusual market
conditions such purchases may be delayed for up to five business days if it is
determined that a fund would be materially disadvantaged by an immediate
transfer of the proceeds of the exchange. If a shareholder is exchanging into a
fund paying daily dividends, and the release of the exchange proceeds is delayed
for the foregoing five-day period, such shareholder will not begin to accrue
dividends until the sixth business day after the exchange.
EXCHANGES BY TELEPHONE. AIM Distributors has made arrangements with
certain dealers and investment advisory firms to accept telephone instructions
to exchange shares between any of the AIM Funds. AIM Distributors reserves the
right to impose conditions on dealers or investment advisors who make telephone
exchanges of shares of the funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a shareholder, dealer or investment advisor who
has satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
shareholder is unable to reach AFS by telephone, he may also request exchanges
by telegraph or use overnight courier services to expedite exchanges by mail,
which will be effective on the business day received by the Transfer Agent as
long as such request is received prior to the close of the customary trading
session of the NYSE. The Transfer Agent and AIM Distributors may in certain
cases be liable for losses due to unauthorized or fraudulent transactions if
they do not follow reasonable procedures for verification of telephone
transactions. Such reasonable procedures may include recordings of telephone
transactions (maintained for six months), requests for confirmation of the
shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transaction.
By signing an account application form, an investor appoints the
Transfer Agent as his true and lawful attorney-in-fact to surrender for
redemption any and all unissued shares held by the Transfer Agent in the
designated account(s), or in any other account with any of the AIM Funds,
present or future, which has the identical registration as the designated
account(s), with full power of substitution in the premises. The Transfer Agent
and AIM Distributors are thereby authorized and directed to accept and act upon
any telephone redemptions of shares held in any of the account(s) listed, from
any person who requests the redemption proceeds to be applied to purchase shares
in any one or more of the AIM Funds, provided that such fund is available for
sale and provided that the registration and mailing address of the shares to be
purchased are identical to the registration of the shares being redeemed. An
investor acknowledges by signing the form that he understands and agrees that
the Transfer Agent and AIM Distributors may not be liable for any loss, expense
or cost arising out of any telephone exchange requests effected in accordance
with the authorization set forth in these instructions if they reasonably
believe such request to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions. Procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), requests for confirmation of the
shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transaction. The Transfer Agent reserves the
right to modify or terminate the telephone exchange privilege at any time
without notice. An investor may elect not to have this privilege by marking the
appropriate box on the application. Then any exchanges must be effected in
writing by the investor.
REDEMPTIONS BY TELEPHONE. By signing an account application form, an
investor appoints the Transfer Agent as his true and lawful attorney-in-fact to
surrender for redemption any and all unissued shares held by the Transfer Agent
in the designated account(s), present or future, with full power of substitution
in the premises. The Transfer Agent and AIM Distributors are thereby authorized
and directed to accept and act upon any telephone redemptions of shares held in
any of the account(s) listed, from any person who requests the redemption. An
investor acknowledges by signing the form that he understands and agrees that
the Transfer Agent and AIM Distributors may not be liable for any loss, expense
or cost arising out of any telephone redemption requests effected in accordance
with the authorization set forth in these instructions if they reasonably
believe such request to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions. Procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), requests for confirmation of the
shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transaction. The Transfer Agent reserves the
right to
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cease to act as attorney-in-fact subject to this appointment, and AIM
Distributors reserves the right to modify or terminate the telephone redemption
privilege at any time without notice. An investor may elect not to have this
privilege by marking the appropriate box on the application. Then any
redemptions must be effected in writing by the investor.
SIGNATURE GUARANTEES. In addition to those circumstances listed in the
"Shareholder Information" section of each Fund's prospectus, signature
guarantees are required in the following situations: (1) requests to transfer
the registration of shares to another owner; (2) telephone exchange and
telephone redemption authorization forms; (3) changes in previously designated
wiring or electronic funds transfer instructions; and (4) written redemptions or
exchanges of shares previously reported as lost, whether or not the redemption
amount is under $50,000 or the proceeds are to be sent to the address of record.
AIM Funds may waive or modify any signature guarantee requirements at any time.
Acceptable guarantors include banks, broker-dealers, credit unions,
national securities exchanges, savings associations and any other organization,
provided that such institution or organization qualifies as an "eligible
guarantor institution" as that term is defined in rules adopted by the SEC, and
further provided that such guarantor institution is listed in one of the
reference guides contained in the Transfer Agent's current Signature Guarantee
Standards and Procedures, such as certain domestic banks, credit unions,
securities dealers, or securities exchanges. The Transfer Agent will also accept
signatures with either: (1) a signature guaranteed with a medallion stamp of the
STAMP Program, or (2) a signature guaranteed with a medallion stamp of the NYSE
Medallion Signature Program, provided that in either event, the amount of the
transaction involved does not exceed the surety coverage amount indicated on the
medallion. For information regarding whether a particular institution or
organization qualifies as an "eligible guarantor institution," an investor
should contact the Client Services Department of AFS.
TRANSACTIONS BY INTERNET. An investor may effect transactions in his
account through the Internet by selecting the AIM Internet Connect option on his
completed account application form or completing an AIM Internet Connect
Authorization Form. By signing either form the investor acknowledges and agrees
that the Transfer Agent and AIM Distributors will not be liable for any loss,
expense or cost arising out of any internet transaction effected in accordance
with the instructions set forth in the forms if they reasonably believe such
request to be genuine. Procedures for verification of internet transactions
include requests for confirmation of the shareholder's personal identification
number and mailing of confirmations promptly after the transactions. The
investor also acknowledges that (1) if he no longer wants the AIM Internet
Connect option, he will notify the Transfer Agent in writing, and (2) the AIM
Internet Connect option may be terminated at any time by the AIM Funds.
DIVIDENDS AND DISTRIBUTIONS. In determining the amount of capital
gains, if any, available for distribution, net capital gains are offset against
available net capital losses, if any, carried forward from previous fiscal
periods.
For funds that do not declare a dividend daily, such dividends and
distributions will be reinvested at the net asset value per share determined on
the ex-dividend date. For funds that declare a dividend daily, such dividends
and distributions will be reinvested at the net asset value per share determined
on the payable date.
Dividends on Class B and Class C shares are expected to be lower than
those for Class A shares or AIM Cash Reserve Shares because of higher
distribution fees paid by Class B and Class C shares. Dividends on all shares
may also be affected by other class-specific expenses.
Changes in the form of dividend and distribution payments may be made
by the shareholder at any time by notice to the Transfer Agent and are effective
as to any subsequent payment if such notice is received by the Transfer Agent
prior to the record date of such payment. Any dividend and distribution election
remains in effect until the Transfer Agent receives a revised written election
by the shareholder.
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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.
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. AIM 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 November 1, 2000, 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 November 1, 2000, and the percentage of the outstanding shares held by such
holders are set forth below:
63
<PAGE> 119
<TABLE>
<CAPTION>
Percentage
Name and Address Percentage Owned Owned of Record
Fund of Owner of Record* and Beneficially
------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
AIM Large Cap Merrill Lynch, Pierce, Fenner & Smith 8.82% -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 Large Cap Merrill Lynch, Pierce, Fenner & Smith 20.26% -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 Large Cap Merrill Lynch Pierce, Fenner & Smith 21.17% -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
AIM Mid Cap Merrill Lynch Pierce, Fenner & Smith 10.92% -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 Mid Cap Merrill Lynch Pierce, Fenner & Smith 18.42% -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 Mid Cap Merrill Lynch Pierce, Fenner & Smith 30.78% -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
AIM Small Cap Merrill Lynch Pierce, Fenner & Smith 9.82% -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 23.98% -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
</TABLE>
----------
* The Trust has no knowledge as to whether all or any portion of the
shares owned of record are also owned beneficially.
64
<PAGE> 120
<TABLE>
<CAPTION>
Percentage
Name and Address Percentage Owned Owned of Record
Fund of Owner of Record* and Beneficially
------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
AIM Small Cap
Opportunities Fund - Merrill Lynch Pierce, Fenner & Smith 43.15% -0-
Class C Shares FBO the Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr., East 2nd Floor
Jacksonville, FL 32246
</TABLE>
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.
----------
* The Trust has no knowledge as to whether all or any portion of the
shares owned of record are also owned beneficially.
65
<PAGE> 121
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.
66
<PAGE> 122
FINANCIAL STATEMENTS
FS
<PAGE> 123
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
AIM Large Cap Opportunities Fund:
We have audited the accompanying statement of assets and liabilities of AIM
Large Cap Opportunities Fund (a series of AIM Special Opportunities Funds)
including the schedule of investments, as of July 31, 2000, and the related
statement of operations, the statement of changes in net assets, and financial
highlights for the period December 30, 1999 (date operations commenced) through
July 31, 2000. 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 auditing standards generally
accepted in the United States of America. 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, 2000, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
Large Cap Opportunities Fund as of July 31, 2000, the results of its operations,
the changes in its net assets and financial highlights for the period December
30, 1999 (date operations commenced) through July 31, 2000, in conformity with
accounting principles generally accepted in the United States of America.
/s/ KPMG LLP
September 11, 2000
Houston, Texas
FS-1
<PAGE> 124
SCHEDULE OF INVESTMENTS
July 31, 2000
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-75.18%
BANKS (MAJOR REGIONAL)-0.93%
Bank of New York Co., Inc. (The) 55,000 $ 2,574,687
--------------------------------------------------------------
BANKS (MONEY CENTER)-1.94%
J.P. Morgan & Co., Inc. 40,000 5,340,000
--------------------------------------------------------------
BIOTECHNOLOGY-3.36%
Affymetrix, Inc.(a) 23,500 3,208,852
--------------------------------------------------------------
Amgen Inc.(a) 38,300 2,487,106
--------------------------------------------------------------
Biogen, Inc.(a) 67,500 3,577,500
--------------------------------------------------------------
9,273,458
--------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-0.46%
Pegasus Communications Corp.(a) 30,000 1,267,500
--------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-13.83%
Alcatel-ADR (France) 48,000 3,510,000
--------------------------------------------------------------
Avici Systems, Inc.(a) 13,880 1,365,445
--------------------------------------------------------------
Comverse Technology, Inc.(a) 41,300 3,624,075
--------------------------------------------------------------
Corning Inc. 33,200 7,766,725
--------------------------------------------------------------
JDS Uniphase Corp.(a) 61,700 7,288,312
--------------------------------------------------------------
Juniper Networks, Inc.(a) 37,500 5,341,406
--------------------------------------------------------------
Nextel Communications, Inc.-Class
A(a) 47,500 2,657,031
--------------------------------------------------------------
Nortel Networks Corp. (Canada) 65,000 4,834,375
--------------------------------------------------------------
Sycamore Networks, Inc.(a) 14,500 1,788,031
--------------------------------------------------------------
38,175,400
--------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-0.89%
Check Point Software Technologies
Ltd.-ADR (Israel)(a) 21,200 2,459,200
--------------------------------------------------------------
COMPUTERS (HARDWARE)-2.18%
Palm, Inc.(a) 100,000 3,900,000
--------------------------------------------------------------
Sun Microsystems, Inc.(a) 20,000 2,108,750
--------------------------------------------------------------
6,008,750
--------------------------------------------------------------
COMPUTERS (NETWORKING)-2.96%
Cisco Systems, Inc.(a) 87,500 5,725,781
--------------------------------------------------------------
Exodus Communications, Inc.(a) 55,000 2,444,062
--------------------------------------------------------------
8,169,843
--------------------------------------------------------------
COMPUTERS (PERIPHERALS)-3.37%
Brocade Communications Systems,
Inc.(a) 42,500 7,591,562
--------------------------------------------------------------
EMC Corp.(a) 20,000 1,702,500
--------------------------------------------------------------
9,294,062
--------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-6.51%
i2 Technologies, Inc.(a) 32,500 4,216,875
--------------------------------------------------------------
Mainspring, Inc.(a) 20,900 313,500
--------------------------------------------------------------
Mercury Interactive Corp.(a) 7,500 744,492
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
Oracle Corp.(a) 21,000 $ 1,578,937
--------------------------------------------------------------
Quest Software, Inc.(a) 80,000 3,780,000
--------------------------------------------------------------
Rational Software Corp.(a) 25,000 2,543,750
--------------------------------------------------------------
VERITAS Software Corp.(a) 47,000 4,791,062
--------------------------------------------------------------
17,968,616
--------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.77%
General Motors Corp.-Class H(a) 82,500 2,134,688
--------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-4.78%
ASM Lithography Holding N.V.
(Netherlands)(a) 16,000 636,000
--------------------------------------------------------------
Broadcom Corp.-Class A(a) 12,500 2,803,125
--------------------------------------------------------------
Celestica Inc. (Canada)(a) 46,500 2,906,250
--------------------------------------------------------------
Maxim Integrated Products, Inc.(a) 45,000 2,972,813
--------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 65,000 3,875,625
--------------------------------------------------------------
13,193,813
--------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-1.16%
KLA-Tencor Corp.(a) 60,000 3,195,000
--------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-3.15%
American Express Co. 55,000 3,117,813
--------------------------------------------------------------
Citigroup Inc. 40,000 2,822,500
--------------------------------------------------------------
Fannie Mae 55,000 2,743,125
--------------------------------------------------------------
8,683,438
--------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-2.08%
American Home Products Corp. 65,000 3,449,063
--------------------------------------------------------------
Pfizer Inc. 53,000 2,285,625
--------------------------------------------------------------
5,734,688
--------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-1.34%
PE Corp-PE Biosystems Group 42,500 3,705,469
--------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-3.46%
Goldman Sachs Group, Inc. (The) 45,000 4,452,188
--------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 32,500 2,965,625
--------------------------------------------------------------
Schwab (Charles) Corp. (The) 59,050 2,133,181
--------------------------------------------------------------
9,550,994
--------------------------------------------------------------
INVESTMENT MANAGEMENT-0.49%
John Nuveen Co. (The)-Class A 30,000 1,340,625
--------------------------------------------------------------
LEISURE TIME (PRODUCTS)-1.14%
Harley-Davidson, Inc. 70,000 3,141,250
--------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-1.52%
Coflexip S.A.-ADR (France) 37,500 2,172,656
--------------------------------------------------------------
Millipore Corp. 32,000 2,012,000
--------------------------------------------------------------
4,184,656
--------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 125
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NATURAL GAS-0.73%
Enron Corp. 27,500 $ 2,024,688
--------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-3.68%
ENSCO International Inc. 62,500 2,109,375
--------------------------------------------------------------
Grant Prideco, Inc.(a) 47,500 955,938
--------------------------------------------------------------
Lone Star Technologies, Inc.(a) 49,500 2,017,125
--------------------------------------------------------------
Schlumberger Ltd. 42,500 3,142,344
--------------------------------------------------------------
Transocean Sedco Forex Inc. 21,000 1,039,500
--------------------------------------------------------------
Weatherford International, Inc.(a) 22,500 901,406
--------------------------------------------------------------
10,165,688
--------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-2.29%
Apache Corp. 50,000 2,487,500
--------------------------------------------------------------
Kerr-McGee Corp. 70,000 3,841,250
--------------------------------------------------------------
6,328,750
--------------------------------------------------------------
OIL & GAS (REFINING &
MARKETING)-0.50%
Valero Energy Corp.-$1.94 Conv.
Pfd. 60,000 1,387,500
--------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-1.10%
Calpine Corp.(a) 42,500 3,028,125
--------------------------------------------------------------
PUBLISHING-0.40%
Ziff Davis Media, Inc.(a) 77,000 1,102,063
--------------------------------------------------------------
RAILROADS-0.64%
Stilwell Financial, Inc.(a) 40,000 1,762,500
--------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-1.11%
Lowe's Cos., Inc. 72,500 3,058,594
--------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-1.24%
Lamar Advertising Co.(a) 75,000 3,421,875
--------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-1.37%
Ariba, Inc.(a) 32,500 3,767,969
--------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-0.73%
Critical Path, Inc.(a) 36,400 2,027,025
--------------------------------------------------------------
SERVICES (DATA PROCESSING)-1.21%
CheckFree Corp.(a) 55,000 3,341,250
--------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-2.31%
Level 3 Communications, Inc.(a) 20,000 1,368,750
--------------------------------------------------------------
Phone.com, Inc.(a) 40,000 3,195,000
--------------------------------------------------------------
Powerwave Technologies, Inc.(a) 52,000 1,803,750
--------------------------------------------------------------
6,367,500
--------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.87%
Corvis Corp.(a) 29,270 2,409,744
--------------------------------------------------------------
TELEPHONE-0.68%
Qwest Communications International
Inc.(a) 40,000 1,877,500
--------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$191,972,166) 207,466,908
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS &
NOTES-1.42%
COMMUNICATIONS EQUIPMENT-0.59%
Kestrel Solutions, Conv. Bonds,
5.50%, 07/15/05 (Acquired
07/20/00; Cost $1,500,000)(b) $1,500,000 $ 1,620,000
--------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.83%
Primus Telecommunications Group,
Inc., Conv. Notes, 5.75%,
02/15/07 (Acquired 02/17/00-
07/24/00; Cost $2,823,192)(b) 4,000,000 2,295,000
--------------------------------------------------------------
Total Convertible Corporate
Bonds & Notes (Cost
$4,331,881) 3,915,000
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION
CONTRACTS PRICE DATE
<S> <C> <C> <C> <C>
OPTIONS PURCHASED-6.03%
CALLS-0.48%
Freddie Mac (Financial-
Diversified) 703 $ 40 Aug-00 94,466
-----------------------------------------------------------------------
Lycos, Inc. (Computers-
Software & Services) 366 60 Oct-00 402,600
-----------------------------------------------------------------------
Micron Technology, Inc.
(Electronics-
Semiconductors) 850 85 Aug-00 371,875
-----------------------------------------------------------------------
OSX Index (Oil & Gas-
Services) 589 140 Sep-00 121,481
-----------------------------------------------------------------------
Philadelphia
Semiconductor Index
(Electronics-
Semiconductors) 85 1,100 Aug-00 161,500
-----------------------------------------------------------------------
S&P 500 Index
(Investments) 434 1,550 Aug-00 23,056
-----------------------------------------------------------------------
SDL, Inc. (Electronics-
Semiconductors) 60 390 Sep-00 141,375
-----------------------------------------------------------------------
1,316,353
-----------------------------------------------------------------------
PUTS-5.55%
AMEX Pharmaceutical
Index (Health
Care-Drugs-Major
Pharmaceuticals) 400 370 Oct-00 385,000
-----------------------------------------------------------------------
Calpine Corp. (Power
Producers-Independent) 425 70 Oct-00 329,375
-----------------------------------------------------------------------
Hewlett-Packard Co.
(Computers-Hardware) 400 115 Aug-00 362,500
-----------------------------------------------------------------------
Morgan Stanley Internet
Index
(Computers-Software &
Services) 837 70 Dec-00 816,075
-----------------------------------------------------------------------
Nasdaq 100 Index
(Investments) 175 3,300 Sep-00 2,185,313
-----------------------------------------------------------------------
45 3,600 Dec-00 1,708,875
-----------------------------------------------------------------------
Pegasus Communications
Corp.
(Broadcasting-Television,
Radio, & Cable) 300 32 Sep-00 43,125
-----------------------------------------------------------------------
Russell 2000 Index
(Investments) 1,244 510 Dec-00 4,385,100
-----------------------------------------------------------------------
S&P 500 Index
(Investments) 303 1,425 Aug-00 1,465,750
-----------------------------------------------------------------------
159 1,450 Aug-00 1,534,500
-----------------------------------------------------------------------
</TABLE>
FS-3
<PAGE> 126
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION MARKET
CONTRACTS PRICE DATE VALUE
<S> <C> <C> <C> <C>
PUTS-(CONTINUED)
S&P 500 Index
(Investments) 200 $1,400 Sep-00 $ 640,087
-----------------------------------------------------------------------
330 1,400 Dec-00 532,650
-----------------------------------------------------------------------
451 1,350 Dec-00 477,500
-----------------------------------------------------------------------
Symbol Technologies,
Inc. (Electrical
Equipment) 456 50 Aug-00 456,000
-----------------------------------------------------------------------
15,321,850
-----------------------------------------------------------------------
Total Options
Purchased (Cost
$18,842,123) 16,638,203
-----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS-13.09%
STIC Liquid Assets Portfolio(c) 18,069,286 18,069,286
--------------------------------------------------------------
STIC Prime Portfolio(c) 18,069,286 18,069,286
--------------------------------------------------------------
Total Money Market Funds (Cost
$36,138,572) 36,138,572
--------------------------------------------------------------
TOTAL INVESTMENTS-95.72% (Cost
$251,284,742) 264,158,683
--------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-4.28% 11,813,415
--------------------------------------------------------------
NET ASSETS-100.00% $275,972,098
==============================================================
</TABLE>
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(d)
Advanced Micro Devices, Inc. 13,000 $ 935,188
--------------------------------------------------------------
Amazon.com, Inc. 42,700 1,286,338
--------------------------------------------------------------
ANTEC Corp. 20,000 756,250
--------------------------------------------------------------
ARM Holdings plc 29,400 1,008,788
--------------------------------------------------------------
AT&T Wireless Group 50,000 1,375,000
--------------------------------------------------------------
Atmel Corp. 39,300 1,176,544
--------------------------------------------------------------
Audiovox Corp.-Class A 31,400 486,700
--------------------------------------------------------------
Broadvision Inc. 28,300 1,024,106
--------------------------------------------------------------
Carrier Access Corp. 14,200 850,225
--------------------------------------------------------------
CNET Networks, Inc. 26,200 784,363
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(d)-(CONTINUED)
Costco Wholesale Corp. 50,000 $ 1,628,125
--------------------------------------------------------------
CVS Corp. 29,200 1,151,575
--------------------------------------------------------------
Digital Island, Inc. 20,000 573,750
--------------------------------------------------------------
DoubleClick Inc. 19,600 704,375
--------------------------------------------------------------
Echelon Corp. 27,500 1,020,938
--------------------------------------------------------------
Express Scripts, Inc. 23,900 1,535,575
--------------------------------------------------------------
Fastenal Co. 28,000 1,729,000
--------------------------------------------------------------
Globalstar Telecommunications Ltd. 25,000 193,750
--------------------------------------------------------------
Hewlett-Packard Co. 4,500 491,344
--------------------------------------------------------------
Knight Trading Group, Inc. 14,500 385,156
--------------------------------------------------------------
Krispy Kreme Doughnuts, Inc. 14,000 952,000
--------------------------------------------------------------
Magna International Inc. 25,000 1,245,313
--------------------------------------------------------------
Newell Rubbermaid, Inc. 70,000 1,885,625
--------------------------------------------------------------
Orthodontic Centers of America, Inc. 63,400 1,640,475
--------------------------------------------------------------
QLogic Corp. 10,200 759,900
--------------------------------------------------------------
QLT Inc. 15,000 988,125
--------------------------------------------------------------
QUALCOMM Inc. 20,400 1,324,725
--------------------------------------------------------------
Scient Corp. 13,000 606,125
--------------------------------------------------------------
Sigma-Aldrich Corp. 45,000 1,226,250
--------------------------------------------------------------
Silicon Storage Technology, Inc. 24,500 1,548,094
--------------------------------------------------------------
Starbucks Corp. 25,000 937,500
--------------------------------------------------------------
Stryker Corp. 52,500 2,254,219
--------------------------------------------------------------
Sunoco, Inc. 40,000 975,000
--------------------------------------------------------------
Symbol Technologies, Inc. 32,500 1,295,938
--------------------------------------------------------------
TMP Worldwide, Inc. 8,700 626,400
--------------------------------------------------------------
United Parcel Service-Class B 50,000 2,937,500
--------------------------------------------------------------
UnitedHealth Group Inc. 27,400 2,241,663
--------------------------------------------------------------
Vignette Corp. 17,000 575,875
--------------------------------------------------------------
Yahoo! Inc. 17,500 2,252,031
--------------------------------------------------------------
$ 45,369,848
==============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Pfd. - Preferred
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Trustees. The
aggregate market value of these securities at 7/31/00 was $3,915,000, which
represented 1.45% of the Fund's net assets.
(c) The money market fund has the same investment advisor as the Fund.
(d) Collateral on short sales was segregated by the Fund in the amount of
$48,532,285, which represents 106.97% of market value of securities sold
short.
See Notes to Financial Statements.
FS-4
<PAGE> 127
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2000
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$251,284,742) $264,158,683
------------------------------------------------------------
Cash 1,378,032
------------------------------------------------------------
Receivables for:
Investments sold 9,164,141
------------------------------------------------------------
Fund shares sold 12,957,317
------------------------------------------------------------
Dividends and interest 298,822
------------------------------------------------------------
Investments sold short 46,493,930
------------------------------------------------------------
Short positions 899,779
------------------------------------------------------------
Short stock rebates 195,994
------------------------------------------------------------
Investment for deferred compensation plan 2,620
------------------------------------------------------------
Other assets 6,396
------------------------------------------------------------
Total assets 335,555,714
------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 13,455,605
------------------------------------------------------------
Fund shares reacquired 136,567
------------------------------------------------------------
Options written (premiums received $398,246) 86,950
------------------------------------------------------------
Deferred compensation plan 2,620
------------------------------------------------------------
Short stock account interest 1,767
------------------------------------------------------------
Market value of securities sold short
(proceeds from short sales $46,493,930) 45,369,848
------------------------------------------------------------
Accrued advisory fees 353,087
------------------------------------------------------------
Accrued administrative services fees 4,235
------------------------------------------------------------
Accrued distribution fees 133,971
------------------------------------------------------------
Accrued trustees' fees 728
------------------------------------------------------------
Accrued transfer agent fees 21,943
------------------------------------------------------------
Accrued operating expenses 16,295
------------------------------------------------------------
Total liabilities 59,583,616
------------------------------------------------------------
Net assets applicable to shares outstanding $275,972,098
============================================================
NET ASSETS:
Class A $138,205,142
============================================================
Class B $102,795,275
============================================================
Class C $ 34,971,681
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 10,532,971
============================================================
Class B 7,848,407
============================================================
Class C 2,670,782
============================================================
Class A:
Net asset value and redemption price per
share $ 13.12
------------------------------------------------------------
Offering price per share:
(Net asset value of $13.12 divided by
94.50%) $ 13.88
============================================================
Class B:
Net asset value and offering price per share $ 13.10
============================================================
Class C:
Net asset value and offering price per share $ 13.09
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the period December 30, 1999
(date operations commenced) through July 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Short stock rebates $ 443,705
------------------------------------------------------------
Dividends -- affiliated issuers 423,405
------------------------------------------------------------
Dividends (net of foreign withholding tax
$4,961) 159,509
------------------------------------------------------------
Interest 69,932
------------------------------------------------------------
Total investment income 1,096,551
------------------------------------------------------------
EXPENSES:
Advisory fees 749,188
------------------------------------------------------------
Administrative services fee 29,372
------------------------------------------------------------
Custodian fees 24,373
------------------------------------------------------------
Distribution fees -- Class A 98,668
------------------------------------------------------------
Distribution fees -- Class B 162,407
------------------------------------------------------------
Distribution fees -- Class C 55,143
------------------------------------------------------------
Interest 10,212
------------------------------------------------------------
Transfer agent fees -- Class A 31,715
------------------------------------------------------------
Transfer agent fees -- Class B 23,773
------------------------------------------------------------
Transfer agent fees -- Class C 8,072
------------------------------------------------------------
Trustees' fees 4,117
------------------------------------------------------------
Dividends on short sales 24,835
------------------------------------------------------------
Other 171,138
------------------------------------------------------------
Total expenses 1,393,013
------------------------------------------------------------
Less: Fees waived (39,872)
------------------------------------------------------------
Expenses paid indirectly (4,522)
------------------------------------------------------------
Net expenses 1,348,619
------------------------------------------------------------
Net investment income (loss) (252,068)
------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, SECURITIES SOLD SHORT,
FUTURES AND OPTION CONTRACTS
Net realized gain (loss) from:
Investment securities (2,400,360)
------------------------------------------------------------
Futures contracts (881,182)
------------------------------------------------------------
Option contracts 2,403,105
------------------------------------------------------------
Securities sold short 1,764,828
------------------------------------------------------------
886,391
------------------------------------------------------------
Change in net unrealized appreciation of:
Investment securities 12,873,942
------------------------------------------------------------
Option contracts 311,296
------------------------------------------------------------
Securities sold short 1,124,086
------------------------------------------------------------
14,309,324
------------------------------------------------------------
Net gain on investment securities, securities
sold short, futures and option contracts 15,195,715
------------------------------------------------------------
Net increase in net assets resulting from
operations $14,943,647
============================================================
</TABLE>
See Notes to Financial Statements.
FS-5
<PAGE> 128
STATEMENT OF CHANGES IN NET ASSETS
For the period December 30, 1999 (date operations commenced) through July 31,
2000
<TABLE>
<CAPTION>
2000
------------
<S> <C>
OPERATIONS:
Net investment income (loss) $ (252,068)
--------------------------------------------------------------------------
Net realized gain from investment securities, securities
sold short, futures and option contracts 886,391
--------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, securities sold short and option contracts 14,309,324
--------------------------------------------------------------------------
Net increase in net assets resulting from operations 14,943,647
--------------------------------------------------------------------------
Share transactions-net:
Class A 130,133,895
--------------------------------------------------------------------------
Class B 97,595,645
--------------------------------------------------------------------------
Class C 33,298,911
--------------------------------------------------------------------------
Net increase in net assets 275,972,098
--------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
--------------------------------------------------------------------------
End of period $275,972,098
==========================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $261,023,720
--------------------------------------------------------------------------
Undistributed net investment income (loss) (49,823)
--------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, securities sold short, futures and option
contracts 688,877
--------------------------------------------------------------------------
Unrealized appreciation of investment securities,
securities sold short, futures and option contracts 14,309,324
--------------------------------------------------------------------------
$275,972,098
==========================================================================
</TABLE>
See Notes to Financial Statements.
FS-6
<PAGE> 129
NOTES TO FINANCIAL STATEMENTS
July 31, 2000
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Large 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 three
separate portfolios, each having an unlimited number of shares of beneficial
interest. The Fund commenced operations on December 30, 1999. The Fund currently
offers three different classes of shares: Class A shares, Class B shares and
Class C shares. Class A shares are sold with a front-end sales charge. Class B
shares and Class C shares are sold with a contingent deferred sales charge.
Class A shares commenced sales on December 30, 1999. Class B and C shares
commenced sales on March 31, 2000. Matters affecting each portfolio or class
will be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is long-term growth of capital.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial
statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price as of the close of the
customary trading session 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 as of the close of
the customary trading session on the valuation date or absent a last sales
price, at the closing bid price. Debt obligations (including convertible
bonds) are valued on the basis of prices provided by an independent pricing
service. Prices provided by the pricing service may be determined without
exclusive reliance on quoted prices, and may reflect appropriate factors such
as yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the 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. For purposes of determining
net asset value per share, futures and option contracts generally will be
valued 15 minutes after the close of the customary trading session of the New
York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the customary
trading session of the NYSE which would not be reflected in the computation
of the Fund's net asset value. If events materially affecting the value of
such securities occur during such period, then these securities will be
valued at their fair value as determined in good faith by or under the
supervision of the Board of Trustees.
B. Securities Transactions and Investment Income -- 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 and short stock rebate income are recorded on the accrual
basis. Dividend income and dividend expense on short sales are recorded on
the ex-dividend date.
On July 31, 2000 additional paid-in capital was decreased by $4,731,
undistributed net investment income was increased by $202,245 and
undistributed net realized gains was decreased by $197,514 as a result of
reclassifications of a net operating loss and other reclassifications. Net
assets of the Fund were unaffected by the reclassifications.
C. Distributions -- Distributions from income and net realized capital gains, if
any, are generally paid annually and recorded on ex-dividend date. The Fund
may elect to use a portion of the proceeds from redemptions as distributions
for federal income tax purposes.
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. Securities Sold Short -- The Fund may enter into short sales of securities
which it concurrently holds (against the box) or for which it holds no
corresponding position (naked). Securities sold short represent a liability
of the Fund to acquire specific securities at prevailing market prices at a
future date in order to satisfy the obligation to deliver the securities
sold. The liability is 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 disclosed in "A" above. The Fund will incur a loss if the
price of the security increases between the date of the short sale and the
date on which the Fund replaces the borrowed security. The Fund realizes a
gain if the price of the security declines between those dates.
FS-7
<PAGE> 130
The Fund is required to segregate cash or securities as collateral in
margin accounts at a level that is equal to the obligation to the broker who
delivered such securities to the buyer on behalf of the Fund. The short stock
rebate presented in the statement of operations represents income earned on
short sale proceeds held on deposit with the broker. The Fund may also earn
or incur margin interest on short sales transactions. Margin interest is the
income earned (expense incurred) as a result of the market value of
securities sold short being less than (greater than) the proceeds received
from the short sales.
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 option's underlying instrument at
a fixed strike price. In return for this right, the Fund pays an option
premium. The option's underlying instrument may be a security, 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.
G. 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.
H. Futures Contracts -- The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits required
upon entering into futures contracts are satisfied by the segregation of
specific securities as collateral for the account of the broker (the Fund's
agent in acquiring the futures position). During the period the futures
contracts are open, changes in the value of the contracts are recognized as
unrealized gains or losses by "marking to market" on a daily basis to reflect
the market value of the contracts at the end of each day's trading. Variation
margin payments are made or received depending upon whether unrealized gains
or losses are incurred. When the contracts are closed, the Fund recognizes a
realized gain or loss equal to the difference between the proceeds from, or
cost of, the closing transaction and the Fund's basis in the contract. Risks
include the possibility of an illiquid market and that a change in value of
the contracts may not correlate with changes in the value of the securities
being hedged.
I. Expenses -- Distribution expenses and certain transfer agency expenses
directly attributable to a class of shares are charged to those classes'
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 a base management fee calculated at the annual rate of
1.50% of the Fund's average daily net assets. The base management fee will be
adjusted, on a monthly basis starting January 1, 2001, (i) upward at the rate of
0.20%, on a pro rata basis, for each percentage point the 12-month rolling
investment performance of the Class A shares exceeds the sum of 2.00% and the
12-month rolling investment record of the S&P 500 Index, or (ii) downward at the
rate of
FS-8
<PAGE> 131
0.20%, on a pro rata basis, for each percentage point the 12-month rolling
investment record of the S&P 500 Index less 2.00% exceeds the 12-month rolling
investment performance of the Class A shares. During the period ended July 31,
2000, AIM waived fees of $39,872.
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. For the period ended July 31, 2000, AIM was
paid $29,372 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. For the period ended July 31, 2000, AFS was
paid $23,127 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 plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.35% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and C shares. Of these amounts, the Fund may
pay a service fee of 0.25% of the average daily net assets of the Class A, Class
B or Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. The Plans also
impose a cap on the total sales charges, including asset-based sales charges
that may be paid by the respective classes. For the period ended July 31, 2000,
the Class A, Class B and Class C shares paid AIM Distributors $98,668, $162,407
and $55,143, respectively, as compensation under the Plans.
AIM Distributors received commissions of $355,159, from sales of the Class A
shares of the Fund during the period ended July 31, 2000. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the period ended July 31, 2000,
AIM Distributors received $3,607 in contingent deferred sales charges imposed on
redemptions of Fund shares.
Certain officers and trustees of the Trust are officers and directors of AIM,
AFS and AIM Distributors. During the period ended July 31, 2000, the Fund paid
legal fees of $2,270 for services rendered by Kramer, Levin, Naftalis & Frankel
LLP as counsel to the Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
For the period ended July 31, 2000, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $372 and reductions in custodian
fees of $4,150 under expense offset arrangements which resulted in a reduction
of the Fund's total expenses of $4,522.
NOTE 4-TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an
"interested person" of AIM. The Trust invests 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. The funds which
are party to the line of credit are charged a commitment fee of 0.10% on the
unused balance of the committed line. During the period ended July 31, 2000, the
Fund did not borrow under the line of credit.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the period ended July 31, 2000 was
$288,400,654 and $92,740,607, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of July 31, 2000 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of:
Investment securities $ 23,850,469
---------------------------------------------------------
Securities sold short 3,712,964
---------------------------------------------------------
Aggregate unrealized (depreciation) of:
Investment securities (12,342,197)
---------------------------------------------------------
Securities sold short (2,588,878)
---------------------------------------------------------
Net unrealized appreciation of investment
securities $ 12,632,358
=========================================================
Cost of investments for tax purposes is $252,650,411.
Proceeds from securities sold short for tax purposes is
$46,493,930.
</TABLE>
NOTE 7-CALL OPTION CONTRACTS
Transactions in call options written during the period ended July 31, 2000 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ------------
<S> <C> <C>
Beginning of year -- $ --
-----------------------------------------------------------
Written 3,080 4,480,974
-----------------------------------------------------------
Closed (2,590) (4,416,700)
-----------------------------------------------------------
Expired (490) (64,274)
-----------------------------------------------------------
End of year -- $ --
===========================================================
</TABLE>
FS-9
<PAGE> 132
NOTE 8-PUT OPTION CONTRACTS
Transactions in put options contracts written during the period ended July 31,
2000 are summarized as follows:
<TABLE>
<CAPTION>
PUT OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ----------
<S> <C> <C>
Beginning of year -- $ --
------------------------------------------------------------------------------------
Purchased 1,121 1,008,570
------------------------------------------------------------------------------------
Closed (970) (498,840)
------------------------------------------------------------------------------------
Expired (104) (111,484)
------------------------------------------------------------------------------------
End of year 47 $ 398,246
====================================================================================
</TABLE>
Open put option contracts written at July 31, 2000 were as follows:
<TABLE>
<CAPTION>
JULY 31,
NUMBER 2000
CONTRACT STRIKE OF PREMIUMS MARKET UNREALIZED
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE APPRECIATION
---------------- -------- ------ --------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Nasdaq 100 Index Sep-00 $260 47 $398,246 $86,950 $311,296
=====================================================================================
</TABLE>
NOTE 9-SHARE INFORMATION
Changes in shares outstanding during the period ended July 31, 2000 were as
follows:
<TABLE>
<CAPTION>
2000
-------------------------
SHARES AMOUNT
---------- ------------
<S> <C> <C>
Sold:
Class A 12,111,778 $149,479,697
---------------------------------------------------------------------------------------
Class B 7,973,127 99,165,325
---------------------------------------------------------------------------------------
Class C 2,722,459 33,913,845
---------------------------------------------------------------------------------------
Reacquired:
Class A (1,578,807) (19,345,802)
---------------------------------------------------------------------------------------
Class B (124,720) (1,569,680)
---------------------------------------------------------------------------------------
Class C (51,677) (614,934)
---------------------------------------------------------------------------------------
21,052,160 $261,028,451
=======================================================================================
</TABLE>
FS-10
<PAGE> 133
NOTE 10-FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
CLASS A
-----------------
DECEMBER 30, 1999
(DATE OPERATIONS
COMMENCED) TO
JULY 31, 2000
-----------------
<S> <C>
Net asset value, beginning of year $ 10.00
------------------------------------------------------------ --------
Income from investment operations:
Net investment income (loss) (0.01)
------------------------------------------------------------ --------
Net gains on securities (both realized and unrealized) 3.13
------------------------------------------------------------ --------
Total from investment operations 3.12
------------------------------------------------------------ --------
Net asset value, end of year $ 13.12
============================================================ ========
Total return(a) 31.20%
============================================================ ========
Ratios/supplemental data:
Net assets, end of year (000s omitted) $138,205
============================================================ ========
Ratio of expenses to average net assets (including interest
expense and dividends on short sales expense):
With fee waivers 2.41%(b)
------------------------------------------------------------ --------
Without fee waivers 2.49%(b)
============================================================ ========
Ratio of expenses to average net assets (excluding interest
expense and dividends on short sales expense):
With fee waivers 2.34%(b)
------------------------------------------------------------ --------
Without fee waivers 2.42%(b)
============================================================ ========
Ratio of net investment income (loss) to average net assets (0.20)%(b)
============================================================ ========
Ratio of interest expense and dividends on short sales
expense to average net assets 0.07%(b)
============================================================ ========
Portfolio turnover rate 125%
============================================================ ========
</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 $47,989,902.
<TABLE>
<CAPTION>
CLASS B CLASS C
-------------- --------------
MARCH 31, 2000 MARCH 31, 2000
(DATE SALES (DATE SALES
COMMENCED) TO COMMENCED) TO
JULY 31, 2000 JULY 31, 2000
-------------- --------------
<S> <C> <C>
Net asset value, beginning of year $ 12.81 $ 12.81
------------------------------------------------------------ -------- --------
Income from investment operations:
Net investment income (loss) (0.02) (0.02)
------------------------------------------------------------ -------- --------
Net gains on securities (both realized and unrealized) 0.31 0.30
------------------------------------------------------------ -------- --------
Total from investment operations 0.29 0.28
------------------------------------------------------------ -------- --------
Net asset value, end of year $ 13.10 $ 13.09
============================================================ ======== ========
Total return(a) 2.26% 2.19%
============================================================ ======== ========
Ratios/supplemental data:
Net assets, end of year (000s omitted) $102,795 $ 34,972
============================================================ ======== ========
Ratio of expenses to average net assets (including interest
expense and dividends on short sales expense) 3.10%(b) 3.10%(b)
============================================================ ======== ========
Ratio of expenses to average net assets (excluding interest
expense and dividends on short sales expense) 3.03%(b) 3.03%(b)
============================================================ ======== ========
Ratio of net investment income (loss) to average net assets (0.89)%(b) (0.89)%(b)
============================================================ ======== ========
Ratio of interest expense and dividends on short sales
expense to average net assets 0.07%(b) 0.07%(b)
============================================================ ======== ========
Portfolio turnover rate 125% 125%
============================================================ ======== ========
</TABLE>
(a) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(b) Ratios are annualized and based on average net assets of $48,326,013 and
$16,408,451 for Class B and Class C, respectively.
FS-11
<PAGE> 134
INDEPENDENT AUDITORS' REPORT
To 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, 2000, and the related statement of
operations for the year then ended, the statement of changes in net assets and
financial highlights for the year then ended and 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 audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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, 2000, 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
Mid Cap Opportunities Fund as of July 31, 2000, the results of its operations
for the year then ended, the changes in its net assets and financial highlights
for the year then ended and for the period December 30, 1998 (date operations
commenced) through July 31, 1999, in conformity with accounting principles
generally accepted in the United States of America.
/s/ KPMG LLP
September 11, 2000
Houston, Texas
FS-12
<PAGE> 135
SCHEDULE OF INVESTMENTS
July 31, 2000
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
STOCKS & OTHER EQUITY INTERESTS-85.39%
AUTO PARTS & EQUIPMENT-0.45%
Danaher Corp. 60,900 $ 3,102,094
--------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.64%
Adolph Coors Co.-Class B 70,400 4,435,200
--------------------------------------------------------------
BIOTECHNOLOGY-1.12%
Affymetrix, Inc.(a) 25,000 3,413,672
--------------------------------------------------------------
PE Corp.-Celera Genomics Group(a) 50,000 4,343,750
--------------------------------------------------------------
7,757,422
--------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-3.46%
Hispanic Broadcasting Corp.(a) 148,300 5,644,669
--------------------------------------------------------------
Pegasus Communications Corp.(a) 113,000 4,774,250
--------------------------------------------------------------
Univision Communications Inc.-Class
A(a) 76,300 9,480,275
--------------------------------------------------------------
Westwood One, Inc.(a) 145,000 4,032,812
--------------------------------------------------------------
23,932,006
--------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-11.40%
ADC Telecommunications, Inc.(a) 481,400 20,188,712
--------------------------------------------------------------
Andrew Corp.(a) 200,000 5,637,500
--------------------------------------------------------------
Bookham Technology PLC-ADR (United
Kingdom)(a) 100,000 6,275,000
--------------------------------------------------------------
Comverse Technology, Inc.(a) 106,000 9,301,500
--------------------------------------------------------------
Digital Lightwave, Inc.(a) 55,100 4,817,806
--------------------------------------------------------------
Ditech Communications Corp.(a) 63,300 3,030,487
--------------------------------------------------------------
Harris Corp. 149,800 5,130,650
--------------------------------------------------------------
Polycom, Inc.(a) 68,200 6,469,409
--------------------------------------------------------------
Sawtek Inc.(a) 112,500 5,990,625
--------------------------------------------------------------
Scientific-Atlanta, Inc. 156,900 12,081,300
--------------------------------------------------------------
78,922,989
--------------------------------------------------------------
COMPUTERS (NETWORKING)-0.65%
Virata Corp.(a) 70,800 4,531,200
--------------------------------------------------------------
COMPUTERS (PERIPHERALS)-1.24%
SanDisk Corp.(a) 135,000 8,606,250
--------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-13.69%
Advanced Fibre Communications,
Inc.(a) 153,200 6,568,450
--------------------------------------------------------------
Allaire Corp.(a) 113,100 3,490,195
--------------------------------------------------------------
Check Point Software Technologies
Ltd. (Israel)(a) 114,400 13,270,400
--------------------------------------------------------------
Digex, Inc.(a) 125,000 7,882,812
--------------------------------------------------------------
i2 Technologies, Inc.(a) 52,400 6,798,900
--------------------------------------------------------------
Macromedia, Inc.(a) 67,300 5,148,450
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
Macrovision Corp.(a) 102,100 $ 7,708,550
--------------------------------------------------------------
Mercury Interactive Corp.(a) 79,800 7,921,397
--------------------------------------------------------------
Orbotech, Ltd. (Israel)(a) 63,700 5,247,287
--------------------------------------------------------------
Portal Software, Inc.(a) 132,700 6,682,689
--------------------------------------------------------------
Quest Software, Inc.(a) 102,500 4,843,125
--------------------------------------------------------------
Rational Software Corp.(a) 79,000 8,038,250
--------------------------------------------------------------
Titan Capital Trust-$2.88 Conv.
Pfd. (Acquired 02/03/00-04/04/00;
Cost $3,262,947)(b) 62,000 2,573,000
--------------------------------------------------------------
Verity, Inc.(a) 78,400 2,856,700
--------------------------------------------------------------
Websense, Inc.(a) 137,200 3,155,600
--------------------------------------------------------------
WebTrends Corp.(a) 85,000 2,555,312
--------------------------------------------------------------
94,741,117
--------------------------------------------------------------
CONSUMER FINANCE-0.64%
Capital One Financial Corp. 75,000 4,396,875
--------------------------------------------------------------
ELECTRIC COMPANIES-0.51%
Montana Power Co. (The) 121,700 3,521,694
--------------------------------------------------------------
ELECTRICAL EQUIPMENT-5.86%
American Power Conversion Corp.(a) 124,100 3,156,794
--------------------------------------------------------------
CommScope, Inc.(a) 90,650 3,031,109
--------------------------------------------------------------
Cree, Inc.(a) 38,900 4,373,819
--------------------------------------------------------------
Electro Scientific Industries,
Inc.(a) 114,000 5,179,875
--------------------------------------------------------------
Sanmina Corp.(a)(b) 77,600 7,207,100
--------------------------------------------------------------
Veeco Instruments Inc.(a) 152,000 11,970,000
--------------------------------------------------------------
Viasystems Group, Inc.(a) 345,000 5,670,937
--------------------------------------------------------------
40,589,634
--------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.40%
Aeroflex Inc.(a) 95,550 2,735,119
--------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-4.31%
Coherent, Inc.(a) 54,800 3,281,150
--------------------------------------------------------------
Methode Electronics, Inc.-Class A 254,700 11,572,931
--------------------------------------------------------------
Newport Corp. 102,600 10,041,975
--------------------------------------------------------------
PerkinElmer, Inc. 76,600 4,897,612
--------------------------------------------------------------
29,793,668
--------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-3.83%
Intersil Holding Corp.(a) 84,000 4,814,250
--------------------------------------------------------------
Micrel, Inc.(a) 69,800 3,494,362
--------------------------------------------------------------
Microchip Technology Inc.(a) 59,750 4,148,891
--------------------------------------------------------------
MIPS Technologies, Inc.-Class A(a) 5,300 247,113
--------------------------------------------------------------
Semtech Corp.(a) 71,600 5,741,425
--------------------------------------------------------------
</TABLE>
FS-13
<PAGE> 136
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (SEMICONDUCTORS)-(CONTINUED)
Vitesse Semiconductor Corp.(a) 135,000 $ 8,049,375
--------------------------------------------------------------
26,495,416
--------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-1.23%
Credence Systems Corp.(a) 10,700 457,425
--------------------------------------------------------------
Novellus Systems, Inc.(a) 55,400 2,988,138
--------------------------------------------------------------
Varian Semiconductor Equipment
Associates, Inc.(a) 103,800 5,040,788
--------------------------------------------------------------
8,486,351
--------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-0.95%
SEI Investments Co. 120,600 6,602,850
--------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-2.34%
Forest Laboratories, Inc.(a) 39,900 4,269,300
--------------------------------------------------------------
Jones Pharma Inc. 76,500 2,500,594
--------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class
A(a) 167,100 9,399,375
--------------------------------------------------------------
16,169,269
--------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-1.27%
Health Management Associates,
Inc.-Class A(a) 561,700 8,811,669
--------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.83%
First Health Group Corp.(a) 188,300 5,766,688
--------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.93%
ACE Ltd. (Bermuda) 178,300 6,418,800
--------------------------------------------------------------
INSURANCE BROKERS-0.36%
Aon Corp. 70,100 2,523,600
--------------------------------------------------------------
INVESTMENT MANAGEMENT-0.62%
Federated Investors, Inc.-Class B 165,000 4,320,938
--------------------------------------------------------------
IRON & STEEL-0.93%
NS Group, Inc.(a) 450,000 6,468,750
--------------------------------------------------------------
LEISURE TIME (PRODUCTS)-1.30%
Harley-Davidson, Inc. 200,000 8,975,000
--------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.64%
Millipore Corp. 70,000 4,401,250
--------------------------------------------------------------
NATURAL GAS-0.45%
Dynegy Inc.-Class A 44,054 3,100,300
--------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-8.60%
BJ Services Co.(a) 50,000 2,918,750
--------------------------------------------------------------
Cooper Cameron Corp.(a) 82,300 5,318,638
--------------------------------------------------------------
ENSCO International Inc. 175,000 5,906,250
--------------------------------------------------------------
Grant Prideco, Inc.(a) 168,100 3,383,013
--------------------------------------------------------------
Nabors Industries, Inc.(a) 137,400 5,719,275
--------------------------------------------------------------
National-Oilwell, Inc.(a) 232,500 7,672,500
--------------------------------------------------------------
Patterson Energy, Inc.(a) 150,000 3,740,625
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT)-(CONTINUED)
R&B Falcon Corp.(a) 249,300 $ 4,970,419
--------------------------------------------------------------
Rowan Cos., Inc.(a) 186,800 4,716,700
--------------------------------------------------------------
Smith International, Inc.(a) 83,100 5,931,263
--------------------------------------------------------------
Transocean Sedco Forex Inc. 115,200 5,702,400
--------------------------------------------------------------
Weatherford International, Inc.(a) 88,500 3,545,531
--------------------------------------------------------------
59,525,364
--------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-1.56%
Anadarko Petroleum Corp. 82,992 3,968,055
--------------------------------------------------------------
Kerr-McGee Corp. 125,000 6,859,375
--------------------------------------------------------------
10,827,430
--------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-0.50%
Valero Energy Corp.-$1.94 Conv.
Pfd. 150,000 3,468,750
--------------------------------------------------------------
RAILROADS-0.76%
Stilwell Financial, Inc.(a) 120,000 5,287,500
--------------------------------------------------------------
RESTAURANTS-0.82%
Brinker International, Inc.(a) 110,000 3,141,875
--------------------------------------------------------------
Outback Steakhouse, Inc.(a) 110,350 2,531,153
--------------------------------------------------------------
5,673,028
--------------------------------------------------------------
RETAIL (DISCOUNTERS)-1.01%
Dollar Tree Stores, Inc.(a) 92,400 3,932,775
--------------------------------------------------------------
Family Dollar Stores, Inc. 181,000 3,054,375
--------------------------------------------------------------
6,987,150
--------------------------------------------------------------
RETAIL (SPECIALTY)-3.30%
Bed Bath & Beyond Inc.(a) 178,600 6,574,713
--------------------------------------------------------------
Linens 'n Things, Inc.(a) 243,500 7,289,781
--------------------------------------------------------------
Tiffany & Co. 109,000 3,733,250
--------------------------------------------------------------
Zale Corp.(a) 140,000 5,232,500
--------------------------------------------------------------
22,830,244
--------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-1.40%
Intimate Brands, Inc. 240,000 4,185,000
--------------------------------------------------------------
Talbots, Inc. (The) 108,500 5,479,250
--------------------------------------------------------------
9,664,250
--------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.99%
Lamar Advertising Co.(a) 150,000 6,843,750
--------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-0.76%
Critical Path, Inc.(a) 94,000 5,234,625
--------------------------------------------------------------
SERVICES (DATA PROCESSING)-2.81%
CheckFree Corp.(a) 135,000 8,201,250
--------------------------------------------------------------
CSG Systems International, Inc.(a) 107,100 5,696,381
--------------------------------------------------------------
Fiserv, Inc.(a) 99,100 5,531,019
--------------------------------------------------------------
19,428,650
--------------------------------------------------------------
</TABLE>
FS-14
<PAGE> 137
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-2.29%
Crown Castle International Corp.(a) 146,000 $ 4,964,000
--------------------------------------------------------------
Powerwave Technologies, Inc.(a) 115,700 4,013,344
--------------------------------------------------------------
Western Wireless Corp.-Class A(a) 125,000 6,875,000
--------------------------------------------------------------
15,852,344
--------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.12%
Corvis Corp.(a) 10,360 852,919
--------------------------------------------------------------
TELEPHONE-0.42%
NTL Inc.(a) 64,000 2,884,000
--------------------------------------------------------------
Total Stocks & Other Equity
Interests (Cost $546,634,042) 590,966,153
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CORPORATE CONVERTIBLE BONDS &
NOTES-1.67%
COMMUNICATIONS EQUIPMENT-0.70%
Kestrel Solutions, Conv. Notes
5.50%, 07/15/05 (Acquired
07/20/00; Cost $4,500,000)(c) $4,500,000 4,860,000
--------------------------------------------------------------
COMPUTERS (NETWORKING)-0.14%
Exodus Communications, Inc., Conv.
Notes
4.75%, 07/15/08 (Acquired
12/02/99; Cost $310,000)(c) 310,000 438,650
--------------------------------------------------------------
4.75%, 07/15/08 350,000 495,250
--------------------------------------------------------------
933,900
--------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.83%
Primus Telecomm Group, Conv. Debs.
5.75%, 02/15/07 (Acquired
02/17/00-07/24/00; Cost
$7,726,662)(c) 10,000,000 5,737,500
--------------------------------------------------------------
Total Corporate Convertible
Bonds & Notes (Cost
$13,123,745) 11,531,400
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION
CONTRACTS PRICE DATE
<S> <C> <C> <C> <C>
OPTIONS PURCHASED-6.69%
CALLS-0.58%
Freddie Mac
(Financial-
Diversified) 2,297 $ 40 Aug-00 308,659
------------------------------------------------------------------------
Lycos, Inc.
(Computers-Software
& Services) 1,134 60 Oct-00 1,247,400
------------------------------------------------------------------------
Micron Technology,
Inc. (Electronics-
Semiconductors) 2,500 85 Aug-00 1,093,750
------------------------------------------------------------------------
NS Group, Inc. (Iron &
Steel) 2,500 18 Oct-00 359,375
------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION MARKET
CONTRACTS PRICE DATE VALUE
<S> <C> <C> <C> <C>
CALLS-(CONTINUED)
Philadelphia Oil
Service Sector Index
(Oil & Gas-Exploration
& Production) 2,437 $ 140 Sep-00 $ 502,631
------------------------------------------------------------------------
Philadelphia
Semiconductor Index
(Electronics-
Semiconductors) 240 1,100 Aug-00 456,000
------------------------------------------------------------------------
S&P 500 Index
(Investments) 1,171 1,550 Aug-00 62,209
------------------------------------------------------------------------
4,030,024
------------------------------------------------------------------------
PUTS-6.11%
AMEX Pharmaceutical
Index (Health
Care-Drugs-Major
Pharmaceuticals) 655 370 Oct-00 630,438
------------------------------------------------------------------------
Morgan Stanley
Internet Index
(Investments) 2,777 70 Dec-00 2,707,575
------------------------------------------------------------------------
Nasdaq 100 Index
(Investments) 274 3,300 Sep-00 3,421,575
------------------------------------------------------------------------
147 3,600 Dec-00 5,582,325
------------------------------------------------------------------------
Pegasus Communications
Corp. (Broadcasting-
Television, Radio &
Cable) 1,130 32 Sep-00 162,438
------------------------------------------------------------------------
Russell 2000 Index
(Investments) 2,512 500 Sep-00 4,553,000
------------------------------------------------------------------------
2,473 510 Dec-00 8,717,325
------------------------------------------------------------------------
S&P 500 Index
(Investments) 580 1,450 Aug-00 1,943,000
------------------------------------------------------------------------
1,484 1,420 Aug-00 3,134,950
------------------------------------------------------------------------
600 1,400 Sep-00 1,432,500
------------------------------------------------------------------------
1,185 1,350 Dec-00 3,851,250
------------------------------------------------------------------------
975 1,400 Dec-00 4,533,750
------------------------------------------------------------------------
Symbol Technologies,
Inc. (Electrical
Equipment) 1,615 50 Aug-00 1,615,000
------------------------------------------------------------------------
42,285,126
------------------------------------------------------------------------
Total Options Purchased (Cost $51,718,702) 46,315,150
------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS-4.94%
STIC Liquid Assets Portfolio(d) 17,090,354 17,090,354
--------------------------------------------------------------
STIC Prime Portfolio(d) 17,090,354 17,090,354
--------------------------------------------------------------
Total Money Market Funds (Cost
$34,180,708) 34,180,708
--------------------------------------------------------------
TOTAL INVESTMENTS-98.69% (Cost
$645,657,197) 682,993,411
--------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.31% 9,100,746
--------------------------------------------------------------
NET ASSETS-100.00% $692,094,157
==============================================================
</TABLE>
FS-15
<PAGE> 138
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(e)
Advanced Micro Devices, Inc. 35,000 $ 2,517,812
-------------------------------------------------------------
Amazon.com, Inc. 113,600 3,422,200
-------------------------------------------------------------
Amkor Technology, Inc. 100,000 2,750,000
-------------------------------------------------------------
ANTEC Corp. 55,000 2,079,687
-------------------------------------------------------------
ARM Holdings PLC-ADR (United Kingdom) 78,100 2,679,806
-------------------------------------------------------------
Atmel Corp. 105,600 3,161,400
-------------------------------------------------------------
Audiovox Corp-Class A 72,100 1,117,550
-------------------------------------------------------------
BroadVision, Inc. 77,700 2,811,769
-------------------------------------------------------------
CacheFlow Inc. 40,000 2,720,000
-------------------------------------------------------------
Carrier Access Corp. 39,000 2,335,125
-------------------------------------------------------------
Costco Wholesale Corp. 100,000 3,256,250
-------------------------------------------------------------
CVS Corp. 81,800 3,225,987
-------------------------------------------------------------
Digital Island Inc. 80,000 2,295,000
-------------------------------------------------------------
DoubleClick Inc. 51,600 1,854,375
-------------------------------------------------------------
Echelon Corp. 80,000 2,970,000
-------------------------------------------------------------
Express Scripts, Inc.-Class A 93,000 5,975,250
-------------------------------------------------------------
Fastenal Co. 92,000 5,681,000
-------------------------------------------------------------
Globalstar Telecommunications Ltd. 88,000 682,000
-------------------------------------------------------------
Hewlett-Packard Co. 12,500 1,364,844
-------------------------------------------------------------
Knight Trading Group, Inc. 52,500 1,394,531
-------------------------------------------------------------
Magna International Inc.-Class A
(Canada) 68,000 3,387,250
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(e)-(CONTINUED)
Metris Companies Inc. 132,500 $ 3,883,906
-------------------------------------------------------------
Newell Rubbermaid Inc. 185,000 4,983,437
-------------------------------------------------------------
Orthodontic Centers of America, Inc. 239,700 6,202,237
-------------------------------------------------------------
Oxford Health Plans, Inc. 150,000 3,590,625
-------------------------------------------------------------
QLogic Corp. 32,500 2,421,250
-------------------------------------------------------------
QLT Inc. (Canada) 45,600 3,003,900
-------------------------------------------------------------
QUALCOMM Inc. 56,700 3,681,956
-------------------------------------------------------------
Scient Corp. 36,000 1,678,500
-------------------------------------------------------------
Sigma-Aldrich Corp. 110,000 2,997,500
-------------------------------------------------------------
Silicon Storage Technology, Inc. 79,000 4,991,813
-------------------------------------------------------------
Starbucks Corp. 85,000 3,187,500
-------------------------------------------------------------
Stryker Corp. 158,000 6,784,125
-------------------------------------------------------------
Sunoco, Inc. 125,000 3,046,875
-------------------------------------------------------------
Symbol Technologies, Inc. 87,500 3,489,063
-------------------------------------------------------------
TMP Worldwide, Inc. 23,800 1,713,600
-------------------------------------------------------------
UnitedHealth Group Inc. 84,600 6,921,338
-------------------------------------------------------------
Vignette Corp. 53,300 1,805,538
-------------------------------------------------------------
Whole Foods Market, Inc. 75,000 3,351,563
-------------------------------------------------------------
Yahoo! Inc. 42,500 5,469,219
-------------------------------------------------------------
$130,885,781
=============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
Pfd. - Preferred
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 7.
(c) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Trustees. The
aggregate market value of these securities at 07/31/00 was $13,609,150 which
represented 1.97% of the Fund's net assets.
(d) The money market fund has the same investment advisor as the Fund.
(e) Collateral on short sales was segregated by the fund in the amount of
$149,532,385 which represents 115.97% of market value of securities sold
short.
See Notes to Financial Statements.
FS-16
<PAGE> 139
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2000
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$645,657,197) $682,993,411
------------------------------------------------------------
Cash 3,358,811
------------------------------------------------------------
Receivables for:
Investments sold 9,613,808
------------------------------------------------------------
Fund shares sold 529,249
------------------------------------------------------------
Dividends and interest 508,950
------------------------------------------------------------
Investments sold short 133,456,563
------------------------------------------------------------
Short positions 2,687,658
------------------------------------------------------------
Short stock rebates 767,223
------------------------------------------------------------
Investment for deferred compensation plan 8,763
------------------------------------------------------------
Other assets 6,853
------------------------------------------------------------
Total assets 833,931,289
------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 7,701,274
------------------------------------------------------------
Fund shares reacquired 1,120,964
------------------------------------------------------------
Options written (premiums received
$1,696,536) 438,781
------------------------------------------------------------
Short stock account interest 16,198
------------------------------------------------------------
Deferred compensation plan 8,763
------------------------------------------------------------
Market value of securities sold short
(proceeds from short sales $133,456,563) 130,885,781
------------------------------------------------------------
Accrued advisory fees 951,444
------------------------------------------------------------
Accrued administrative services fees 14,199
------------------------------------------------------------
Accrued distribution fees 413,166
------------------------------------------------------------
Accrued trustees' fees 617
------------------------------------------------------------
Accrued transfer agent fees 130,411
------------------------------------------------------------
Accrued operating expenses 155,534
------------------------------------------------------------
Total liabilities 141,837,132
------------------------------------------------------------
Net assets applicable to shares outstanding $692,094,157
============================================================
NET ASSETS:
Class A $336,203,260
============================================================
Class B $255,438,870
============================================================
Class C $100,452,027
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 14,234,752
============================================================
Class B 10,865,522
============================================================
Class C 4,273,607
============================================================
Class A:
Net asset value and redemption price per
share $ 23.62
------------------------------------------------------------
Offering price per share:
(Net asset value of $23.62 divided by
94.50%) $ 24.99
============================================================
Class B:
Net asset value and offering price per share $ 23.51
============================================================
Class C:
Net asset value and offering price per share $ 23.51
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended July 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Short stock rebate $ 2,762,008
------------------------------------------------------------
Dividends -- Affiliated issuers 1,454,901
------------------------------------------------------------
Dividends 534,381
------------------------------------------------------------
Interest 527,559
------------------------------------------------------------
Total investment income 5,278,849
------------------------------------------------------------
EXPENSES:
Advisory fees 5,153,525
------------------------------------------------------------
Administrative services fee 86,581
------------------------------------------------------------
Custodian fees 67,327
------------------------------------------------------------
Distribution fees -- Class A 596,038
------------------------------------------------------------
Distribution fees -- Class B 1,287,873
------------------------------------------------------------
Distribution fees -- Class C 485,856
------------------------------------------------------------
Interest 576,971
------------------------------------------------------------
Transfer agent fees -- Class A 178,964
------------------------------------------------------------
Transfer agent fees -- Class B 175,188
------------------------------------------------------------
Transfer agent fees -- Class C 66,085
------------------------------------------------------------
Trustees' fees 7,449
------------------------------------------------------------
Dividends on short sales 297,343
------------------------------------------------------------
Other 568,905
------------------------------------------------------------
Total expenses 9,548,105
------------------------------------------------------------
Less: Fees waived (123,065)
------------------------------------------------------------
Expenses paid indirectly (27,311)
------------------------------------------------------------
Net expenses 9,397,729
------------------------------------------------------------
Net investment income (loss) (4,118,880)
------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, SECURITIES SOLD
SHORT, FUTURES AND OPTION CONTRACTS
Net realized gain (loss) from:
Investment securities (59,472,683)
------------------------------------------------------------
Futures contracts (608,808)
------------------------------------------------------------
Option contracts 15,389,246
------------------------------------------------------------
Securities sold short 8,185,246
------------------------------------------------------------
(36,506,999)
------------------------------------------------------------
Change in net unrealized appreciation of:
Investment securities 36,515,950
------------------------------------------------------------
Option contracts 1,261,674
------------------------------------------------------------
Securities sold short 2,568,948
------------------------------------------------------------
40,346,572
------------------------------------------------------------
Net gain on investment securities, securities
sold short, futures and option contracts 3,839,573
------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $ (279,307)
============================================================
</TABLE>
See Notes to Financial Statements.
FS-17
<PAGE> 140
STATEMENT OF CHANGES IN NET ASSETS
For the year ended July 31, 2000 and the period December 30, 1998 (date
operations commenced) through July 31, 1999
<TABLE>
<CAPTION>
2000 1999
------------ ----------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (4,118,880) $ (12,670)
----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
securities sold short, futures and option contracts (36,506,999) 454,839
----------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, securities sold short, futures and option
contracts 40,346,572 818,178
----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (279,307) 1,260,347
----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (50,980) --
----------------------------------------------------------------------------------------
Class B (21,216) --
----------------------------------------------------------------------------------------
Class C (6,678) --
----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (685,956) --
----------------------------------------------------------------------------------------
Class B (9,194) --
----------------------------------------------------------------------------------------
Class C (2,917) --
----------------------------------------------------------------------------------------
Share transactions-net:
Class A 329,734,266 3,529,528
----------------------------------------------------------------------------------------
Class B 255,671,637 --
----------------------------------------------------------------------------------------
Class C 102,954,627 --
----------------------------------------------------------------------------------------
Net increase in net assets 687,304,282 4,789,875
----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 4,789,875 --
----------------------------------------------------------------------------------------
End of year $692,094,157 $4,789,875
========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $687,714,752 $3,529,528
----------------------------------------------------------------------------------------
Undistributed net investment income (loss) (31,466) --
----------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, securities sold short, futures and option
contracts (36,753,879) 442,169
----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
securities sold short, futures and option contracts 41,164,750 818,178
----------------------------------------------------------------------------------------
$692,094,157 $4,789,875
========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-18
<PAGE> 141
NOTES TO FINANCIAL STATEMENTS
July 31, 2000
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 three
separate portfolios, each having an unlimited number of shares of beneficial
interest. The Fund consists of three different classes of shares: Class A
shares, Class B shares and Class C shares. Class A shares are sold with a
front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. The Fund is closed to new investors as of
March 21, 2000. Matters affecting each portfolio or class will be voted on
exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is long-term growth of capital.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial
statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price as of the close of the
customary trading session 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 as of the close of
the customary trading session on the valuation date or absent a last sales
price, at the closing bid price. Debt obligations (including convertible
bonds) are valued on the basis of prices provided by an independent pricing
service. Prices provided by the pricing service may be determined without
exclusive reliance on quoted prices, and may reflect appropriate factors such
as yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the 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. For purposes of determining
net asset value per share, futures and option contracts generally will be
valued 15 minutes after the close of the customary trading session of the New
York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the customary
trading session of the NYSE which would not be reflected in the computation
of the Fund's net asset value. If events materially affecting the value of
such securities occur during such period, then these securities will be
valued at their fair value as determined in good faith by or under the
supervision of the Board of Trustees.
B. Securities Transactions and Investment Income -- 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 and short stock rebate income are recorded on the accrual
basis. Dividend income and dividend expense on short sales are recorded on
the ex-dividend date.
On July 31, 2000 additional paid-in capital was decreased by $4,175,306,
undistributed net investment income was increased by $4,166,288 and
undistributed net realized gains was increased by $9,018 as a result of
reclassifications of a net operating loss and other reclassifications. Net
assets of the Fund were unaffected by the reclassifications.
C. Distributions -- Distributions from income and net realized capital gains, if
any, are generally paid annually and recorded on ex-dividend date. The Fund
may elect to use a portion of the proceeds from redemptions as distributions
for federal income tax purposes.
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. Securities Sold Short -- The Fund may enter into short sales of securities
which it concurrently holds (against the box) or for which it holds no
corresponding position (naked). Securities sold short represent a liability
of the Fund to acquire specific securities at prevailing market prices at a
future date in order to satisfy the obligation to deliver the securities
sold. The liability is 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 disclosed in "A" above. The Fund will incur a loss if the
price of the security increases between the date of the short sale and the
date on which the Fund replaces the borrowed security. The Fund realizes a
gain if the price of the security declines between those dates.
The Fund is required to segregate cash or securities as collateral in
margin accounts at a level that is equal to the obligation to the broker who
delivered such securities to the
FS-19
<PAGE> 142
buyer on behalf of the Fund. The short stock rebate presented in the
statement of operations represents income earned on short sale proceeds held
on deposit with the broker. The Fund may also earn or incur margin interest
on short sales transactions. Margin interest is the income earned (expense
incurred) as a result of the market value of securities sold short being less
than (greater than) the proceeds received from the short sales.
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 option's underlying instrument at
a fixed strike price. In return for this right, the Fund pays an option
premium. The option's underlying instrument may be a security, 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.
G. 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.
H. Futures Contracts -- The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits required
upon entering into futures contracts are satisfied by the segregation of
specific securities as collateral for the account of the broker (the Fund's
agent in acquiring the futures position). During the period the futures
contracts are open, changes in the value of the contracts are recognized as
unrealized gains or losses by "marking to market" on a daily basis to reflect
the market value of the contracts at the end of each day's trading. Variation
margin payments are made or received depending upon whether unrealized gains
or losses are incurred. When the contracts are closed, the Fund recognizes a
realized gain or loss equal to the difference between the proceeds from, or
cost of, the closing transaction and the Fund's basis in the contract. Risks
include the possibility of an illiquid market and that a change in value of
the contracts may not correlate with changes in the value of the securities
being hedged.
I. Expenses -- Distribution expenses and certain transfer agency expenses
directly attributable to a class of shares are charged to those classes'
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 a base management fee calculated at the annual rate of
1.50% of the Fund's average daily net assets. The base management fee will be
adjusted, on a monthly basis starting January 1, 2001, (i) upward at the rate of
0.20%, on a pro rata basis, for each percentage point the 12-month rolling
investment performance of the Class A shares exceeds the sum of 2.00% and the
12-month rolling investment record of the S&P MidCap 400 Index, or (ii) downward
at the rate of 0.20%, on a pro rata basis, for each percentage point the
12-month rolling investment record of the S&P MidCap 400 Index
FS-20
<PAGE> 143
less 2.00% exceeds the 12-month rolling investment performance of the Class A
shares.
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. For the year ended July 31, 2000, AIM was paid
$86,581 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. For the year ended July 31, 2000, AFS was paid
$176,151 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 plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.35% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and C shares. Of these amounts, the Fund may
pay a service fee of 0.25% of the average daily net assets of the Class A, Class
B or Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. The Plans also
impose a cap on the total sales charges, including asset-based sales charges
that may be paid by the respective classes. Upon the Fund closing to new
investors AIM Distributors agreed to waive 0.10% of the Fund's average daily net
assets of Class A distribution fees. For the year ended July 31, 2000, the Class
A, Class B and Class C shares paid AIM Distributors $472,973, $1,287,873 and
$485,856, respectively, as compensation under the Plans. During the year ended
July 31, 2000, AIM Distributors waived fees of $123,065 for Class A shares.
AIM Distributors received commissions of $894,229, from sales of the Class A
shares of the Fund during the year ended July 31, 2000. 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, 2000, AIM
Distributors received $28,018 in contingent deferred sales charges imposed on
redemptions of Fund shares.
Certain officers and trustees of the Trust are officers and directors of AIM,
AFS and AIM Distributors.
During the year ended July 31, 2000, the Fund paid legal fees of $3,273 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
For the year ended July 31, 2000, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $3,615 and reductions in custodian
fees of $23,696 under expense offset arrangements which resulted in a reduction
of the Fund's total expenses of $27,311.
NOTE 4-TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an
"interested person" of AIM. The Trust invests 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. The funds which
are party to the line of credit are charged a commitment fee of 0.10% on the
unused balance of the committed line.
During the year ended July 31, 2000, the average outstanding daily balance of
bank loans for the Fund was $7,131,148 with a weighted average interest rate of
6.98%.
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, 2000 was
$1,215,360,162 and $610,462,548, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of July 31, 2000 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of:
Investment securities $ 93,859,060
------------------------------------------------------------
Securities sold short 12,641,968
------------------------------------------------------------
Aggregate unrealized (depreciation) of:
Investment securities (57,823,117)
------------------------------------------------------------
Securities sold short (10,071,186)
------------------------------------------------------------
Net unrealized appreciation of investment
securities $ 38,606,725
============================================================
Cost of investments for tax purposes is $646,957,468.
Proceeds from securities sold short for tax purposes is
$133,456,563.
</TABLE>
NOTE 7-CALL OPTION CONTRACTS
Transactions in call options written during the year ended July 31, 2000 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ------------
<S> <C> <C>
Beginning of year -- $ --
------------------------------------------------------------
Written 13,350 27,110,355
------------------------------------------------------------
Closed (12,737) (26,863,020)
------------------------------------------------------------
Expired (458) (164,645)
------------------------------------------------------------
End of year 155 $ 82,690
============================================================
</TABLE>
Open call options written at July 31, 2000 were as follows:
<TABLE>
<CAPTION>
NUMBER JULY 31,
CONTRACT STRIKE OF PREMIUMS 2000 UNREALIZED
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE APPRECIATION
--------------------- -------- ------ --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Sanmina Corp. Sep-00 $105 155 $82,690 $68,781 $13,909
=============================================================================================
</TABLE>
FS-21
<PAGE> 144
NOTE 8-PUT OPTION CONTRACTS
Transactions in put options contracts written during the year ended July 31,
2000 are summarized as follows:
<TABLE>
<CAPTION>
PUT OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of year 21 $ 19,586
-------------------------------------------------------------------------------------
Purchased 6,291 5,398,859
-------------------------------------------------------------------------------------
Closed (5,185) (2,624,326)
-------------------------------------------------------------------------------------
Expired (927) (1,180,273)
-------------------------------------------------------------------------------------
End of year 200 $ 1,613,846
=====================================================================================
</TABLE>
Open put option contracts written at July 31, 2000 were as follows:
<TABLE>
<CAPTION>
JULY 31,
2000
CONTRACT STRIKE NUMBER OF PREMIUMS MARKET UNREALIZED
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE APPRECIATION
---------------- -------- ------ --------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Nasdaq 100 Index Sep-00 $260 200 $1,613,846 $370,000 $ 1,243,846
=======================================================================================
</TABLE>
NOTE 9-SHARE INFORMATION
Changes in shares outstanding during the years ended July 31, 2000 and the
period December 30, 1998 (date operations commenced) through July 31, 1999 were
as follows:
<TABLE>
<CAPTION>
JULY 31, 2000 JULY 31, 1999
-------------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ -------- ----------
<S> <C> <C> <C> <C>
Sold:
Class A 15,903,016 $376,526,177 331,198 $3,867,041
------------------------------------------------------------------------------------------------------------------
Class B 11,676,896 275,160,286 -- --
------------------------------------------------------------------------------------------------------------------
Class C 4,564,213 109,937,385 -- --
------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 39,350 706,157 -- --
------------------------------------------------------------------------------------------------------------------
Class B 1,107 21,560 -- --
------------------------------------------------------------------------------------------------------------------
Class C 511 9,927 -- --
------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (2,011,095) (47,498,068) (27,717) (337,513)
------------------------------------------------------------------------------------------------------------------
Class B (812,481) (19,510,209) -- --
------------------------------------------------------------------------------------------------------------------
Class C (291,117) (6,992,685) -- --
------------------------------------------------------------------------------------------------------------------
29,070,400 $688,360,530 303,481 $3,529,528
==================================================================================================================
</TABLE>
FS-22
<PAGE> 145
NOTE 10-FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------
DECEMBER 30, 1998
(DATE OPERATIONS
YEAR ENDED COMMENCED) TO
JULY 31, 2000(a) JULY 31, 1999
---------------- -----------------
<S> <C> <C>
Net asset value, beginning of period $ 15.78 $10.00
------------------------------------------------------------ -------- ------
Income from investment operations:
Net investment income (loss) (0.18) (0.04)
------------------------------------------------------------ -------- ------
Net gains on securities (both realized and unrealized) 9.92 5.82
------------------------------------------------------------ -------- ------
Total from investment operations 9.74 5.78
------------------------------------------------------------ -------- ------
Less distributions:
Dividends from net investment income (0.02) --
------------------------------------------------------------ -------- ------
Distributions from net realized gains (1.88) --
------------------------------------------------------------ -------- ------
Total distributions (1.90) --
------------------------------------------------------------ -------- ------
Net asset value, end of period $ 23.62 $15.78
============================================================ ======== ======
Total return(b) 65.58% 57.80%
============================================================ ======== ======
Ratios/supplemental data:
Net assets, end of year (000s omitted) $336,203 $4,790
============================================================ ======== ======
Ratio of expenses to average net assets (including interest
expense and dividends on short sales expense):
With fee waivers 2.33%(c) 2.28%(d)
------------------------------------------------------------ -------- ------
Without fee waivers 2.40%(c) 7.55%(d)
============================================================ ======== ======
Ratio of expenses to average net assets (excluding interest
expense and dividends on short sales expense):
With fee waivers 2.08%(c) 2.19%(d)
------------------------------------------------------------ -------- ------
Without fee waivers 2.15%(c) 7.46%(d)
============================================================ ======== ======
Ratio of net investment income (loss) to average net assets (0.80)%(c) (0.79)%(d)
============================================================ ======== ======
Ratio of interest expense and dividends on short sales
expense to average net assets 0.25%(c) 0.09%(d)
============================================================ ======== ======
Portfolio turnover rate 196% 135%
============================================================ ======== ======
</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 based on average net assets of $170,296,714.
(d) Annualized.
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------- -----------------
NOVEMBER 12, 1999 NOVEMBER 12, 1999
(DATE SALES (DATE SALES
COMMENCED) TO COMMENCED) TO
JULY 31, 2000(a) JULY 31, 2000(a)
----------------- -----------------
<S> <C> <C>
Net asset value, beginning of period $ 17.83 $ 17.83
------------------------------------------------------------ -------- --------
Income from investment operations:
Net investment income (loss) (0.28) (0.28)
------------------------------------------------------------ -------- --------
Net gains on securities (both realized and unrealized) 5.97 5.97
------------------------------------------------------------ -------- --------
Total from investment operations 5.69 5.69
------------------------------------------------------------ -------- --------
Less distributions:
Dividends from net investment income (0.01) (0.01)
------------------------------------------------------------ -------- --------
Total distributions (0.01) (0.01)
------------------------------------------------------------ -------- --------
Net asset value, end of period $ 23.51 $ 23.51
============================================================ ======== =======
Total return(b) 31.95% 31.95%
============================================================ ======== =======
Ratios/supplemental data:
Net assets, end of year (000s omitted) $255,439 $100,452
============================================================ ======== =======
Ratio of expenses to average net assets (including interest
expense and dividends on short sales expense) 3.08%(c) 3.08%(c)
------------------------------------------------------------ -------- --------
Ratio of expenses to average net assets (excluding interest
expense and dividends on short sales expense) 2.83%(c) 2.83%(c)
============================================================ ======== =======
Ratio of net investment income (loss) to average net assets (1.55)%(c) (1.55)%(c)
============================================================ ======== =======
Ratio of interest expense and dividends on short sales
expense to average net assets 0.25%(c) 0.25%(c)
============================================================ ======== =======
Portfolio turnover rate 196% 196%
============================================================ ======== =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average net assets of $179,224,846 and
$67,613,477 for Class B and Class C, respectively.
FS-23
<PAGE> 146
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, 2000, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the years in the two-year period then ended and the
financial highlights for each of the years in the two-year period then ended 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 auditing standards generally
accepted in the United States of America. 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, 2000, 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, 2000, the results of its operations
for the year then ended, the statements of changes in its net assets for each of
the years in the two-year period then ended and the financial highlights for
each of the years in the two-year period then ended and for the period June 29,
1998 (date operations commenced) through July 31, 1998, in conformity with
accounting principles generally accepted in the United States of America.
/s/ KPMG LLP
September 11, 2000
Houston, Texas
FS-24
<PAGE> 147
SCHEDULE OF INVESTMENTS
July 31, 2000
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-81.58%
BANKS (REGIONAL)-0.49%
Greater Bay Bancorp 75,000 $ 4,035,937
--------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.70%
Pegasus Communications Corp.(a) 136,400 5,762,900
--------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-4.52%
Allen Group, Inc.(a) 16,000 280,000
--------------------------------------------------------------
Allied Riser Communications Corp.(a) 500,000 5,125,000
--------------------------------------------------------------
Polycom, Inc.(a) 129,900 12,322,233
--------------------------------------------------------------
Tollgrade Communications, Inc.(a) 150,000 15,747,656
--------------------------------------------------------------
Westell Technologies, Inc.-Class A(a) 150,000 3,609,375
--------------------------------------------------------------
37,084,264
--------------------------------------------------------------
COMPUTERS (PERIPHERALS)-2.59%
InFocus Corp.(a) 209,800 7,343,000
--------------------------------------------------------------
Media 100 Inc.(a) 200,000 2,212,500
--------------------------------------------------------------
SanDisk Corp.(a) 183,600 11,704,500
--------------------------------------------------------------
21,260,000
--------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-11.63%
Allaire Corp.(a) 150,000 4,628,906
--------------------------------------------------------------
Commtouch Software Ltd. (Israel)(a) 100,000 2,056,250
--------------------------------------------------------------
Digex, Inc.(a) 187,600 11,830,525
--------------------------------------------------------------
i2 Technologies, Inc.(a) 71,500 9,277,125
--------------------------------------------------------------
Macromedia, Inc.(a) 81,300 6,219,450
--------------------------------------------------------------
Macrovision Corp.(a) 146,900 11,090,950
--------------------------------------------------------------
Mercury Interactive Corp.(a) 92,000 9,132,437
--------------------------------------------------------------
Natural MicroSystems Corp.(a) 90,000 10,029,375
--------------------------------------------------------------
Orbotech, Ltd. (Israel)(a) 80,000 6,590,000
--------------------------------------------------------------
Quest Software, Inc.(a) 125,000 5,906,250
--------------------------------------------------------------
Rational Software Corp.(a) 104,900 10,673,575
--------------------------------------------------------------
Verity, Inc.(a) 93,700 3,414,194
--------------------------------------------------------------
WebTrends Corp.(a) 150,000 4,509,375
--------------------------------------------------------------
95,358,412
--------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-0.64%
Bindley Western Industries, Inc. 200,000 5,262,500
--------------------------------------------------------------
ELECTRICAL EQUIPMENT-3.92%
CommScope, Inc.(a) 109,400 3,658,062
--------------------------------------------------------------
Electro Scientific Industries, Inc.(a) 147,500 6,702,031
--------------------------------------------------------------
Plexus Corp.(a) 35,000 3,948,437
--------------------------------------------------------------
Veeco Instruments Inc.(a) 177,400 13,970,250
--------------------------------------------------------------
Viasystems Group, Inc.(a) 234,600 $ 3,856,237
--------------------------------------------------------------
32,135,017
--------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS)-2.05%
Kent Electronics Corp.(a) 262,300 8,164,087
--------------------------------------------------------------
Power-One, Inc.(a) 73,500 8,677,594
--------------------------------------------------------------
16,841,681
--------------------------------------------------------------
ELECTRONICS (DEFENSE)-1.74%
Aeroflex Inc.(a) 117,775 3,371,309
--------------------------------------------------------------
Anaren Microwave, Inc.(a) 150,000 10,884,375
--------------------------------------------------------------
14,255,684
--------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION)-6.42%
Alpha Industries, Inc.(a) 162,600 5,538,562
--------------------------------------------------------------
Coherent, Inc.(a) 65,200 3,903,850
--------------------------------------------------------------
Keithley Instruments, Inc. 80,000 3,875,000
--------------------------------------------------------------
Methode Electronics, Inc.-Class A 150,000 6,815,625
--------------------------------------------------------------
Newport Corp. 124,300 12,165,862
--------------------------------------------------------------
Photon Dynamics, Inc.(a) 94,400 5,097,600
--------------------------------------------------------------
Trimble Navigation Ltd.(a) 110,000 4,757,500
--------------------------------------------------------------
Varian Inc.(a) 250,000 10,531,250
--------------------------------------------------------------
52,685,249
--------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-7.79%
Cirrus Logic, Inc.(a) 325,000 6,296,875
--------------------------------------------------------------
Dense-Pac Microsystems, Inc.(a) 500,000 5,406,250
--------------------------------------------------------------
Elantec Semiconductor, Inc.(a) 222,100 16,171,656
--------------------------------------------------------------
Exar Corp.(a) 160,000 14,850,000
--------------------------------------------------------------
MIPS Technologies, Inc.-Class A(a) 85,000 3,963,125
--------------------------------------------------------------
TranSwitch Corp.(a) 104,900 8,378,888
--------------------------------------------------------------
Zoran Corp.(a) 200,000 8,825,000
--------------------------------------------------------------
63,891,794
--------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-3.14%
Advanced Energy Industries, Inc.(a) 125,000 5,625,000
--------------------------------------------------------------
Credence Systems Corp.(a) 70,000 2,992,500
--------------------------------------------------------------
Cymer, Inc.(a) 190,000 8,621,250
--------------------------------------------------------------
Varian Semiconductor Equipment
Associates, Inc.(a) 175,000 8,498,438
--------------------------------------------------------------
25,737,188
--------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.07%
SEI Investments Co. 159,600 8,738,100
--------------------------------------------------------------
</TABLE>
FS-25
<PAGE> 148
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
GAMING, LOTTERY & PARIMUTUEL COMPANIES-0.63%
Isle of Capri Casinos, Inc.(a) 419,600 $ 5,192,550
--------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-1.86%
Alpharma Inc.-Class A 150,400 9,851,200
--------------------------------------------------------------
Jones Pharma Inc. 107,900 3,526,981
--------------------------------------------------------------
Pain Therapeutics, Inc.(a) 99,300 1,837,050
--------------------------------------------------------------
15,215,231
--------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.86%
First Health Group Corp.(a) 230,200 7,049,875
--------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-1.84%
ArthroCare Corp.(a) 113,600 4,125,100
--------------------------------------------------------------
Coopers Cos., Inc. 125,000 4,390,625
--------------------------------------------------------------
Intuitive Surgical, Inc.(a) 250,000 4,718,750
--------------------------------------------------------------
Zoll Medical Corp.(a) 45,000 1,828,125
--------------------------------------------------------------
15,062,600
--------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-1.18%
Priority Healthcare Corp.-Class B(a) 125,000 6,703,125
--------------------------------------------------------------
Techne Corp.(a) 30,000 2,996,250
--------------------------------------------------------------
9,699,375
--------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.76%
Raymond James Financial, Inc. 250,000 6,250,000
--------------------------------------------------------------
INVESTMENT MANAGEMENT-0.63%
Federated Investors, Inc.-Class B 196,650 5,149,772
--------------------------------------------------------------
INVESTMENTS-1.09%
Nasdaq 100 Shares(a) 100,000 8,950,000
--------------------------------------------------------------
IRON & STEEL-0.96%
NS Group, Inc.(a) 550,000 7,906,250
--------------------------------------------------------------
LEISURE TIME (PRODUCTS)-1.02%
Oakley, Inc.(a) 575,000 8,337,500
--------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.82%
Dril-Quip, Inc.(a) 167,800 6,701,513
--------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-7.10%
Cal Dive International, Inc.(a) 280,900 13,553,425
--------------------------------------------------------------
Grey Wolf, Inc.(a) 1,500,000 6,937,500
--------------------------------------------------------------
Marine Drilling Cos., Inc.(a) 400,000 8,700,000
--------------------------------------------------------------
National-Oilwell, Inc.(a) 283,900 9,368,700
--------------------------------------------------------------
Patterson Energy, Inc.(a) 262,300 6,541,106
--------------------------------------------------------------
Precision Drilling Corp.
(Canada)(a) 209,800 7,159,425
--------------------------------------------------------------
UTI Energy Corp.(a) 188,800 5,947,200
--------------------------------------------------------------
58,207,356
--------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-2.22%
Comstock Resources, Inc.(a) 500,000 $ 3,468,750
--------------------------------------------------------------
Cross Timbers Oil Co. 165,000 2,712,188
--------------------------------------------------------------
Evergreen Resources, Inc.(a) 150,000 4,106,250
--------------------------------------------------------------
Spinnaker Exploration Co.(a) 175,000 4,364,063
--------------------------------------------------------------
Startech Energy, Inc. (Canada)(a) 671,600 3,525,900
--------------------------------------------------------------
18,177,151
--------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-0.42%
Valero Energy Corp.-$1.94 Conv.
Pfd. 150,000 3,468,750
--------------------------------------------------------------
RESTAURANTS-1.68%
Jack in the Box Inc.(a) 157,400 3,374,263
--------------------------------------------------------------
Sonic Corp.(a) 340,900 10,376,144
--------------------------------------------------------------
13,750,407
--------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-2.15%
Tweeter Home Entertainment Group,
Inc.(a) 314,700 11,368,538
--------------------------------------------------------------
Ultimate Electronics, Inc.(a) 254,800 6,274,450
--------------------------------------------------------------
17,642,988
--------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.89%
Fred's, Inc. 350,000 7,262,500
--------------------------------------------------------------
RETAIL (SPECIALTY)-0.96%
Linens 'n Things, Inc.(a) 262,300 7,852,606
--------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-2.64%
Chico's FAS, Inc.(a) 200,000 5,900,000
--------------------------------------------------------------
Christopher & Banks Corp.(a) 262,500 5,971,875
--------------------------------------------------------------
Factory 2-U Stores Inc.(a) 150,000 6,225,000
--------------------------------------------------------------
Too Inc.(a) 157,400 3,531,663
--------------------------------------------------------------
21,628,538
--------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-1.67%
Lamar Advertising Co.(a) 300,000 13,687,500
--------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.53%
Championship Auto Racing Teams,
Inc.(a) 175,000 4,364,063
--------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-1.67%
Insight Enterprises, Inc.(a) 131,100 6,063,375
--------------------------------------------------------------
Investment Technology Group, Inc.(a) 157,400 7,653,575
--------------------------------------------------------------
13,716,950
--------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.55%
Learning Tree International, Inc.(a) 100,000 4,512,500
--------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.63%
Powerwave Technologies, Inc.(a) 150,000 5,203,125
--------------------------------------------------------------
</TABLE>
FS-26
<PAGE> 149
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (LONG DISTANCE)-0.12%
Corvis Corp.(a) 12,180 $ 1,002,757
--------------------------------------------------------------
Total Common Stocks & Other Equity
Interests (Cost $462,695,099) 669,040,583
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE CORPORATE NOTES-0.69%
COMMUNICATIONS EQUIPMENT-0.69%
Kestrel Solutions, Conv. Notes,
5.50%, 07/15/05 (Acquired
07/20/00; Cost $5,250,000)(b) $5,250,000 5,670,000
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION
CONTRACTS PRICE DATE
<S> <C> <C> <C> <C>
OPTIONS PURCHASED-5.04%
CALLS-0.33%
Micron Technology,
Inc. (Electronics-
Semiconductors) 2,650 $ 85 Aug-00 1,159,375
-----------------------------------------------------------------------
NS Group, Inc. (Iron
& Steel) 2,000 18 Oct-00 287,500
-----------------------------------------------------------------------
Philadelphia Oil
Service Sector
Index (Oil & Gas-
Exploration &
Production) 2,974 140 Sep-00 613,388
-----------------------------------------------------------------------
Philadelphia
Semiconductor Index
(Electronics-
Semiconductors) 290 1,100 Aug-00 551,000
-----------------------------------------------------------------------
S&P 500 Index
(Investments) 1,395 1,550 Aug-00 74,109
-----------------------------------------------------------------------
2,685,372
-----------------------------------------------------------------------
PUTS-4.71%
AMEX Pharmaceutical
Index (Health
Care-Drugs- Major
Pharmaceuticals) 795 370 Oct-00 765,187
-----------------------------------------------------------------------
Morgan Stanley
Internet Index
(Computers-
Software &
Services) 3,386 70 Dec-00 3,301,350
-----------------------------------------------------------------------
Nasdaq 100 Index
(Investments) 301 3,300 Sep-00 3,758,738
-----------------------------------------------------------------------
183 3,600 Dec-00 6,949,425
-----------------------------------------------------------------------
Pegasus
Communications
Corp.
(Broadcasting-
Television, Radio &
Cable) 1,300 32 Sep-00 186,875
-----------------------------------------------------------------------
Russell 2000 Index
(Investments) 3,246 500 Sep-00 5,883,375
-----------------------------------------------------------------------
1,483 510 Dec-00 5,227,575
-----------------------------------------------------------------------
S&P 500 Index
(Investments) 1,338 $1,420 Aug-00 $2,826,525
-----------------------------------------------------------------------
761 1,450 Aug-00 2,549,350
-----------------------------------------------------------------------
700 1,400 Sep-00 1,671,250
-----------------------------------------------------------------------
1,195 1,400 Dec-00 5,556,750
-----------------------------------------------------------------------
38,676,400
-----------------------------------------------------------------------
Total Options
Purchased (Cost
$50,745,528) 41,361,772
-----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS-10.54%
STIC Liquid Assets Portfolio(c) 43,223,960 43,223,960
--------------------------------------------------------------
STIC Prime Portfolio(c) 43,223,960 43,223,960
--------------------------------------------------------------
Total Money Market Funds
(Cost $86,447,920) 86,447,920
--------------------------------------------------------------
TOTAL INVESTMENTS-97.85%
(Cost $605,138,547) 802,520,275
--------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-2.15% 17,651,660
--------------------------------------------------------------
NET ASSETS-100.00% $820,171,935
==============================================================
</TABLE>
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(d)
Administaff, Inc. 75,000 $ 3,993,750
--------------------------------------------------------------
Advanced Micro Devices, Inc. 40,000 2,877,500
--------------------------------------------------------------
Amazon.com, Inc. 132,400 3,988,550
--------------------------------------------------------------
Amkor Technology, Inc. 100,000 2,750,000
--------------------------------------------------------------
ANTEC Corp. 63,000 2,382,187
--------------------------------------------------------------
ARM Holdings PLC-ADR (United Kingdom) 92,500 3,173,906
--------------------------------------------------------------
Atmel Corp. 126,500 3,787,094
--------------------------------------------------------------
Audiovox Corp.-Class A 84,600 1,311,300
--------------------------------------------------------------
BroadVision, Inc. 94,000 3,401,625
--------------------------------------------------------------
Brooktrout Inc. 150,000 4,537,500
--------------------------------------------------------------
CacheFlow Inc. 45,000 3,060,000
--------------------------------------------------------------
Carrier Access Corp. 53,700 3,215,288
--------------------------------------------------------------
Certicom Corp. (Canada) 170,000 4,505,000
--------------------------------------------------------------
Costco Wholesale Corp. 125,000 4,070,313
--------------------------------------------------------------
CVS Corp. 97,300 3,837,269
--------------------------------------------------------------
Cysive, Inc. 100,000 2,400,000
--------------------------------------------------------------
Digital Island, Inc. 100,000 2,868,750
--------------------------------------------------------------
DoubleClick Inc. 62,400 2,242,500
--------------------------------------------------------------
Echelon Corp. 100,000 3,712,500
--------------------------------------------------------------
Express Scripts, Inc.-Class A 113,200 7,273,100
--------------------------------------------------------------
Globalstar Telecommunications Ltd. 142,000 1,100,500
--------------------------------------------------------------
Hewlett-Packard Co. 15,000 1,637,813
--------------------------------------------------------------
Lernout & Hauspie Speech Products N.V.
(Belgium) 50,000 1,556,250
--------------------------------------------------------------
Magna International, Inc. (Canada) 79,000 3,935,188
--------------------------------------------------------------
</TABLE>
FS-27
<PAGE> 150
<TABLE>
<CAPTION>
SHARES
SOLD MARKET
SHORT VALUE
<S> <C> <C>
SECURITIES SOLD SHORT(d)-(CONTINUED)
Metris Cos. Inc. 162,500 $ 4,763,281
--------------------------------------------------------------
Newell Rubbermaid Inc. 225,000 6,060,938
--------------------------------------------------------------
1-800 CONTACTS, INC. 150,000 8,550,000
--------------------------------------------------------------
Orthodontic Centers of America, Inc. 290,600 7,519,275
--------------------------------------------------------------
Oxford Health Plans, Inc. 200,000 4,787,500
--------------------------------------------------------------
PolyMedica Corp. 95,000 3,595,156
--------------------------------------------------------------
Qlogic Corp. 40,400 3,009,800
--------------------------------------------------------------
QLT Inc. (Canada) 56,200 3,702,175
--------------------------------------------------------------
QUALCOMM Inc. 66,100 4,292,369
--------------------------------------------------------------
Scient Corp. 42,500 1,981,562
--------------------------------------------------------------
Silicon Storage Technology, Inc. 95,000 6,002,812
--------------------------------------------------------------
Starbucks Corp. 105,000 3,937,500
--------------------------------------------------------------
Stryker Corp. 187,200 8,037,900
--------------------------------------------------------------
Sunoco, Inc. 135,000 3,290,625
--------------------------------------------------------------
TMP Worldwide Inc. 28,300 2,037,600
--------------------------------------------------------------
UnitedHealth Group Inc. 103,700 8,483,956
--------------------------------------------------------------
Vicinity Corp. 42,500 844,687
--------------------------------------------------------------
Vignette Corp. 65,600 2,222,200
--------------------------------------------------------------
Whole Foods Market, Inc. 125,000 5,585,937
--------------------------------------------------------------
$166,323,156
==============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Pfd. - Preferred
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Trustees. The market
value at 07/31/00 represented 0.69% of the Fund's net assets.
(c) The money market fund has the same investment advisor as the Fund.
(d) Collateral on short sales was segregated by the Fund in the amount of
$181,928,530 which represents 110.62% of market value of the securities sold
short.
See Notes to Financial Statements.
FS-28
<PAGE> 151
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2000
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$605,138,547) $802,520,275
------------------------------------------------------------
Cash 5,928,740
------------------------------------------------------------
Receivables for:
Investments sold 14,395,037
------------------------------------------------------------
Fund shares sold 743,527
------------------------------------------------------------
Dividends and interest 593,022
------------------------------------------------------------
Investments sold short 164,181,124
------------------------------------------------------------
Short positions covered 3,304,824
------------------------------------------------------------
Short stock rebates 883,081
------------------------------------------------------------
Investment for deferred compensation plan 12,994
------------------------------------------------------------
Total assets 992,562,624
------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 2,834,291
------------------------------------------------------------
Fund shares reacquired 1,324,557
------------------------------------------------------------
Options written (premiums received
$1,816,355) 421,800
------------------------------------------------------------
Short stock account interest 38,919
------------------------------------------------------------
Deferred compensation plan 12,994
------------------------------------------------------------
Market value of securities sold short
(proceeds from short sales $164,181,124) 166,323,156
------------------------------------------------------------
Accrued advisory fees 730,364
------------------------------------------------------------
Accrued administrative services fees 11,187
------------------------------------------------------------
Accrued distribution fees 492,873
------------------------------------------------------------
Accrued transfer agent fees 57,624
------------------------------------------------------------
Accrued operating expenses 142,924
------------------------------------------------------------
Total liabilities 172,390,689
------------------------------------------------------------
Net assets applicable to shares outstanding $820,171,935
============================================================
NET ASSETS:
Class A $449,043,670
============================================================
Class B $326,570,806
============================================================
Class C $ 44,557,459
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 17,410,901
============================================================
Class B 12,853,519
============================================================
Class C 1,752,179
============================================================
Class A:
Net asset value and redemption price per
share $ 25.79
------------------------------------------------------------
Offering price per share:
(Net asset value of $25.79 divided by
94.50%) $ 27.29
============================================================
Class B:
Net asset value and offering price per share $ 25.41
============================================================
Class C:
Net asset value and offering price per share $ 25.43
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended July 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Short stock rebates $ 5,100,917
------------------------------------------------------------
Dividends -- affiliated issuers 1,778,327
------------------------------------------------------------
Dividends 395,709
------------------------------------------------------------
Interest 291,637
------------------------------------------------------------
Total investment income 7,566,590
------------------------------------------------------------
EXPENSES:
Advisory fees 6,847,355
------------------------------------------------------------
Administrative services fee 126,377
------------------------------------------------------------
Custodian fees 99,433
------------------------------------------------------------
Distribution fees -- Class A 1,322,447
------------------------------------------------------------
Distribution fees -- Class B 2,762,425
------------------------------------------------------------
Distribution fees -- Class C 306,511
------------------------------------------------------------
Interest 1,399,665
------------------------------------------------------------
Transfer agent fees -- Class A 247,830
------------------------------------------------------------
Transfer agent fees -- Class B 232,766
------------------------------------------------------------
Transfer agent fees -- Class C 25,821
------------------------------------------------------------
Trustee's fees 8,629
------------------------------------------------------------
Dividends on short sales 401,666
------------------------------------------------------------
Other 714,423
------------------------------------------------------------
Total expenses 14,495,348
------------------------------------------------------------
Less: Fees waived (314,784)
------------------------------------------------------------
Expenses paid indirectly (16,795)
------------------------------------------------------------
Net expenses 14,163,769
------------------------------------------------------------
Net investment income (loss) (6,597,179)
------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, SECURITIES SOLD
SHORT, FUTURES AND OPTION CONTRACTS
Net realized gain (loss) from:
Investment securities 281,397,793
------------------------------------------------------------
Futures contracts (897,367)
------------------------------------------------------------
Option contracts 18,473,981
------------------------------------------------------------
Securities sold short (12,793,600)
------------------------------------------------------------
286,180,807
------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 92,319,494
------------------------------------------------------------
Option contracts 1,652,600
------------------------------------------------------------
Securities sold short (3,440,914)
------------------------------------------------------------
90,531,180
------------------------------------------------------------
Net gain on investment securities, securities
sold short, futures and option contracts 376,711,987
------------------------------------------------------------
Net increase in net assets resulting from
operations $370,114,808
============================================================
</TABLE>
See Notes to Financial Statements.
FS-29
<PAGE> 152
STATEMENT OF CHANGES IN NET ASSETS
For the years ended July 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (6,597,179) $ (4,494,793)
------------------------------------------------------------------------------------------
Net realized gain from investment securities, securities
sold short, futures and option contracts 286,180,807 8,988,418
------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, securities sold short, futures and option
contracts 90,531,180 113,395,076
------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 370,114,808 117,888,701
------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (15,796,321) (102,881)
------------------------------------------------------------------------------------------
Class B (11,509,981) (48,732)
------------------------------------------------------------------------------------------
Class C (1,189,843) --
------------------------------------------------------------------------------------------
Share transactions-net:
Class A 52,117,173 30,818,297
------------------------------------------------------------------------------------------
Class B 35,576,046 19,845,339
------------------------------------------------------------------------------------------
Class C 25,368,723 5,266,423
------------------------------------------------------------------------------------------
Net increase in net assets 454,680,605 173,667,147
------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 365,491,330 191,824,183
------------------------------------------------------------------------------------------
End of year $820,171,935 $365,491,330
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $366,807,012 $253,662,739
------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (83,038) (97,371)
------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, securities sold short, futures and option
contracts 256,813,710 5,822,891
------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, securities sold short, futures and option
contracts 196,634,251 106,103,071
------------------------------------------------------------------------------------------
$820,171,935 $365,491,330
==========================================================================================
</TABLE>
See Notes to Financial Statements.
FS-30
<PAGE> 153
NOTES TO FINANCIAL STATEMENTS
July 31, 2000
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 three
separate portfolios, each having an unlimited number of shares of beneficial
interest. The Fund consist of three different classes of shares: Class A shares,
Class B shares and Class C shares. Class A shares are sold with a front-end
sales charge. Class B shares and Class C shares are sold with a contingent
deferred sales charge. The Fund was closed to new investors as of November 4,
1999. Matters affecting each portfolio or class will be voted on exclusively by
the shareholders of such portfolio or class. The assets, liabilities and
operations of each portfolio are accounted for separately. Information presented
in these financial statements pertains only to the Fund. The Fund's investment
objective is long-term growth of capital.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial
statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price as of the close of the
customary trading session 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 as of the close of
the customary trading session on the valuation date or absent a last sales
price, at the closing bid price. Debt obligations (including convertible
bonds) are valued on the basis of prices provided by an independent pricing
service. Prices provided by the pricing service may be determined without
exclusive reliance on quoted prices, and may reflect appropriate factors such
as yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the 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. For purposes of determining
net asset value per share, futures and option contracts generally will be
valued 15 minutes after the close of the customary trading session of the New
York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the customary
trading session of the NYSE which would not be reflected in the computation
of the Fund's net asset value. If events materially affecting the value of
such securities occur during such period, then these securities will be
valued at their fair value as determined in good faith by or under the
supervision of the Board of Trustees.
B. Securities Transactions and Investment Income -- 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 and short stock rebate income are recorded on the accrual
basis. Dividend income and dividend expense on short sales are recorded on
the ex-dividend date.
On July 31, 2000 additional paid-in capital was increased by $82,331,
undistributed net investment income was increased by $6,611,512 and
undistributed net realized gains was decreased by $6,693,843 as a result of
reclassifications of a net operating loss, equalization credits and other
reclassifications. Net assets of the Fund were unaffected by the
reclassifications.
C. Distributions -- Distributions from income and net realized capital gains, if
any, are generally paid annually and recorded on ex-dividend date. The Fund
may elect to use a portion of the proceeds from redemptions as distributions
for federal income tax purposes.
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. Securities Sold Short -- The Fund may enter into short sales of securities
which it concurrently holds (against the box) or for which it holds no
corresponding position (naked). Securities sold short represent a liability
of the Fund to acquire specific securities at prevailing market prices at a
future date in order to satisfy the obligation to deliver the securities
sold. The liability is 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 disclosed in "A" above. The Fund will incur a loss if the
price of the security increases between the date of the short sale and the
date on which the Fund replaces the borrowed security. The Fund realizes a
gain if the price of the security declines between those dates.
The Fund is required to segregate cash or securities as collateral in
margin accounts at a level that is equal to the obligation to the broker who
delivered such securities to the buyer on behalf of the Fund. The short stock
rebate presented in the statement of operations represents income earned on
FS-31
<PAGE> 154
short sale proceeds held on deposit with the broker. The Fund may also earn
or incur margin interest on short sales transactions. Margin interest is the
income earned (expense incurred) as a result of the market value of
securities sold short being less than (greater than) the proceeds received
from the short sales.
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 option's underlying instrument at
a fixed strike price. In return for this right, the Fund pays an option
premium. The option's underlying instrument may be a security, 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.
G. 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.
H. Futures Contracts -- The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits required
upon entering into futures contracts are satisfied by the segregation of
specific securities as collateral for the account of the broker (the Fund's
agent in acquiring the futures position). During the period the futures
contracts are open, changes in the value of the contracts are recognized as
unrealized gains or losses by "marking to market" on a daily basis to reflect
the market value of the contracts at the end of each day's trading. Variation
margin payments are made or received depending upon whether unrealized gains
or losses are incurred. When the contracts are closed, the Fund recognizes a
realized gain or loss equal to the difference between the proceeds from, or
cost of, the closing transaction and the Fund's basis in the contract. Risks
include the possibility of an illiquid market and that a change in value of
the contracts may not correlate with changes in the value of the securities
being hedged.
I. Expenses -- Distribution expenses and certain transfer agency expenses
directly attributable to a class of shares are charged to those classes'
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 a base management fee calculated at the annual rate of
1.00% of the Fund's average daily net assets. The base management fee will be
adjusted, on a monthly basis starting January 1, 2001, (i) upward at the rate of
0.15%, on a pro rata basis, for each percentage point the 12-month rolling
investment performance of the Class A shares exceeds the sum of 2.00% and the
12-month rolling investment record of the Russell 2000 Index, or (ii) downward
at the rate of 0.15%, on a pro rata basis, for each percentage point the
12-month rolling investment record of the Russell 2000 Index less 2.00% exceeds
the 12-month rolling investment performance of the Class A shares.
FS-32
<PAGE> 155
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. For the year ended July 31, 2000, AIM was paid
$126,377 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. For the year ended July 31, 2000, AFS was paid
$206,416 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 plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.35% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and C shares. Of these amounts, the Fund may
pay a service fee of 0.25% of the average daily net assets of the Class A, Class
B or Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. The Plans also
impose a cap on the total sales charges, including asset-based sales charges
that may be paid by the respective classes. Upon the Fund closing to new
investors AIM Distributors agreed to waive 0.10% of the Fund's average daily net
assets of Class A distribution fees. For the year ended July 31, 2000, the Class
A, Class B and Class C shares paid AIM Distributors $1,007,663, $2,762,425 and
$306,511, respectively, as compensation under the Plans. During the year ended
July 31, 2000, AIM Distributors waived fees of $314,784 for Class A shares.
AIM Distributors received commissions of $280,701, from sales of the Class A
shares of the Fund during the year ended July 31, 2000. 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, 2000, AIM
Distributors received $38,002 in contingent deferred sales charges imposed on
redemptions of Fund shares.
Certain officers and trustees of the Trust are officers and directors of AIM,
AFS and AIM Distributors.
During the year ended July 31, 2000, the Fund paid legal fees of $3,722 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Company's directors. A member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
For the year ended July 31, 2000, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) of $7,599 and reductions in custodian
fees of $9,196 under expense offset arrangements which resulted in a reduction
of the Fund's total expenses of $16,795.
NOTE 4-TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an
"interested person" of AIM. The Trust invests 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. The funds which
are party to the line of credit are charged a commitment fee of 0.10% on the
unused balance of the committed line.
During the year ended July 31, 2000, the average outstanding daily balance of
bank loans for the Fund was $15,109,290 with a weighted average interest rate of
6.14%.
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, 2000 was
$1,260,650,596 and $1,402,401,764, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of July 31, 2000 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of:
Investment securities $232,723,060
----------------------------------------------------------------
Securities sold short 14,314,078
----------------------------------------------------------------
Aggregate unrealized (depreciation) of:
Investment securities (35,640,214)
----------------------------------------------------------------
Securities sold short (16,456,111)
----------------------------------------------------------------
Net unrealized appreciation of investment
securities $194,940,813
================================================================
</TABLE>
Cost of investments for tax purposes is $605,437,429.
Proceeds from securities sold short for tax purposes is $164,181,124.
NOTE 7-CALL OPTION CONTRACTS
Transactions in call options written during the year ended July 31, 2000 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ------------
<S> <C> <C>
Beginning of year -- $ --
-------------------------------------------------------------
Written 14,857 31,123,327
-------------------------------------------------------------
Closed (14,355) (30,942,864)
-------------------------------------------------------------
Expired (502) (180,463)
-------------------------------------------------------------
End of year -- $ --
=============================================================
</TABLE>
NOTE 8-PUT OPTION CONTRACTS
Transactions in put options contracts written during the year ended July 31,
2000 are summarized as follows:
<TABLE>
<CAPTION>
PUT OPTION CONTRACTS
-----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of year 1,683 $ 1,266,630
-------------------------------------------------------------
Purchased 11,302 8,023,393
-------------------------------------------------------------
Closed (11,738) (6,201,656)
-------------------------------------------------------------
Expired (1,019) (1,272,012)
-------------------------------------------------------------
End of year 228 $ 1,816,355
=============================================================
</TABLE>
Open put option contracts written at July 31, 2000 were as follows:
<TABLE>
<CAPTION>
JULY 31,
NUMBER 2000
CONTRACT STRIKE OF PREMIUMS MARKET UNREALIZED
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE APPRECIATION
----- -------- ------ --------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Nasdaq 100 Index Sep-00 $2,600 228 $1,816,355 $421,800 $1,394,555
==========================================================================================
</TABLE>
FS-33
<PAGE> 156
NOTE 9-SHARE INFORMATION
Changes in shares outstanding during the years ended July 31, 2000 and 1999 were
as follows:
<TABLE>
<CAPTION>
2000 1999
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 6,753,064 $125,825,634 9,086,718 $99,751,555
---------------------------------------------------------------------------------------------------------------------
Class B 4,029,763 72,063,849 4,403,590 48,831,913
---------------------------------------------------------------------------------------------------------------------
Class C 1,535,334 29,503,687 463,451 5,940,023
---------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 778,251 14,945,789 8,677 96,302
---------------------------------------------------------------------------------------------------------------------
Class B 531,984 10,113,306 3,755 41,572
---------------------------------------------------------------------------------------------------------------------
Class C 57,775 1,099,467 -- --
---------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (3,968,990) (88,654,250) (6,264,993) (69,029,559)
---------------------------------------------------------------------------------------------------------------------
Class B (2,136,331) (46,601,109) (2,617,703) (29,028,148)
---------------------------------------------------------------------------------------------------------------------
Class C (245,494) (5,234,431) (58,887) (673,599)
---------------------------------------------------------------------------------------------------------------------
7,335,356 $113,061,942 5,024,608 $55,930,059
=====================================================================================================================
</TABLE>
NOTE 10-FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the period indicated.
<TABLE>
<CAPTION>
CLASS A
------------------------------------------
JUNE 29, 1998
(DATE OPERATIONS
YEAR ENDED JULY 31, COMMENCED) TO
---------------------- JULY 31,
2000(a) 1999(a) 1998(a)
--------- --------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 14.86 $ 9.76 $ 10.00
------------------------------------------------------------ -------- -------- --------
Income from investment operations:
Net investment income (loss) (0.14) (0.09) 0.02
------------------------------------------------------------ -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 11.97 5.20 (0.26)
------------------------------------------------------------ -------- -------- --------
Total from investment operations 11.83 5.11 (0.24)
------------------------------------------------------------ -------- -------- --------
Less distributions:
Dividends from net investment income -- (0.01) --
------------------------------------------------------------ -------- -------- --------
Distributions from net realized gains (0.90) -- --
------------------------------------------------------------ -------- -------- --------
Net asset value, end of period $ 25.79 $ 14.86 $ 9.76
============================================================ ======== ======== ========
Total return(b) 81.64% 52.36% (2.40)%
============================================================ ======== ======== ========
Ratios/supplemental data:
Net assets, end of year (000s omitted) $449,044 $205,721 $107,540
============================================================ ======== ======== ========
Ratio of expenses to average net assets (including interest
expense and dividends on short sales expense):
With fee waivers 1.73%(c) 2.35% 1.59%(d)
------------------------------------------------------------ -------- -------- --------
Without fee waivers 1.81%(c) 2.35% 1.59%(d)
============================================================ ======== ======== ========
Ratio of expenses to average net assets (excluding interest
expense and dividends on short sales expense):
With fee waivers 1.47%(c) 1.74% 1.59%(d)
------------------------------------------------------------ -------- -------- --------
Without fee waivers 1.55%(c) 1.74% 1.59%(d)
============================================================ ======== ======== ========
Ratio of net investment income (loss) to average net assets (0.63)%(c) (1.44)% 2.00%(d)
============================================================ ======== ======== ========
Ratio of interest expense and dividends on short sales
expense to average net assets 0.26%(c) 0.61% --
============================================================ ======== ======== ========
Portfolio turnover rate 198% 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 based on average net assets of $377,841,908.
(d) Annualized.
FS-34
<PAGE> 157
NOTE 10-FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
CLASS B
------------------------------------------
JULY 13, 1998
(DATE SALES
YEAR ENDED JULY 31, COMMENCED) TO
---------------------- JULY 31,
2000(a) 1999(a) 1998(a)
--------- --------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 14.75 $ 9.76 $ 10.07
------------------------------------------------------------ -------- -------- -------
Income from investment operations:
Net investment income (loss) (0.30) (0.17) 0.01
------------------------------------------------------------ -------- -------- -------
Net gains (losses) on securities (both realized and
unrealized) 11.86 5.17 (0.32)
------------------------------------------------------------ -------- -------- -------
Total from investment operations 11.56 5.00 (0.31)
------------------------------------------------------------ -------- -------- -------
Less distributions:
Dividends from net investment income -- (0.01) --
------------------------------------------------------------ -------- -------- -------
Distributions from net realized gains (0.90) -- --
------------------------------------------------------------ -------- -------- -------
Net asset value, end of period $ 25.41 $ 14.75 $ 9.76
============================================================ ======== ======== =======
Total return(b) 80.38% 51.30% (3.08)%
============================================================ ======== ======== =======
Ratios/supplemental data:
Net assets, end of year (000s omitted) $326,571 $153,793 $84,285
============================================================ ======== ======== =======
Ratio of expenses to average net assets (including interest
expense and dividends on short sales expense): 2.48%(c) 3.03% 2.30%(d)
============================================================ ======== ======== =======
Ratio of expenses to average net assets (excluding interest
expense and dividends on short sales expense): 2.22%(c) 2.42% 2.30%(d)
============================================================ ======== ======== =======
Ratio of net investment income (loss) to average net assets (1.38)%(c) (2.12)% 1.29%(d)
============================================================ ======== ======== =======
Ratio of interest expense and dividends on short sales
expense to average net assets 0.26%(c) 0.61% --
============================================================ ======== ======== =======
Portfolio turnover rate 198% 220% 13%
============================================================ ======== ======== =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average net assets of $276,242,462.
(d) Annualized.
<TABLE>
<CAPTION>
CLASS C
-------------------------------
DECEMBER 30, 1999
(DATE SALES
YEAR ENDED COMMENCED) TO
JULY 31, JULY 31,
2000(a) 1999(a)
---------- -----------------
<S> <C> <C>
Net asset value, beginning of period $ 14.78 $11.70
------------------------------------------------------------ ------- ------
Income from investment operations:
Net investment income (loss) (0.32) (0.11)
------------------------------------------------------------ ------- ------
Net gains on securities (both realized and unrealized) 11.87 3.19
------------------------------------------------------------ ------- ------
Total from investment operations 11.55 3.08
------------------------------------------------------------ ------- ------
Less distributions from net realized gains (0.90) --
------------------------------------------------------------ ------- ------
Net asset value, end of period $ 25.43 $14.78
============================================================ ======== ======
Total return(b) 80.15% 29.31%
============================================================ ======== ======
Ratios/supplemental data:
Net assets, end of year (000s omitted) $44,557 $5,977
============================================================ ======== ======
Ratio of expenses to average net assets (including interest
expense and dividends on short sales expense): 2.48%(c) 3.03%(d)
============================================================ ======== ======
Ratio of expenses to average net assets (excluding interest
expense and dividends on short sales expense): 2.22%(c) 2.42%(d)
============================================================ ======== ======
Ratio of net investment income (loss) to average net assets (1.38)%(c) (2.12)%(d)
============================================================ ======== ======
Ratio of interest expense and dividends on short sales
expense to average net assets 0.26%(c) 0.61%(d)
============================================================ ======== ======
Portfolio turnover rate 198% 220%
============================================================ ======== ======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average net assets of $30,651,089.
(d) Annualized.
FS-35
<PAGE> 158
PART C
OTHER INFORMATION
<TABLE>
<CAPTION>
Item 23. Exhibits
Exhibit
Number Description
------ -----------
<S> <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, was filed as an Exhibit to Post-Effective Amendment No. 4 on September 27, 1999.
(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.
- (c) Amendment No. 2 to Amended and Restated Agreement and Declaration of Trust of AIM Special
Opportunities Funds, effective May 10, 2000, is filed herewith electronically.
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) Amendment No. 2 to Amended and Restated By-Laws of AIM Special Opportunities Funds (a
Delaware Business Trust), adopted effective June 14, 2000, is filed herewith electronically.
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.
</TABLE>
C-1
<PAGE> 159
<TABLE>
<S> <C>
(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.
(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.
- (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.
- (c) Master Investment Advisory Agreement, dated November 4, 1999, between Registrant and A I M
Advisors, Inc. is filed herewith electronically.
(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 A I M
</TABLE>
C-2
<PAGE> 160
<TABLE>
<S> <C>
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.
- (h) Amendment No. 7 to Foreign Country Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement, dated November 15, 1999, between Registrant and A I M
Advisors, Inc. is filed herewith electronically.
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.
- (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.
- (c) Amendment No. 2 to Master Distribution Agreement (Class A and Class C shares), dated
September 27, 1999, between Registrant and A I M Distributors, Inc. was filed as an exhibit to
Post-Effective Amendment No. 5 on November 5, 1999.
(2) - First Amended and Restated Master Distribution Agreement, dated July 1, 2000, between AIM
Special Opportunities Funds (Class A Shares and Class C Shares) and A I M Distributors, Inc. is
filed herewith electronically.
(3) - 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.
(4) - 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.
(5) - (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) Amendment No. 2 to Master Distribution Agreement (Class B Shares), dated September 27,
1999, between Registrant and A I M Distributors, Inc. was filed as an exhibit to Post-Effective
Amendment No. 5 on November 5, 1999, and is hereby incorporated by reference.
</TABLE>
C-3
<PAGE> 161
<TABLE>
<S> <C>
f (1) - (a) 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.
- (b) AIM Funds Retirement Plan for Eligible Directors/Trustees effective as of March 8, 1994,
as restated September 18, 1995, as restated March 7, 2000 is filed herewith electronically.
(2) - (a) 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.
- (b) Form of Director Deferred Compensation Agreement for Registrant's Non-Affiliated
Directors, as amended March 7, 2000 is filed herewith electronically.
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.
- (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.
(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.
(3) - (a) Master Custodian Contract, dated May 1, 2000, between Registrant and State Street Bank and
Trust Company is filed herewith electronically.
- (b) Amendment to Custodian Contract, dated May 1, 2000, between Registrant and State Street
Bank and Trust Company dated May 1, 2000, is filed herewith electronically.
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. was filed as an Exhibit to Post-Effective
Amendment No. 4 on September 27, 1999, and is hereby incorporated by reference.
- (c) Amendment No. 2 to the Transfer Agency and Service Agreement, dated June 24, 1998,
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.
</TABLE>
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<TABLE>
<S> <C>
- (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.
- (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, was filed as an Exhibit to
Post-Effective Amendment No. 4 on September 27, 1999, and is hereby incorporated by
reference.
- (k) Amendment No. 7 to the Remote Access and Related Services Agreement for IMPRESSPlus Forms
Processing Software, dated February 29, 2000, is filed herewith electronically.
- (l) Amendment No. 8 to the Remote Access and Related Services Agreement for AccessTA
Services, dated June 26, 2000, is filed herewith electronically.
- (m) Amendment No. 9 - Restated and Amended Amendment No. 6 to the Remote Access and Related
Services Agreement for IMPRESSNet(TM) Services, dated June 26, 2000, is filed herewith
electronically.
- (n) Amendment No. 10 to the Remote Access and Related Services Agreement, dated July 28,
2000, 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.
- (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.
</TABLE>
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<PAGE> 163
<TABLE>
<S> <C>
- (c) Amendment No. 2 to Master Administrative Services Agreement, dated September 27, 1999,
between Registrant and A I M Advisors, Inc. was filed as an Exhibit to Post-Effective Amendment
No. 5 on November 5, 1999.
(4) - Master Administrative Services Agreement, dated November 4, 1999, between Registrant and A I M
Advisors, Inc. is filed herewith electronically.
(5) - 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.
(6) - Memorandum of Agreement, dated as of September 27, 1999, between Registrant and A I M Advisors,
Inc. is filed herewith electronically.
(7) - Memorandum of Agreement, dated as of July 1, 2000, between Registrant and A I M Advisors, Inc.
is filed herewith electronically.
(8) - Memorandum of Agreement, dated as of July 1, 2000, for AIM Small Cap Opportunities Fund and AIM
Mid Cap Opportunities Fund and September 29, 2000, for AIM Large Cap Opportunities Fund, between
Registrant and A I M Distributors, 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.
- (c) Initial Capitalization Agreement of Registrant's AIM Large Cap Opportunities Fund, dated
December 30, 1999, is filed herewith electronically.
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.
- (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.
- (c) Amendment No. 2 to Master Distribution Plan, dated September 27, 1999, for Registrant's
Class A and C shares was filed as an Exhibit to Post-Effective Amendment No. 5 on November 5,
1999.
</TABLE>
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<PAGE> 164
<TABLE>
<S> <C>
(2) - First Amended and Restated Master Distribution Plan, dated July 1, 2000, of Registrant (Class A
Shares and Class C Shares), is filed herewith electronically.
(3) - 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.
(4) - 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.
(5) - 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.
(6) - 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.
(7) - 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.
(8) - Shareholder Service Agreement for Shares of the AIM Mutual Funds (A I M Distributors, Inc. as
Principal) to be used in connection with Registrant's Master Distribution Plan is filed herewith
electronically.
(9) - (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) Amendment No. 2 to Master Distribution Plan, dated September 27, 1999, for Registrant's
Class B shares was filed as an Exhibit to Post-Effective Amendment No. 5 on November 5, 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.
(2) - Third Amended and Restated Multiple Class Plan (Rule 18f-3) was filed as an Exhibit to
Post-Effective Amendment No. 4 on September 27, 1999, and is hereby incorporated by reference.
o - Reserved
p (1) - (a) The A I M Management Group Code of Ethics, as amended August 17, 1999, relating to A I M
Management Group Inc. and A I M Advisors, Inc. was filed as an Exhibit to Post-Effective
Amendment No. 4 on September 27, 1999, and is hereby incorporated by reference.
- (b) The A I M Management Group Inc. Code of Ethics, as revised February 24, 2000, is filed
herewith electronically.
</TABLE>
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<PAGE> 165
<TABLE>
<S> <C>
(2) - (a) Code of Ethics of A I M Special Opportunities Funds, effective as of March 10, 1998, was
filed as an Exhibit to Post-Effective Amendment No. 4 on September 27, 1999, and is hereby
incorporated by reference.
- (b) A I M Funds Code of Ethics of the Registrant, effective June 14, 2000, is filed herewith
electronically.
- (c) A I M Funds Code of Ethics of the Registrant, effective September 23, 2000, 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.
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<PAGE> 166
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
AIM Equity Funds (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
AIM Tax-Exempt Funds
AIM Variable Insurance Funds
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 None
Board of Directors
Michael J. Cemo President & Director None
Gary T. Crum Director Senior Vice President
Robert H. Graham Senior Vice President Chairman, President &
& Director Trustee
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
B.J. Thompson First Vice President None
Kathleen J. Pflueger Secretary Assistant Secretary
</TABLE>
--------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
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<PAGE> 167
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
---------------- -------------------------- ---------------
<S> <C> <C>
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
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
</TABLE>
--------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
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<PAGE> 168
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
---------------- -------------------------- ---------------
<S> <C> <C>
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 Capage 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
P. Michelle Grace Assistant Secretary Assistant Secretary
Lisa A. Moss Assistant Secretary Assistant Secretary
</TABLE>
(c) Not Applicable
Item 28. Location of Accounts and Records
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
--------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
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<PAGE> 169
Item 30. Undertakings
Not Applicable
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<PAGE> 170
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 17th day of
November, 2000.
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/ ROBERT H. GRAHAM Chairman, Trustee & President November 17, 2000
------------------------- (Principal Executive Officer)
(Robert H. Graham)
/s/ BRUCE L. CROCKETT Trustee November 17, 2000
-------------------------
(Bruce L. Crockett)
/s/ OWEN DALY II Trustee November 17, 2000
-------------------------
(Owen Daly II)
/s/ EDWARD K. DUNN, JR. Trustee November 17, 2000
-------------------------
(Edward K. Dunn, Jr.)
/s/ JACK FIELDS Trustee November 17, 2000
-------------------------
(Jack Fields)
/s/ CARL FRISCHLING Trustee November 17, 2000
-------------------------
(Carl Frischling)
/s/ PREMA MATHAI-DAVIS Trustee November 17, 2000
-------------------------
(Prema Mathai-Davis)
/s/ LEWIS F. PENNOCK Trustee November 17, 2000
-------------------------
(Lewis F. Pennock)
/s/ LOUIS S. SKLAR Trustee November 17, 2000
-------------------------
(Louis S. Sklar)
/s/ DANA R. SUTTON Vice President & November 17, 2000
------------------------- Treasurer (Principal Financial
(Dana R. Sutton) and Accounting Officer)
<PAGE> 171
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
a(2)(c) Amendment No. 2 to Amended and Restated Agreement and Declaration of Trust of AIM Special
Opportunities Funds, effective May 10, 2000.
b(2)(c) Amendment No. 2 to Amended and Restated By-Laws of AIM Special Opportunities Funds (a
Delaware Business Trust), adopted effective June 14, 2000.
d(1)(c) Master Investment Advisory Agreement, dated November 4, 1999, between Registrant and
A I M Advisors, Inc.
d(2)(h) Amendment No. 7 to Foreign Country Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement, dated November 15, 1999, between Registrant and A I M
Advisors, Inc.
e(2) First Amended and Restated Master Distribution Agreement, dated July 1, 2000, between AIM
Special Opportunities Funds (Class A Shares and Class C Shares) and A I M Distributors, Inc.
f(1)(b) AIM Funds Retirement Plan for Eligible Directors/Trustees effective as of March 8, 1994, as
restated September 18, 1995, as restated March 7, 2000.
f(2)(b) Form of Director Deferred Compensation Agreement for Registrant's Non-Affiliated Directors,
as amended March 7, 2000.
g(3)(a) Master Custodian Contract, dated May 1, 2000, between Registrant and State Street Bank and
Trust Company.
g(3)(b) Amendment to Custodian Contract, dated May 1, 2000, between Registrant and State Street Bank
and Trust Company dated May 1, 2000.
h(1)(c) Amendment No. 2 to the Transfer Agency and Service Agreement, dated June 24, 1998, between
Registrant and A I M Fund Services, Inc.
h(2)(k) Amendment No. 7 to the Remote Access and Related Services Agreement for IMPRESSPlus Forms
Processing Software, dated February 29, 2000.
h(2)(l) Amendment No. 8 to the Remote Access and Related Services Agreement for AccessTA Services,
dated June 26, 2000.
h(2)(m) Amendment No. 9 - Restated and Amended Amendment No. 6 to the Remote Access and Related
Services Agreement for IMPRESSNet(TM) Services, dated June 26, 2000.
h(2)(n) Amendment No. 10 to the Remote Access and Related Services Agreement, dated July 28, 2000.
h(4) Master Administrative Services Agreement, dated November 4, 1999, between Registrant and
A I M Advisors, Inc.
h(6) Memorandum of Agreement, dated as of September 27, 1999, between Registrant and A I M
Advisors, Inc.
h(7) Memorandum of Agreement, dated as of July 1, 2000, between Registrant and A I M Advisors,
Inc.
</TABLE>
<PAGE> 172
<TABLE>
<S> <C>
h(8) Memorandum of Agreement, dated as of July 1, 2000, for AIM Small Cap Opportunities Fund and
AIM Mid Cap Opportunities Fund and September 29, 2000, for AIM Large Cap Opportunities Fund,
between Registrant and A I M Distributors, Inc.
i(2) Consent of Ballard Spahr Andrews & Ingersoll, LLP.
j Consent of KPMG LLP.
l(1)(c) Initial Capitalization Agreement of Registrant's AIM Large Cap Opportunities Fund, dated
December 30, 1999.
m(2) First Amended and Restated Master Distribution Plan, dated July 1, 2000, of Registrant (Class A
Shares and Class C Shares).
m(8) Shareholder Service Agreement for Shares of the AIM Mutual Funds (A I M Distributors, Inc.
as Principal) to be used in connection with Registrant's Master Distribution Plan.
p(1)(b) The A I M Management Group Inc. Code of Ethics, as revised February 24, 2000.
p(2)(b) A I M Funds Code of Ethics of the Registrant, effective June 14, 2000.
p(2)(c) A I M Funds Code of Ethics of the Registrant, effective September 23, 2000.
</TABLE>
