<PAGE> 1
STATEMENT OF
ADDITIONAL INFORMATION
AIM BALANCED FUND
AIM GLOBAL UTILITIES FUND
AIM SELECT GROWTH FUND
AIM VALUE FUND
(SERIES PORTFOLIOS OF
AIM FUNDS GROUP)
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TEXAS 77046-1173
(713) 626-1919
-----------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, AND IT SHOULD
BE READ IN CONJUNCTION WITH A PROSPECTUS FOR THE ABOVE-NAMED FUNDS, A COPY
OF WHICH MAY BE OBTAINED FROM AUTHORIZED DEALERS OR BY WRITING
A I M FUND SERVICES, INC., P.O. BOX 4739, HOUSTON, TEXAS 77210-4739.
-----------------
STATEMENT OF ADDITIONAL INFORMATION DATED: JUNE 1, 2000,
RELATING TO THE AIM BALANCED FUND PROSPECTUS DATED JUNE 1, 2000,
THE AIM GLOBAL UTILITIES FUND PROSPECTUS DATED JUNE 1, 2000,
THE AIM SELECT GROWTH FUND PROSPECTUS DATED JUNE 1, 2000,
AND THE AIM VALUE FUND PROSPECTUS DATED JUNE 1, 2000.
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T A B L E O F C O N T E N T S
<TABLE>
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Page
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INTRODUCTION.................................................................1
GENERAL INFORMATION ABOUT THE TRUST..........................................1
The Trust and its Shares............................................1
PERFORMANCE INFORMATION......................................................3
Total Return Quotations.............................................5
Yield Quotations....................................................7
PORTFOLIO TRANSACTIONS AND BROKERAGE.........................................7
General Brokerage Policy............................................7
Allocation of Portfolio Transactions................................8
Allocation of IPO Securities Transactions...........................8
Section 28(e) Standards.............................................9
Transactions with Regular Brokers..................................10
Brokerage Commissions Paid.........................................10
Portfolio Turnover.................................................10
INVESTMENT STRATEGIES AND RISKS.............................................11
All Funds..........................................................11
AIM Global Utilities Fund..........................................12
AIM Balanced Fund..................................................13
Risk Factors Regarding Non-Investment Grade Debt Securities........14
Real Estate Investment Trusts ("REITs")............................14
Lending Portfolio Securities: All Funds...........................15
Short Sales: All Funds............................................15
Margin Transactions................................................16
Delayed Delivery Agreements: All Funds............................16
When-Issued Securities: All Funds.................................16
Investments in Foreign Securities: All Funds......................17
Risk Factors Regarding Foreign Securities..........................17
Foreign Exchange Transactions: All Funds..........................18
Illiquid Securities................................................18
Rule 144A Securities...............................................19
Repurchase Agreements..............................................19
Reverse Repurchase Agreements......................................19
Equity-Linked Derivatives..........................................20
Investment in Other Investment Companies...........................20
Temporary Defensive Investments....................................20
OPTIONS, FUTURES AND CURRENCY STRATEGIES....................................20
Introduction.......................................................20
General Risks of Options, Futures and Currency Strategies..........20
Cover ..........................................................21
Writing Call Options...............................................22
Writing Put Options................................................22
Purchasing Put Options.............................................22
Purchasing Call Options............................................23
Over-The-Counter Options...........................................23
Index Options......................................................24
Limitations on Options.............................................24
Interest Rate, Currency and Stock Index Futures Contracts..........24
Options on Futures Contracts.......................................25
Forward Contracts..................................................25
</TABLE>
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<TABLE>
<S> <C>
Limitations on Use of Futures, Options on Futures and Certain
Options on Currencies..............................................26
INVESTMENT RESTRICTIONS.....................................................26
Fundamental Restrictions...........................................26
Non-Fundamental Restrictions.......................................27
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.........................28
MANAGEMENT..................................................................31
Trustees and Officers..............................................31
INVESTMENT ADVISORY AND OTHER SERVICES......................................36
THE DISTRIBUTION PLANS......................................................40
THE DISTRIBUTOR.............................................................44
SALES CHARGES AND DEALER CONCESSIONS........................................46
REDUCTIONS IN INITIAL SALES CHARGES.........................................49
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS.................................52
HOW TO PURCHASE AND REDEEM SHARES...........................................54
Backup Withholding.................................................55
NET ASSET VALUE DETERMINATION...............................................57
TAX MATTERS.................................................................58
SHAREHOLDER INFORMATION.....................................................59
MISCELLANEOUS INFORMATION...................................................62
Charges for Certain Account Information............................62
Audit Reports......................................................62
Legal Matters......................................................62
Custodians and Transfer Agent......................................62
RATINGS OF SECURITIES.......................................................63
FINANCIAL STATEMENTS........................................................FS
</TABLE>
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<PAGE> 4
INTRODUCTION
AIM Funds Group (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 a fund being considered for investment. The information for AIM
BALANCED FUND is included in a Prospectus dated June 1, 2000. The information
for AIM GLOBAL UTILITIES FUND is included in a Prospectus dated June 1, 2000.
The information for AIM SELECT GROWTH FUND is included in a Prospectus dated
June 1, 2000. The information for AIM VALUE FUND is included in a Prospectus
dated June 1, 2000. Copies of each Prospectus and additional copies of this
Statement of Additional Information may be obtained without charge by writing
the principal distributor of the Funds' shares, A I M Distributors, Inc. ("AIM
Distributors"), P.O. Box 4739, Houston, Texas 77210-4739, or by calling (800)
347-4246. Investors must receive a Prospectus before they invest in any Fund.
This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Funds. Some of
the information required to be in this Statement of Additional Information is
also included in the Prospectuses, and in order to avoid repetition, reference
will be made 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 prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE TRUST
THE TRUST AND ITS SHARES
The Trust was previously organized as a Massachusetts business trust
pursuant to a Master Trust Agreement, dated October 30, 1984, as amended.
Pursuant to agreements and plans of reorganization, the Funds were reorganized
on October 15, 1993 as portfolios of AIM Funds Group, a Delaware business trust
which is registered under the Investment Company Act of 1940, as amended (the
"1940 Act") as an open-end series management investment company. The Trust
currently is organized under an Amended and Restated Agreement and Declaration
of Trust, dated November 5, 1998, as amended (the "Trust Agreement"). The Trust
currently consists of four separate portfolios: AIM BALANCED FUND, AIM GLOBAL
UTILITIES FUND, AIM SELECT GROWTH FUND and AIM VALUE FUND (each a "Fund" and
collectively, the "Funds"). Each Fund is a series of shares 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.
On October 15, 1993, the Funds (other than AIM BALANCED FUND) succeeded
to the assets and assumed the liabilities of the funds with corresponding names
(the "Predecessor Funds") of AIM Funds Group, a Massachusetts business trust
("AFG"), pursuant to an Agreement and Plan of Reorganization between the Trust
and AFG. Also on October 15, 1993, AIM BALANCED FUND succeeded to the assets and
assumed the liabilities of AIM Convertible Securities, Inc., a Maryland
corporation ("ACS"), pursuant to an Agreement and Plan of Reorganization between
the Trust and ACS. All historical financial and other information contained in
this Statement of Additional Information for periods prior to October 15, 1993
relating to the Funds (or a class thereof) is that of the Predecessor Funds (or
the corresponding class thereof) or ACS. Pursuant to an Amendment to the Trust
Agreement, dated May 1, 1995, AIM Utilities Fund changed its name to AIM GLOBAL
UTILITIES FUND. The Trust Agreement was amended on May 1, 1998, to change the
name of AIM Growth Fund to AIM SELECT GROWTH FUND. Shares of beneficial interest
of the Trust are redeemable at their net asset value (subject, in certain
circumstances, to a contingent deferred sales charge) at the option of the
shareholder or at the option of the Trust in certain circumstances. For
information concerning the methods of redemption, investors should consult the
Prospectuses under the caption "Redeeming Shares."
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<PAGE> 5
The assets received by the Trust from the issue or sale of shares of
each of its series of shares, and all income, earnings, profits and proceeds
thereof, subject only to the rights of creditors, are specifically allocated to
the appropriate Fund. They constitute the underlying assets of each Fund, are
required to be segregated on the Trust's books of account, and are to be charged
with the expenses with respect to such Fund and its respective classes. Any
general expenses of the Trust not readily identifiable as belonging to a
particular Fund are allocated by or under the direction of the Board of
Trustees, primarily on the basis of relative net assets, or other relevant
factors.
Each share of each Fund represents an equal proportionate interest in
that Fund with each other share and is entitled to such dividends and
distributions out of the income belonging to such Fund as are declared by the
Board. Each Fund offers three separate classes of shares: 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
shareholders of Class A shares and Class B shareholders of a given Fund must
approve any material increase in fees payable with respect to the Class A shares
of such Fund under the Class A and C Plan).
The Trust is not required to hold annual or regular meetings of
shareholders. Meetings of shareholders of a Fund will be held from time to time
to consider matters requiring a vote of such shareholders in accordance with the
requirements of the 1940 Act, state law or the provisions of the Trust
Agreement. It is not expected that shareholder meetings will be held annually.
Shareholders of each Fund are entitled to one vote per share (with
proportionate voting for fractional shares), irrespective of the relative net
asset value of the shares of a Fund. However, on matters affecting an individual
Fund or class of shares, a separate vote of shareholders of that Fund or class
is required. Shareholders of a Fund or class are not entitled to vote on any
matter which does not affect that Fund or class but which requires a separate
vote of another Fund or class. An example of a matter which would be voted on
separately by shareholders of each Fund is the approval of the Advisory
Agreement, and an example of a matter which would be voted on separately by
shareholders of each class of shares is approval of the distribution plans. When
issued, shares of each Fund 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.
Shares do not have cumulative voting rights, which means that in situations in
which shareholders elect trustees, holders of more than 50% of the shares voting
for the election of trustees can elect all of the trustees of the Trust, and the
holders of less than 50% of the shares voting for the election of trustees will
not be able to elect any trustees.
The Trust Agreement provides that the trustees of the Trust shall hold
office during the existence of the Trust, except as follows: (a) any trustee may
resign or retire; (b) any trustee may be removed by a vote of at least
two-thirds of the outstanding shares of the Trust, or at any time by written
instrument signed by at least two-thirds of the trustees and specifying when
such removal becomes effective; or (c) any trustee who has died or become
incapacitated and is unable to serve may be removed by a written instrument
signed by a majority of the trustees.
Under Delaware law, shareholders of a Delaware business trust shall be
entitled to the same limitations of liability extended to shareholders of
private for-profit corporations, however, there is a remote possibility that
shareholders could, under certain circumstances, be held liable for the
obligations
2
<PAGE> 6
of the Trust to the extent the courts of another state which does not recognize
such limited liability were to apply the laws of such state to a controversy
involving such obligations. However, the Trust Agreement disclaims shareholder
liability for acts or obligations of the Trust and requires that notice of such
disclaimer be given in each agreement, obligation or instrument entered into or
executed by the Trust or the trustees to all parties, and each party thereto
must expressly waive all rights of action directly against shareholders of the
Trust. The Trust Agreement provides for indemnification out of the property of a
Fund for all losses and expenses of any shareholder of such Fund held liable on
account of being or having been a shareholder. Thus, the risk of a shareholder
incurring financial loss due to shareholder liability is limited to
circumstances in which a Fund would be unable to meet its obligations and
wherein the complaining party was held not to be bound by the disclaimer.
The Trust Agreement further provides that the trustees and officers
will not be liable for any act, omission or obligation of the Trust or any
Trustee or officer. However, nothing in the Trust Agreement protects a trustee
or officer against any liability to the Trust or to the shareholders to which a
trustee or officer would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his 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 INFORMATION
All advertisements of the Funds will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of a Fund's 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. Further information regarding
each Fund's performance is contained in that 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 a Fund's maximum
front-end 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.
A Fund's total return shows its overall change in value, including
changes in share price and assuming all the Fund's dividends and capital gain
distributions are reinvested. A cumulative total return reflects the Fund's
performance over a stated period of time. An average annual total return
reflects the hypothetical compounded annual rate of return that would have
produced the same cumulative total return if the Fund's performance had been
constant over the entire period. Because average annual returns tend to even out
variations in the Fund's return, investors should recognize that such returns
are not the same as actual year-by-year results. To illustrate the components of
overall performance, a Fund may separate its cumulative and average annual
returns into income results and capital gains or losses.
Yield is a function of the type and quality of a Fund's investments,
the maturity of the securities held in a Fund's portfolio and the operating
expense ratio of the Fund. Yield is computed in accordance with standardized
formulas described below and can be expected to fluctuate from time to time and
is not necessarily indicative of future results. Accordingly, yield information
may not provide a basis for comparison with investments which pay a fixed rate
of interest for a stated period of time. Yield reflects
3
<PAGE> 7
investment income net of expenses over the relevant period attributable to a
Fund share, expressed as an annualized percentage of the maximum offering price
per share for Class A shares and net asset value per share for Class B shares
and Class C shares.
From time to time, A I M Advisors, Inc. ("AIM") or its affiliates may
waive all or a portion of their fees and/or assume certain expenses of any Fund.
Voluntary fee waivers or reductions or commitments to assume expenses may be
rescinded at any time without further notice to investors. During periods of
voluntary fee waivers or reductions or commitments to assume expenses, AIM will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions or reimbursement of expenses set
forth in the Fee Table in a Prospectus may not be terminated or amended to the
Funds' detriment during the period stated in the agreement between AIM and the
Fund. Fee waivers or reductions or commitments to reduce expenses will have the
effect of increasing that Fund's yield and total return.
The performance of each Fund will vary from time to time and past
results are not necessarily indicative of future results. A Fund's performance
is a function of its portfolio management in selecting the type and quality of
portfolio securities and is affected by operating expenses of the Fund and
market 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.
Each of the Funds may participate in the initial public offering
("IPO") market, and a significant portion of the Funds' total returns may be
attributable to their investments in IPOs. Investments in IPOs could have a
magnified impact on a Fund with a small asset base, such as AIM GLOBAL UTILITIES
FUND. There is no guarantee that as a Fund's assets grow, it will continue to
experience substantially similar performance by investing in IPOs.
Total return and yield figures for the Funds are neither fixed nor
guaranteed. The Funds may provide performance information in reports, sales
literature and advertisements. The Funds may also, from time to time, quote
information about the Funds published or aired by publications or other media
entities which contain articles or segments relating to investment results or
other data about one or more of the Funds. The following is a list of such
publications or media entities:
<TABLE>
<S> <C> <C>
Advertising Age Forbes Nation's Business
Barron's Fortune New York Times
Best's Review Hartford Courant Pension World
Broker World Inc. Pensions & Investments
Business Week Institutional Investor Personal Investor
Changing Times Insurance Forum Philadelphia Inquirer
Christian Science Monitor Insurance Week USA Today
Consumer Reports Investor's Daily U.S. News & World Report
Economist Journal of the American Wall Street Journal
FACS of the Week Society of CLU & ChFC Washington Post
Financial Planning Kiplinger Letter CNN
Financial Product News Money CNBC
Financial Services Week Mutual Fund Forecaster PBS
Financial World
</TABLE>
Each Fund may also compare its performance to performance data of
similar mutual funds as published by the following services:
<TABLE>
<S> <C>
Bank Rate Monitor Stanger
Donoghue's Weisenberger
Mutual Fund Values (Morningstar) Lipper, Inc.
</TABLE>
Each Fund's performance may also be compared in advertising to the
performance of comparative benchmarks such as the following:
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<PAGE> 8
<TABLE>
<S> <C>
Standard & Poor's 400 Index
Standard & Poor's 500 Stock Index Bond Buyer Index
Dow Jones Industrial Average NASDAQ
EAFE Index COFI
Consumer Price Index First Boston High Yield Index
Lehman Bond Indices
</TABLE>
Each Fund may also compare its performance to rates on Certificates of
Deposit and other fixed rate investments such as the following:
10 year Treasury Notes
30 year Treasury Bonds
90 day Treasury Bills
Advertising for AIM GLOBAL UTILITIES FUND, AIM SELECT GROWTH FUND and
AIM VALUE FUND may from time to time include discussions of general economic
conditions and interest rates. Advertising for such Funds and for AIM BALANCED
FUND may also include references to the use of those Funds as part of an
individual's overall retirement investment program. From time to time, sales
literature and/or advertisements for any of the Funds may disclose (i) the
largest holdings in the Fund's portfolio, (ii) certain selling group members
and/or (iii) certain institutional shareholders.
From time to time, the Funds' sales literature and/or advertisements
may discuss generic topics pertaining to the mutual fund industry. This
includes, but is 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.
Although performance data may be useful to prospective investors when
comparing a Fund's performance with other funds and other potential investments,
investors should note that the methods of computing performance of other
potential investments are not necessarily comparable to the methods employed by
a Fund.
TOTAL RETURN QUOTATIONS
The standard formula for calculating total return is as follows:
n
P(1+T) = ERV
Where P = a hypothetical initial payment of $1,000.
T = average annual total return (assuming the applicable
maximum sales load is deducted at the beginning of the
1, 5, or 10 year periods).
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the 1, 5, or 10 year periods (or
fractional portion of such period).
The average annual total returns for each Fund, with respect to its
Class A shares, for the one, five and ten year periods ended December 31, 1999,
are as follows:
<TABLE>
<CAPTION>
PERIODS ENDED DECEMBER 31, 1999
---------------------------------------
CLASS A SHARES: 1 YEAR 5 YEARS 10 YEARS
-------------- ------ ------- --------
<S> <C> <C> <C>
AIM Balanced Fund.............................................. 13.38% 20.62% 15.42%
AIM Global Utilities Fund...................................... 26.79% 21.55% 13.06%
AIM Select Growth Fund......................................... 33.67% 26.47% 15.30%
AIM Value Fund................................................. 22.80% 25.56% 20.60%
</TABLE>
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The average annual total returns for each Fund, with respect to its
Class B shares, for the periods ended December 31, 1999, are as follows:
<TABLE>
<CAPTION>
PERIODS ENDED DECEMBER 31, 1999
---------------------------------------
CLASS B SHARES: SINCE
-------------- 1 YEAR 5 YEARS INCEPTION*
------ ------- ----------
<S> <C> <C> <C>
AIM Balanced Fund.............................................. 13.08% 20.63% 14.66%
AIM Global Utilities Fund...................................... 28.16% 21.83% 13.61%
AIM Select Growth Fund......................................... 35.26% 26.66% 19.31%
AIM Value Fund................................................. 23.94% 25.80% 20.78%
</TABLE>
*The inception date of the Class B shares of AIM GLOBAL UTILITIES FUND
and AIM SELECT GROWTH FUND, was September 1, 1993; and the inception
date of the Class B shares of AIM BALANCED FUND and AIM VALUE FUND was
October 18, 1993.
The average annual total returns for each Fund, with respect to its
Class C shares, for the periods ended December 31, 1999, are as follows:
<TABLE>
<CAPTION>
PERIODS ENDED DECEMBER 31, 1999
-------------------------------
CLASS C SHARES: SINCE
-------------- -----
1 YEAR INCEPTION*
------ ---------
<S> <C> <C>
AIM Balanced Fund 17.09% 14.29%
AIM Global Utilities Fund 32.18% 24.10%
AIM Select Growth Fund 39.26% 24.65%
AIM Value Fund 27.92% 24.55%
</TABLE>
* The inception date of the Class C shares of the Funds was August 4, 1997.
Standard total return quotes may be accompanied by total return figures
calculated by alternative methods. For example, average annual total return may
be calculated without assuming payment of the full sales load according to the
following formula:
n
P(1+U) = ERV
Where P = a hypothetical initial payment of $1,000.
U = average annual total return assuming payment of only
a stated portion of, or none of, the applicable maximum
sales load at the beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
Cumulative total return across a stated period may be calculated as
follows:
n
P(1+V) = ERV
Where P = a hypothetical initial payment of $1,000.
V = cumulative total return assuming payment of all of, a
stated portion of, or none of, the applicable maximum
sales load at the beginning of the stated period.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
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<PAGE> 10
YIELD QUOTATIONS
The standard formula for calculating yield for each Fund is as follows:
6
YIELD = 2[((a-b)/(c x d) + 1) - 1]
Where a = dividends and interest earned during a stated 30-day
period. For purposes of this calculation, dividends are
accrued rather than recorded on the ex-dividend date.
Interest earned under this formula must generally be
calculated based on the yield to maturity of each
obligation (or, if more appropriate, based on yield to
call date).
b = expenses accrued during period (net of reimbursement).
c = the average daily number of shares outstanding during
the period.
d = the maximum offering price per share on the last day of
the period.
The yields for each of the named Funds are as follows:
<TABLE>
<CAPTION>
30 DAYS ENDED DECEMBER 31, 1999
-------------------------------
CLASS A SHARES CLASS B SHARES CLASS C SHARES
-------------- -------------- --------------
<S> <C> <C> <C>
AIM Balanced Fund........................... 2.40% 1.74% 1.74%
AIM Global Utilities Fund................... 1.02% 0.44% 0.44%
</TABLE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
AIM makes decisions to buy and sell securities for each Fund, selects
broker-dealers, effects the Funds' investment portfolio transactions, allocates
brokerage fees in such transactions, and where applicable, negotiates
commissions and spreads on transactions. AIM's primary consideration in
effecting a security transaction is to obtain the most favorable execution of
the order, which includes the best price on the security and a low commission
rate. While AIM seeks reasonably competitive commission rates, the Funds may not
pay the lowest commission or spread available. See "Section 28(e) Standards"
below.
Some of the securities in which the Funds invest are traded in
over-the-counter markets. In such transactions, a Fund deals directly with
dealers who make markets in the securities involved, except when better prices
are available elsewhere. Portfolio transactions placed through dealers who are
primary market makers are effected at net prices without commissions, but which
include compensation in the form of a mark up or mark down.
Traditionally, commission rates have not been negotiated on stock
markets outside the United States. Although in recent years many overseas stock
markets have adopted a system of negotiated rates, a number of markets maintain
an established schedule of minimum commission rates.
AIM may determine target levels of commission business with various
brokers on behalf of its clients (including the Funds) over a certain time
period. The target levels will be based upon the following factors, among
others: (1) the execution services provided by the broker; (2) the research
services provided by the broker; and (3) the broker's interest in mutual funds
in general and in the Funds and other mutual funds advised by AIM or A I M
Capital Management, Inc. (collectively, the "AIM Funds") in particular,
including sales of the Funds and of the other AIM Funds. In connection with (3)
above, the Funds' trades may be executed directly by dealers that sell shares of
the AIM Funds or by other broker-dealers with which such dealers have clearing
arrangements. AIM will not use a specific formula in connection with any of
these considerations to determine the target levels.
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<PAGE> 11
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 AIM 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 Boards 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.
Under the 1940 Act, certain persons affiliated with the Trust are
prohibited from dealing with the Funds as principal in any purchase or sale of
securities unless an exemptive order allowing such transactions is obtained from
the SEC. The 1940 Act also prohibits the Funds from purchasing a security being
publicly underwritten by a syndicate of which certain persons affiliated with
the Trust are members except in accordance with certain conditions. These
conditions may restrict the ability of a Fund to purchase municipal securities
being publicly underwritten by such syndicate, and the Fund may be required to
wait until the syndicate has been terminated before buying such securities. At
such time, the market price of the securities may be higher or lower than the
original offering price. A person affiliated with the Trust may, from time to
time, serve as placement agent or financial advisor to an issuer of municipal
securities and be paid a fee by such issuer. Each Fund may purchase such
municipal securities directly from the issuer, provided that the purchase is
reviewed by the Board of Trustees and a determination is made that the placement
fee or other remuneration paid by the issuer to a person affiliated with the
Trust is fair and reasonable in relation to the fees charged by others
performing similar services.
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage numerous other investment accounts. Some
of these accounts may have investment objectives similar to the Funds.
Occasionally, identical securities will be appropriate for investment by one of
the Funds and by another Fund or one or more of these investment accounts.
However, the position of each account in the same securities and the length of
time that each account may hold its investment in the same securities may vary.
The timing and amount of purchase by each account will also be determined by its
cash position. If the purchase or sale of securities is consistent with the
investment policies of the Fund(s) and one or more of these accounts, and is
considered at or about the same time, AIM will fairly allocate transactions in
such securities among the Fund(s) and these accounts. AIM may combine such
transactions, in accordance with applicable laws and regulations, to obtain the
most favorable execution. Simultaneous transactions could, however, adversely
affect a Fund's ability to obtain or dispose of the full amount of a security
which it seeks to purchase or sell.
Sometimes the procedure for allocating portfolio transactions among the
various investment accounts advised by AIM could have an adverse effect on the
price or amount of securities available to a Fund. In making such allocations,
AIM considers the investment objectives and policies of its advisory clients,
the relative size of portfolio holdings of the same or comparable securities,
the availability of cash for investment, the size of investment commitments
generally held, and the judgments of the persons responsible for recommending
the investment.
ALLOCATION OF IPO SECURITIES TRANSACTIONS
From time to time, certain of the AIM Funds or other accounts managed
by AIM may become interested in participating in security distributions that are
available in an IPO, and occasions may arise when purchases of such securities
by one AIM Fund or account may also be considered for purchase by one or more
other AIM Funds or accounts. In such cases, it shall be AIM's practice to
combine or otherwise bunch indications of interest for IPO securities for all
AIM Funds and accounts participating in purchase transactions for that security,
and to allocate such transactions in accordance with the following procedures:
AIM will determine the eligibility of each AIM Fund and account that
seeks to participate in a particular IPO by reviewing a number of factors,
including suitability of the investment with the AIM Fund's
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<PAGE> 12
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 and account with an asset level of less than $500 million
will be placed in one of three tiers, depending upon its asset level. The AIM
Funds and accounts in the tier containing funds and accounts with the smallest
asset levels will participate first, each receiving a 40 basis point allocation
(rounded to the nearest share round lot that approximates 40 basis points) (the
"Allocation"), based on that AIM Fund's or account's net assets. This process
continues until all of the AIM Funds and accounts in the three tiers receive
their Allocation, or until the shares are all allocated. Should securities
remain after this process, eligible AIM Funds and accounts will receive their
Allocation on a straight pro rata basis. For the tier of AIM Funds and accounts
not receiving a full Allocation, the Allocation may be made only to certain AIM
Funds or accounts so that each may receive close to or exactly 40 basis points.
Any AIM Funds and/or accounts with substantially identical investment
objectives and policies participates in syndicates, in amounts that are
substantially proportionate to each other. In these cases, the net assets of the
largest AIM Fund will be used to determine in which tier, as described in the
paragraph above, such group of AIM Funds or accounts will be placed. If no AIM
Fund participates, 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 custody services, as well as the providing of equipment used to
communicate research information, the providing of specialized consultations
with AIM personnel with respect to computerized systems and data furnished to
AIM as a component of other research services, the arranging of meetings with
management of companies, and the providing of access to consultants who supply
research information.
The outside research assistance is useful to AIM since the
broker-dealers used by AIM tend to follow a broader universe of securities and
other matters than AIM's staff can follow. In addition, the research provides
AIM with a diverse perspective on financial markets. Research services provided
to AIM by broker-dealers are available for the benefit of all accounts managed
or advised by AIM or by its affiliates. Some broker-dealers may indicate that
the provision of research services is dependent upon
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<PAGE> 13
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 December 31, 1999, no Funds entered into repurchase agreements
with their regular brokers, as that term is defined in Rule 10b-1 under the 1940
Act.
As of December 31, 1999, AIM BALANCED FUND held an amount of common
stock issued by Merrill Lynch & Co., Inc., Morgan Stanley Dean Witter & Co. and
Goldman Sachs Group, Inc. (The) having a market value of $14,696,000,
$21,412,500 and $4,926,006, respectively. As of December 31, 1999, AIM VALUE
FUND held an amount of common stock issued by Morgan Stanley having a market
value of $685,414,125.
BROKERAGE COMMISSIONS PAID
For the year ended December 31, 1999, AIM BALANCED FUND, AIM GLOBAL
UTILITIES FUND, AIM SELECT GROWTH FUND and AIM VALUE FUND directed certain
brokerage transactions to broker-dealers that provided AIM with research,
statistical and other information: $156,721,721, $10,896,995, $74,955,560 and
$3,288,505,195, respectively. For the same period, AIM BALANCED FUND, AIM GLOBAL
UTILITIES FUND, AIM SELECT GROWTH FUND, and AIM VALUE FUND paid the following in
related brokerage commissions: $252,312, $19,863, $92,999 and $3,014,005,
respectively.
Except as noted, the Trust does not utilize an affiliated broker or
dealer in effecting portfolio transactions and does not recapture commissions
paid in such transactions. Brokerage commissions or underwriting concessions (or
both) paid by each of the Funds listed below were as follows for the years ended
December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
FUND 1999 1998 1997
---- ------------ ------------ ------------
(000) (000) (000)
<S> <C> <C> <C>
AIM Balanced Fund.............................. $ 1,595 $ 1,328 $ 726
AIM Global Utilities Fund...................... 199 209 150
AIM Select Growth Fund......................... 592 906 1,101
AIM Value Fund................................. 23,804 34,489 35,473
</TABLE>
PORTFOLIO TURNOVER
Any particular security will be sold, and the proceeds reinvested,
whenever such action is deemed prudent from the viewpoint of a Fund's investment
objective(s), regardless of the holding period of that security. Each Fund's
historical portfolio turnover rates are included in the Financial Highlights
tables of the Fund's Prospectus. A higher rate of portfolio turnover may result
in higher transaction costs, including brokerage commissions. Also, to the
extent that higher portfolio turnover results in a higher rate of net realized
capital gains to a Fund, the portion of the Fund's distributions constituting
taxable capital gains may increase. See "Tax Matters."
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<PAGE> 14
INVESTMENT STRATEGIES AND RISKS
Information concerning each Fund's non-fundamental investment objective
is set forth in the Prospectuses under the heading "Investment Objective and
Strategies." There can be no assurance that any Fund will achieve its objective.
The principal features of each Fund's investment program and the principal risks
associated with that investment program are discussed in the Prospectuses under
the headings "Investment Objective and Strategies" and "Principal Risks of
Investing in the Fund."
Set forth in this section is a description of each Fund's investment
policies, strategies and practices. The investment objective(s) of each Fund are
non-fundamental policies and may be changed by the Board of Trustees without
shareholder approval. Each Fund's investment policies, strategies and practices
are also non-fundamental. The Board of Trustees of the Trust reserves the right
to change any of these non-fundamental investment policies, strategies or
practices without shareholder approval. However, shareholders will be notified
before any material change in the investment policies becomes effective. Each
Fund has adopted certain investment restrictions, some of which are fundamental
and cannot be changed without shareholder approval. See "Investment
Restrictions" in this Statement of Additional Information. Individuals
considering the purchase of shares of any Fund should recognize that there are
risks in the ownership of any security. Any percentage limitations with respect
to assets of a Fund will be applied at the time of purchase. A later change in
percentage resulting from changes in asset values will not be considered a
violation of the percentage limitations. The percentage limitations applicable
to borrowings and reverse repurchase agreements will be applied in accordance
with applicable provisions of the 1940 Act and the rules and regulations
promulgated thereunder which specifically limit each Fund's borrowing abilities.
ALL FUNDS
AIM GLOBAL UTILITIES FUND, AIM SELECT GROWTH FUND and AIM VALUE FUND
invest in securities traded in the over-the-counter market or listed on a
national securities exchange. AIM BALANCED FUND, investing in both equity and
debt securities, acquires securities in the over-the-counter market and on
national securities exchanges, and acquires bonds in new offerings or in
principal trades with broker-dealers. Ordinarily, the Funds do not purchase
securities with the intention of engaging in short-term trading. However, any
particular security will be sold, and the proceeds reinvested, whenever such
action is deemed prudent from the viewpoint of a Fund's investment objectives,
regardless of the holding period of that security.
A portion of each Fund's assets may be held in cash and high quality,
short-term money market instruments such as certificates of deposit, commercial
paper, bankers' acceptances, short-term U.S. Government obligations, taxable
municipal securities, master notes, and repurchase agreements, pending
investment in portfolio securities, to meet anticipated short-term cash needs
such as dividend payments or redemptions of shares, or for temporary defensive
purposes. Such investments generally will have maturities of 60 days or less and
normally are held to maturity. The underlying securities that are subject to a
repurchase agreement will be "marked-to-market" on a daily basis so that AIM can
determine the value of the securities in relation to the amount of the
repurchase agreement.
U.S. Government securities may take the form of participation interests
in, and may be evidenced by, deposit or safekeeping receipts. Participation
interests are pro rata interests in U.S. Government securities. A Fund may
acquire participation interests in pools of mortgages sold by the Government
National Mortgage Association ("GNMA"), the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Banks. Instruments evidencing
deposit or safekeeping are documentary receipts for such original securities
held in custody by others.
U.S. Government securities, including those that are guaranteed by
federal agencies or instrumentalities, may or may not be backed by the "full
faith and credit" of the United States. Some securities issued by federal
agencies or instrumentalities are only supported by the credit of the agency or
instrumentality (such as the Federal Home Loan Banks) while others have an
additional line of credit with the U.S. Treasury (such as FNMA). In the case of
securities not backed by the full faith and credit of the United States, the
Funds must look principally to the agency issuing or guaranteeing the obligation
for ultimate repayment and may not be able to assert a claim against the United
States itself in the event the agency or instrumentality does not meet its
commitments.
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<PAGE> 15
AIM GLOBAL UTILITIES FUND
DESCRIPTION OF THE UTILITIES INDUSTRY
Electric Utility Industry. Electric utilities are heavily regulated.
Local rates are subject to the review of state commissions, and sales either
between companies or that cross state lines are subject to review by the Federal
Energy Regulatory Commission. The industry is also subject to regulation by the
SEC under the Public Utility Holding Company Act of 1935. In addition, companies
constructing or operating nuclear powered generating stations are subject to
extensive regulation by the Nuclear Regulatory Commission.
Electric utility companies are also subject to extensive local
regulation in environmental and site location matters. Future legislation with
regard to the issues of acid rain and toxic and radioactive wastes could have a
significant impact on the manner in which utility companies conduct their
business, and the costs that they incur. Since the late 1970s, investor-owned
utilities have experienced a number of unfavorable regulatory trends, including
increased regulatory resistance to price increases and new legislation
encouraging deregulation and competition.
Electric utilities and their predominant business, electric energy
generation, transmission and distribution, are undergoing fundamental changes
that may materially affect their financial condition. These changes are
attributable to advancements in technology, as well as deregulation of the
retail sale of electric generation and other aspects of utilities' core
businesses. For example, Federal law and regulations have been amended to
provide for open transmission system access and competitive wholesale sales of
electric generation, and various states are considering, or have adopted
(including California, Illinois, Massachusetts, New Hampshire, New York, and
Pennsylvania), new regulatory structures to allow access by some or all
customers to energy suppliers in addition to the local utility.
Competition in electric generation is expected to create new
uncertainties in the electric utility industry. These uncertainties include
future prices of electricity in both the wholesale and retail markets, potential
changes in the composition of utilities' customer base and supply and demand
volatility. Specifically, it is expected that state deregulation of electric
generating operations will result in price pressures that will reduce the future
revenues of utilities in such states. In addition, to the extent a utility loses
retail customers, it may have to sell generation previously used to serve retail
customers in the wholesale market. Since margins in the wholesale market are
currently lower than in the retail market, this change could further reduce
revenues and adversely affect the profit margins of affected utilities.
Furthermore, the ability of utilities to compete in the retail electric
generation market may be compromised by the costs of earlier investments in
generation facilities such as nuclear power plants. While the trend in this area
has been to allow utilities to recover such costs through the imposition of
surcharges on customers' bills, not every state that deregulates its retail
electric generation market may do so. It is also unknown at this time whether
the existing state statutory schemes designed to address the loss of investments
suffered by deregulated utilities will adequately compensate such utilities or
place them in a position to effectively compete with new market entrants who are
not encumbered by these investments.
Natural Gas Industry. The natural gas industry is comprised primarily
of many small distribution companies and a few large interstate pipeline
companies. The Public Utility Holding Company Act of 1935 has generally acted as
a bar to the consolidation of pipeline and distribution companies. Regulation of
these companies is similar to that of electric companies. The performance of
natural gas utilities may also be substantially affected by fluctuations in
energy prices.
In addition, the gas industry is continuing to undergo structural
changes in response to federal policies designed to increase competition. These
policies have required interstate gas pipelines to unbundle their gas sales
service from other regulated tariff services, such as transportation and
storage. There are also initiatives in several states, such as Pennsylvania, to
deregulate the gas industry.
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<PAGE> 16
Communications Industry. Most of the communications industry capacity
is concentrated in the hands of a few very large publicly-held companies, unlike
the situation in the electric and gas industries. Significant risks for the
investor to overcome still exist, however, including risk related to pricing at
marginal versus embedded cost. New entrants may have lower costs of material due
to newer technologies or lower standards of reliability than those imposed in
the past by American Telephone & Telegraph ("AT&T") on the industry.
Accordingly, the marginal cost of incremental service is much lower than the
costs embedded in an existing network. Communications companies are not subject
to the Public Utility Holding Company Act of 1935.
Interstate communications service may be subject to Federal
Communications Commission regulation. Local service may be regulated by the
states. In addition, AT&T and its former subsidiaries are still subject to
judicial review pursuant to the settlement of the antitrust case brought against
them by the Department of Justice.
Water Utility Industry. The water utility industry is composed of
regulated public utilities that are involved in the distribution of drinking
water to densely populated areas. The industry is geographically diverse and
subject to the same rate base and rate of return regulations as are other public
utilities. Demand for water is most heavily influenced by the local weather,
population growth in the service area and new construction. Supplies of clean,
drinkable water are limited and are primarily a function of the amount of past
rainfall.
Other. In addition to the particular types of utilities industries
described above, the Fund may invest in developing utility technology companies
(such as cellular telephone, fiber optics and satellite communications firms)
and in holding companies which derive a substantial portion of their revenues
from utility-related activities.
NON-DIVERSIFIED PORTFOLIO
AIM GLOBAL UTILITIES FUND is a non-diversified portfolio, which means
that it may invest a greater proportion of its assets in the securities of a
smaller number of issuers and therefore may be subject to greater market and
credit risk than a more broadly diversified portfolio. The Fund is subject to
the issuer diversification requirements of the Internal Revenue Code of 1986, as
amended, that are applicable to regulated investment companies. To qualify as a
regulated investment company, the Fund must diversify its holdings so that, at
the end of each fiscal quarter: (i) at least 50% of the market value of the
Fund's assets is represented by cash and cash items, U.S. Government securities,
securities of other regulated investment companies and other securities, with
such other securities limited, with respect to any one issuer, to an amount not
greater than 5% of the Fund's total assets and not more than 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
Fund's total assets is invested in the securities (other than U.S. Government
securities or securities of other regulated investment companies) of any one
issuer, or of two or more issuers which the Fund controls and which are
determined to be engaged in the same, similar or related trades or businesses.
AIM BALANCED FUND
Most debt securities purchased by the Fund will be rated Baa or better
by Moody's or BBB or better by S&P or, if unrated, deemed to be of comparable
quality by AIM, although the Fund may invest to a limited extent in lower- rated
securities. The fixed income securities in which the Fund invests may include
U.S. Government obligations, mortgage-backed securities, asset-backed
securities, bank obligations, corporate debt obligations and unrated
obligations, including those of foreign issuers. The Fund may, in pursuit of its
objective, invest up to 10% of its total assets in debt securities rated lower
than Baa by Moody's or BBB by S&P (or a comparable rating of any other
nationally recognized statistical rating organizations "NRSROs") or unrated
securities determined by AIM to be of comparable quality.
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<PAGE> 17
RISK FACTORS REGARDING NON-INVESTMENT GRADE DEBT SECURITIES
AIM BALANCED FUND and AIM GLOBAL UTILITIES FUND may seek to meet their
respective investment objectives by investing in non-investment grade debt
securities, commonly known as "junk bonds." While generally providing greater
income and opportunity for gain, non-investment grade debt securities may be
subject to greater risks than higher-rated securities. Economic downturns tend
to disrupt the market for junk bonds and adversely affect their values. Such
economic downturns may be expected to result in increased price volatility for
junk bonds and of the value of shares of the above-named Funds, and increased
issuer defaults on junk bonds.
In addition, many issuers of junk bonds are substantially leveraged,
which may impair their ability to meet their obligations. In some cases, junk
bonds are subordinated to the prior payment of senior indebtedness, which
potentially limits a Fund's ability to fully recover principal or to receive
payments when senior securities are subject to a default.
The credit rating of a junk bond does not necessarily address its
market value risk, and ratings may from time to time change to reflect
developments regarding the issuer's financial condition. Junk bonds have
speculative characteristics which are likely to increase in number and
significance with each successive lower rating category.
When the secondary market for junk bonds becomes more illiquid, or in
the absence of readily available market quotations for such securities, the
relative lack of reliable objective data makes it more difficult for the
trustees to value a Fund's securities, and judgment plays a more important role
in determining such valuations. Increased illiquidity in the junk bond market
also may affect a Fund's ability to dispose of such securities at desirable
prices.
In the event a Fund experiences an unexpected level of net redemptions,
the Fund could be forced to sell its junk bonds without regard to their
investment merits, thereby decreasing the asset base upon which the Fund's
expenses can be spread and possibly reducing the Fund's rate of return. Prices
of junk bonds have been found to be less sensitive to fluctuations in interest
rates, and more sensitive to adverse economic changes and individual corporate
developments than those of higher-rated debt securities.
REAL ESTATE INVESTMENT TRUSTS ("REITs")
To the extent consistent with their respective investment objectives
and policies, AIM BALANCED FUND, AIM GLOBAL UTILITIES FUND, AIM SELECT GROWTH
FUND and AIM VALUE FUND may each invest up to 25% of its total assets in equity
and/or debt securities issued by REITs.
REITs are trusts which sell equity or debt securities to investors and
use the proceeds to invest in real estate or interests therein. A REIT may focus
on particular projects, such as apartment complexes, or geographic regions, such
as the southeastern United States, or both.
To the extent that a Fund has the ability to invest in REITs, such Fund
could conceivably own real estate directly as a result of a default on the
securities it owns. A Fund, therefore, may be subject to certain risks
associated with the direct ownership of real estate including difficulties in
valuing and trading real estate, declines in the value of real estate, risks
related to general and local economic 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, equity REITs may be affected
by any changes in the value of the underlying property owned by the trusts,
while mortgage REITs may be affected by the quality of any credit extended.
Equity and mortgage REITs are dependent upon management skill, are not
diversified, and are therefore subject to the risk of financing single or a
limited number of projects. Such trusts are also subject to heavy cash flow
dependency, defaults by borrowers, self-liquidation, and
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<PAGE> 18
the possibility of failing to maintain exemption from the 1940 Act. Changes in
interest rates may also affect the value of debt securities held by a Fund. By
investing in REITs indirectly through a Fund, a shareholder will bear not only
his/her proportionate share of the expenses of the Fund, but also, indirectly,
similar expenses of the REITs.
LENDING PORTFOLIO SECURITIES: ALL FUNDS
Consistent with applicable regulatory requirements, the Funds may lend
their portfolio securities (principally to broker-dealers) to the extent of
one-third of their respective total assets. Such loans would be callable at any
time and would be continuously secured by collateral equal to no less than the
market value, determined daily, of the loaned securities. Such collateral will
be cash or debt securities issued or guaranteed by the U.S. Government or any of
its agencies. The Funds would continue to receive the income on loaned
securities and would, at the same time, earn interest on the loan collateral or
on the investment of the loan collateral if it were cash. Any cash collateral
pursuant to these loans would be invested in short-term money market
instruments or affiliated money market funds. Where voting or consent rights
with respect to loaned securities pass to the borrower, the Funds will follow
the policy of calling the loan, in whole or in part as may be appropriate, to
permit the exercise of such voting or consent rights if the matters involved are
expected to have a material effect on the Funds' investment in the loaned
securities. Lending securities entails a risk of loss to the Funds if and to the
extent that the market value of the securities loaned were to increase and the
lender did not increase the collateral accordingly.
SHORT SALES: ALL FUNDS
Each of the Funds may from time to time make short sales of securities
which it owns or which it has the right to acquire through the conversion or
exchange of other securities it owns. In a short sale, a Fund does not
immediately deliver the securities sold and does not receive the proceeds from
the sale. A Fund is said to have a short position in the securities sold until
it delivers the securities sold, at which time it receives the proceeds of the
sale. A Fund will neither make short sales of securities nor maintain a short
position unless, at all times when a short position is open, the Fund owns an
equal amount of such securities or securities convertible into or exchangeable,
without payment of any further consideration, for securities of the same issue
as, and equal in amount to, the securities sold short. This is a technique known
as selling short "against the box." To secure its obligation to deliver the
securities sold short, a Fund will deposit in escrow in a separate account with
its custodian, State Street Bank and Trust Company ("State Street"), an equal
amount of the securities sold short or securities convertible into or
exchangeable for such securities. In no event may more than 10% of a Fund's
total assets be deposited or pledged as collateral for short sales at any one
time.
Since a Fund ordinarily will want to continue to receive interest and
dividend payments on securities in its portfolio which are convertible into the
securities sold short, the Fund will normally close out a short position by
purchasing and delivering an equal amount of the securities sold short, rather
than by delivering securities which it already holds.
A Fund will make a short sale, as a hedge, when it believes that the
price of a security may decline, causing a decline in the value of a security
owned by the Fund or a security convertible into or exchangeable for such
security, or when the Fund does not want to sell the security it owns, because,
among other reasons, it wishes to defer recognition of gain or loss for federal
income tax purposes. In such case, any future losses in a Fund's long position
should be reduced by a gain in the short position. Conversely, any gain in the
long position should be reduced by a loss in the short position. The extent to
which such gains or losses are reduced will depend upon the amount of the
security sold short relative to the amount a Fund owns, either directly or
indirectly, and, in the case where the Fund owns convertible securities, changes
in the conversion premium. In determining the number of shares to be sold short
against a Fund's position in a convertible security, the anticipated fluctuation
in the conversion premium is considered. A Fund may also make short sales to
generate additional income from the investment of the cash proceeds of short
sales.
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MARGIN TRANSACTIONS
None of the Funds will purchase any security on margin, except that
each Fund may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of portfolio securities. The payment by a Fund
of initial or variation margin in connection with futures or related options
transactions will not be considered the purchase of a security on margin.
DELAYED DELIVERY AGREEMENTS: ALL FUNDS
Each Fund may purchase or sell securities on a delayed delivery basis.
Delayed delivery agreements involve commitments by a Fund to dealers or issuers
to acquire securities or instruments at a specified future date beyond the
customary same-day settlement for such securities or instruments. These
commitments may fix the payment price and interest rate to be received on the
investment. Delayed delivery agreements will not be used as a speculative or
leverage technique. Rather, from time to time, AIM can anticipate that cash for
investment purposes will result from, among other things, scheduled maturities
of existing portfolio instruments or from net sales of shares of a Fund. To
assure that a Fund will be as fully invested as possible in instruments meeting
the Fund's investment objective, the Fund may enter into delayed delivery
agreements, but only to the extent of anticipated funds available for investment
during a period of not more than five business days. Until the settlement date,
a Fund will segregate liquid assets of a dollar value sufficient at all times to
make payment for the delayed delivery securities. No more than 25% of a Fund's
total assets will be committed to delayed delivery agreements and when-issued
securities, as described below. The delayed delivery securities, which will not
begin to accrue interest or dividends until the settlement date, will be
recorded as an asset of a Fund and will be subject to the risk of market
fluctuation. The purchase price of the delayed delivery securities is a
liability of a Fund until settlement. Absent extraordinary circumstances, a Fund
will not sell or otherwise transfer the delayed delivery securities prior to
settlement. If cash is not available to a Fund at the time of settlement, the
Fund may be required to dispose of portfolio securities that it would otherwise
hold to maturity in order to meet its obligation to accept delivery under a
delayed delivery agreement. The Board of Trustees has determined that entering
into delayed delivery agreements does not present a materially increased risk of
loss to shareholders, but the Board of Trustees may restrict the use of delayed
delivery agreements if the risk of loss is determined to be material.
WHEN-ISSUED SECURITIES: ALL FUNDS
Each Fund may purchase securities on a "when-issued" basis, that is,
the date for delivery of and payment for the securities is not fixed at the date
of purchase, but is set after the securities are issued (normally within
forty-five days after the date of the transaction). The payment obligation and,
if applicable, the interest rate that will be received on the securities are
fixed at the time the buyer enters into the commitment. A Fund will only make
commitments to purchase such securities with the intention of actually acquiring
such securities, but the Fund may sell these securities before the settlement
date if it is deemed advisable. No additional when-issued commitments will be
made if as a result more than 25% of a Fund's total assets would become
committed to purchases of when-issued securities and delayed delivery
agreements.
If a Fund purchases a when-issued security, it will direct its
custodian bank to collateralize the when-issued commitment by segregating liquid
assets in the same fashion as required for a delayed delivery agreement. Such
segregated liquid assets will likewise be marked-to-market, and the amount
segregated will be increased if necessary to maintain adequate coverage of the
when-issued commitments.
Securities purchased on a when-issued basis and the securities held in
a Fund's portfolio are subject to changes in market value based upon the
public's perception of the creditworthiness of the issuer and, if applicable,
changes in the level of interest rates. Therefore, if a Fund is to remain
substantially fully invested at the same time that it has purchased securities
on a when-issued basis, there will be a possibility that the market value of the
Fund's assets will fluctuate to a greater degree. Furthermore, when the time
comes for the Fund to meet its obligations under when-issued commitments,
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the Fund will do so by using then available cash flow, by sale of the segregated
liquid assets, by sale of other securities or, although it would not normally
expect to do so, by directing the sale of the when- issued securities themselves
(which may have a market value greater or less than the Fund's payment
obligation).
Investment in securities on a when-issued or delayed delivery basis may
increase a Fund's exposure to market fluctuation and may increase the
possibility that the Fund will incur short-term gains subject to federal
taxation or short- term losses if the Fund must engage in portfolio transactions
in order to honor a when-issued or delayed delivery commitment. In a delayed
delivery transaction, the Fund relies on the other party to complete the
transaction. If the transaction is not completed, the Fund may miss a price or
yield considered to be advantageous. A Fund will employ techniques designed to
reduce such risks. If a Fund purchases a when-issued security, the Fund's
custodian bank will segregate liquid assets in an amount equal to the
when-issued commitment. If the market value of such segregated assets declines,
additional liquid assets will be segregated on a daily basis so that the market
value of the segregated assets will equal the amount of the Fund's when-issued
commitments. To the extent liquid assets are segregated, they will not be
available for new investments or to meet redemptions. Securities purchased on a
delayed delivery basis may require a similar segregation of liquid assets.
INVESTMENTS IN FOREIGN SECURITIES: ALL FUNDS
Each Fund may invest up to 25% of its total assets (up to 80% for AIM
GLOBAL UTILITIES FUND) in foreign securities. To the extent it invests in
securities denominated in foreign currencies, each Fund bears the risks 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. Each Fund may
invest in securities of foreign issuers which are in the form of American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), or other
securities representing underlying securities of foreign issuers, and such
investments are treated as foreign securities for purposes of percentage
limitations on investments in foreign securities. For a discussion of the risks
pertaining to investments in foreign securities, see "Risk Factors Regarding
Foreign Securities" below.
RISK FACTORS REGARDING FOREIGN SECURITIES
Investments by a Fund in foreign securities, whether denominated in
U.S. dollars or foreign currencies, may entail all of the risks set forth below.
Investments by a Fund in ADRs, EDRs or similar securities also may entail some
or all of the risks described below.
Currency Risk. The value of the Funds' foreign investments will be
affected by changes in currency exchange rates. The U.S. dollar value of a
foreign security decreases when the value of the U.S. dollar rises against the
foreign currency in which the security is denominated, and increases when the
value of the U.S. dollar falls against such currency.
Political and Economic Risk. The economies of many of the countries in
which the Funds may invest may not be 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
Securities and Exchange Commission 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 Fund's
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
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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.
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.
FOREIGN EXCHANGE TRANSACTIONS: ALL FUNDS
Each Fund has authority to deal in foreign exchange between currencies
of the different countries in which it will invest either for the settlement of
transactions or as a hedge against possible variations in the foreign exchange
rates between those currencies. This may be accomplished through direct
purchases or sales of foreign currency, purchases of futures contracts with
respect to foreign currency, and contractual agreements to purchase or sell a
specified currency at a specified future date (up to one year) at a price set
at the time of the contract. Such contractual commitments may be forward
contracts entered into directly with another party or exchange traded futures
contracts.
The Funds may purchase and sell options on futures contracts, forward
contracts or futures contracts which are denominated in a particular foreign
currency to hedge the risk of fluctuations in the value of another currency.
Each Fund's dealings in foreign exchange will be limited to hedging foreign
currency exposure and may involve 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 Fund accruing in connection
with the purchase or sale of its portfolio securities, the sale and redemption
of shares of the Fund, or the payment of dividends and distributions by the
Fund. Position hedging is the purchase or sale of foreign currency with respect
to portfolio security positions (or underlying portfolio security positions,
such as in an ADR) denominated or quoted in a foreign currency. The Funds will
not speculate in foreign exchange. No Fund will commit a larger percentage of
its total assets to foreign exchange hedges than the percentage of its total
assets which it could invest in foreign securities. Further information
concerning futures contracts and related options is set forth under the heading
"Options, Futures and Currency Strategies."
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.
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RULE 144A SECURITIES
Each of the Funds may purchase securities which, while privately
placed, are eligible for purchase and resale 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 their respective net 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 net 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.
REPURCHASE AGREEMENTS
Each of the Funds may engage in repurchase agreement transactions
involving the types of securities in which it is permitted to invest. Repurchase
agreements are agreements under which the purchaser (for example, a Fund)
acquires ownership of a security and the seller agrees, at the time of the sale,
to repurchase the security at a mutually agreed upon time and price, thereby
determining the yield during the purchaser's holding period. A Fund may,
however, enter into a "continuing contract" or "open" repurchase agreement under
which the seller is under a continuing obligation to repurchase the underlying
obligation from the Fund on demand and the effective interest rate is negotiated
on a daily basis. In general, a Fund will enter into repurchase agreements only
with domestic banks with total assets of at least $1 billion or with primary
dealers in U.S. Government securities; however, total assets will not be the
sole determinative factor, and a Fund may enter into repurchase agreements with
other institutions which the Board of Trustees believes present minimal credit
risks. Nevertheless, if the seller of a repurchase agreement fails to repurchase
the debt instrument in accordance with the terms of the agreement, the Fund
which entered into the repurchase agreement may incur a loss to the extent that
the proceeds it realizes on the sale of the underlying obligation are less than
the repurchase price. Repurchase agreements are considered to be loans by a Fund
under the 1940 Act.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are agreements which involve the sale of
securities held by a Fund, with an agreement that the Fund will repurchase the
securities at an agreed upon price and date. A Fund may employ reverse
repurchase agreements (i) for temporary emergency purposes, such as to meet
unanticipated net redemptions so as to avoid liquidating other portfolio
securities during unfavorable market conditions; (ii) to cover short-term cash
requirements resulting from the timing of trade settlements; or (iii) to take
advantage of market situations where the interest income to be earned from the
investment of the proceeds of the transaction is greater than the interest
expense of the transaction. At the time it enters into a reverse repurchase
agreement, a Fund will segregate liquid assets having a dollar value equal to
the repurchase price. Reverse repurchase agreements are considered borrowings by
a Fund under the 1940 Act.
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EQUITY-LINKED DERIVATIVES
Each of the Funds may invest in equity-linked derivative products
designed to replicate the composition and performance of particular indices.
Examples of such products include S&P Depositary Receipts ("SPDRs"), World
Equity Benchmark Series ("WEBs"), NASDAQ 100 tracking shares ("QQQs"), Dow Jones
Industrial Average Instruments ("DIAMONDS") and Optomised Portfolios as Listed
Securities ("OPALS"). Investments in equity-linked derivatives involve the same
risks associated with a direct investment in the types of securities included in
the indices such products are designed to track. There can be no assurance that
the trading price of the equity-linked derivatives will equal the underlying
value of the basket of securities purchased to replicate a particular index or
that such basket will replicate the index. Investments in equity-linked
derivatives may constitute investment in other investment companies. See
"Investment in Other Investment Companies."
INVESTMENT IN OTHER INVESTMENT COMPANIES
Each of the Funds may invest in other investment companies to the
extent permitted by the 1940 Act, and rules and regulations thereunder, and if
applicable, exemptive orders granted by the SEC. The following restrictions
apply to investments in other investment companies other than Affiliated Money
Market Funds (defined below): (i) a Fund may not purchase more than 3% of the
total outstanding voting stock of another investment company; (ii) a Fund may
not invest more than 5% of its total assets in securities issued by another
investment company; and (iii) a Fund may not invest more than 10% of its total
assets in securities issued by other investment companies other than Affiliated
Money Market Funds. With respect to a Fund's purchase of shares of another
investment company, including Affiliated Money Market Funds, the Fund will
indirectly bear its proportionate share of the advisory fees and other 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 such Fund.
TEMPORARY DEFENSIVE INVESTMENTS
In anticipation of or in response to adverse market conditions, for
cash management purposes, or for defensive purposes, each of the Funds may
temporarily hold all or a portion of its assets in cash, money market
instruments, bonds, or other debt securities. Each of the Funds may also invest
up to 25% of its total assets in Affiliated Money Market Funds for these
purposes.
OPTIONS, FUTURES AND CURRENCY STRATEGIES
INTRODUCTION
The Funds may each use forward contracts, futures contracts, options on
securities, options on indices, options on currencies, and options on futures
contracts to attempt to hedge against the overall level of investment and
currency risk normally associated with each Fund's investments. These
instruments are often referred to as "derivatives," which may be defined as
financial instruments whose performance is derived, at least in part, from the
performance of another asset (such as a security, currency or an index of
securities).
GENERAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use by the Funds of options, futures contracts and forward currency
contracts involves special considerations and risks, as described below. Risks
pertaining to particular strategies are described in the sections that follow.
(1) Successful use of hedging transactions depends upon AIM's ability
to correctly predict the direction of changes in the value of the applicable
markets and securities, contracts and/or currencies.
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While AIM is experienced in the use of these instruments, there can be no
assurance that any particular hedging strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between the price movements of an instrument (such as an option contract) and
the price movements of the investments being hedged. For example, if a
"protective put" is used to hedge a potential decline in a security and the
security does decline in price, the put option's increased value may not
completely offset the loss in the underlying security. Such a lack of
correlation might occur due to factors unrelated to the value of the investments
being hedged, such as changing interest rates, market liquidity, and speculative
or other pressures on the markets in which the hedging instrument is traded.
(3) Hedging strategies, if successful, can reduce risk of loss by
wholly or partially offsetting the negative effect of unfavorable price
movements in the investments being hedged. However, hedging strategies can also
reduce opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments.
(4) There is no assurance that a liquid secondary market will exist for
any particular option, futures contract, forward contract or option thereon at
any particular time.
(5) As described below, a Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in instruments involving obligations to third parties. If a Fund were
unable to close out its positions in such instruments, it might be required to
continue to maintain such assets or accounts or make such payments until the
position expired or matured. The requirements might impair the Fund's ability to
sell a portfolio security or make an investment at a time when it would
otherwise be favorable to do so, or require that the Fund sell a portfolio
security at a disadvantageous time.
(6) There is no assurance that a Fund will use hedging transactions.
For example, if a Fund determines that the cost of hedging will exceed the
potential benefit to the Fund, the Fund will not enter into such transaction.
COVER
Transactions using forward contracts, futures contracts and options
(other than options purchased by a Fund) expose a Fund to an obligation to
another party. A Fund will not enter into any such transactions unless it owns
either (1) an offsetting ("covered") position in securities, currencies, or
other options, forward contracts or futures contracts or (2) cash, liquid assets
and/or short-term debt securities with a value sufficient at all times to cover
its potential obligations not covered as provided in (1) above. Each Fund will
comply with SEC guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash or liquid securities. To the extent that a
futures contract, forward contract or option is deemed to be illiquid, the
assets used to "cover" the Fund's obligation will also be treated as illiquid
for purposes of determining the Fund's maximum allowable investment in illiquid
securities.
Even though options purchased by the Funds do not expose the Funds to
an obligation to another party, but rather provide the Funds with a right to
exercise, the Funds intend to "cover" the cost of any such exercise. To the
extent that a purchased option is deemed illiquid, the Fund will treat the
market value of the option (i.e., the amount at risk to the Fund) as illiquid,
but will not treat the assets used as cover on such transactions as illiquid.
Assets used as cover cannot be sold while the position in the
corresponding forward contract, futures contract or option is open, unless they
are replaced with other appropriate assets. If a large portion of a Fund's
assets is used for cover or otherwise set aside, it could affect portfolio
management or the Fund's ability to meet redemption requests or other current
obligations.
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WRITING CALL OPTIONS
Each of the Funds may write (sell) covered call options on securities,
futures contracts, forward contracts, indices and currencies. As the writer of a
call option, a Fund would have the obligation to deliver the underlying
security, cash or currency (depending on the type of derivative) to the holder
(buyer) at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). So long as
the obligation of a Fund continues, it may be assigned an exercise notice,
requiring it to deliver the underlying security, cash or currency against
payment of the exercise price. This obligation terminates upon the expiration of
the call option, or such earlier time at which a Fund effects a closing purchase
transaction by purchasing an option identical to that previously sold.
When writing a call option a Fund, in return for the premium, gives up
the opportunity for profit from a price increase in the underlying security,
contract or currency above the exercise price, and retains the risk of loss
should the price of the security, contract or currency decline. Unlike one who
owns securities, contracts or currencies not subject to an option, a Fund has no
control over when it may be required to sell the underlying securities,
contracts or currencies, since most options may be exercised at any time prior
to the option's expiration. If a call option that a Fund has written expires, it
will realize a gain in the amount of the premium; however, such gain may be
offset by a decline in the market value of the underlying security, contract or
currency during the option period. If the call option is exercised, a Fund will
realize a gain or loss from the sale of the underlying security, contract or
currency, which will be increased or offset by the premium received.
Writing call options can serve as a limited hedge because declines in
the value of the hedged investment would be offset to the extent of the premium
received for writing the option.
Closing transactions may be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security, contract or currency
from being called or to permit the sale of the underlying security, contract or
currency. Furthermore, effecting a closing transaction will permit a Fund to
write another call option on the underlying security, contract or currency with
either a different exercise price or expiration date, or both.
WRITING PUT OPTIONS
Each of the Funds may write (sell) covered put options on securities,
futures contracts, forward contracts, indices and currencies. As the writer of a
put option, a Fund would have the obligation to buy the underlying security,
contract or currency (depending on the type of derivative) at the exercise price
at any time until (American style) or on (European style) the expiration date.
This obligation terminates upon the expiration of the put option, or such
earlier time at which a Fund effects a closing purchase transaction by
purchasing an option identical to that previously sold.
A Fund would write a put option at an exercise price that, reduced by
the premium received on the option, reflects the lower price it is willing to
pay for the underlying security, contract or currency. The risk in such a
transaction would be that the market price of the underlying security, contract
or currency would decline below the exercise price less the premium received.
PURCHASING PUT OPTIONS
Each of the Funds may purchase covered put options on securities,
futures contracts, forward contracts, indices and currencies. As the holder of a
put option, a Fund would have the right to sell the underlying security,
contract or currency at the exercise price at any time until (American style) or
on (European style) the expiration date. A Fund may enter into closing sale
transactions with respect to such options, exercise such option or permit such
option to expire.
A Fund may purchase a put option on an underlying security, contract or
currency ("protective put") owned by the Fund in order to protect against an
anticipated decline in the value of the security,
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contract or currency. Such hedge protection is provided only during the life of
the put option. The premium paid for the put option and any transaction costs
would reduce any profit realized when the security, contract or currency is
delivered upon exercise of said option. Conversely, if the underlying security,
contract or currency does not decline in value, the option may expire worthless
and the premium paid for the protective put would be lost.
A Fund may also purchase put options on underlying securities,
contracts or currencies against which it has written other put options. For
example, where a Fund has written a put option on an underlying security, rather
than entering a closing transaction of the written option, it may purchase a put
option with a different exercise price and/or expiration date that would
eliminate some or all of the risk associated with the written put. Used in
combinations, these strategies are commonly referred to as "put spreads."
Likewise, a Fund may write call options on underlying securities, contracts or
currencies against which it has purchased protective put options. This strategy
is commonly referred to as a "collar."
PURCHASING CALL OPTIONS
Each of the Funds may purchase covered call options on securities,
futures contracts, forward contracts, indices and currencies. As the holder of a
call option, a Fund would have the right to purchase the underlying security,
contract or currency at the exercise price at any time until (American style) or
on (European style) the expiration date. A Fund may enter into closing sale
transactions with respect to such options, exercise such options or permit such
options to expire.
Call options may be purchased by a Fund for the purpose of acquiring
the underlying security, contract or currency for its portfolio. Utilized in
this fashion, the purchase of call options would enable a Fund to acquire the
security, contract or currency at the exercise price of the call option plus the
premium paid. So long as it holds such a call option, rather than the underlying
security or currency itself, the Fund is partially protected from any unexpected
decline in the market price of the underlying security, contract or currency
and, in such event, could allow the call option to expire, incurring a loss only
to the extent of the premium paid for the option.
Each of the Funds may also purchase call options on underlying
securities, contracts or currencies against which it has written other call
options. For example, where a Fund has written a call option on an underlying
security, rather than entering a closing transaction of the written option, it
may purchase a call option with a different exercise strike and/or expiration
date that would eliminate some or all of the risk associated with the written
call. Used in combinations, these strategies are commonly referred to as "call
spreads."
OVER-THE-COUNTER OPTIONS
Options may be either listed on an exchange or traded in
over-the-counter ("OTC") markets. Listed options are third-party contracts
(i.e., performance of the obligations of the purchaser and seller is guaranteed
by the exchange or clearing corporation) and have standardized strike prices and
expiration dates. OTC options are two-party contracts with negotiated strike
prices and expiration dates. A Fund will not purchase an OTC option unless it
believes that daily valuations for such options are readily obtainable. OTC
options differ from exchange-traded options in that OTC options are transacted
with dealers directly and not through a clearing corporation (which guarantees
performance). Consequently, there is a risk of non-performance by the dealer.
Since no exchange is involved, OTC options are valued on the basis of an average
of the last bid prices obtained from dealers, unless a quotation from only one
dealer is available, in which case only that dealer's price will be used. In the
case of OTC options, there can be no assurance that a liquid secondary market
will exist for any particular option at any specific time. Although a Fund will
enter into OTC options only with dealers that are expected to be capable of
entering into closing transactions with it, there is no assurance that the Fund
will in fact be able to close out an OTC option position at a favorable price
prior to expiration. In the event of insolvency of the dealer, a Fund might be
unable to close out an OTC option position at any time prior to its expiration.
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The staff of the SEC considers purchased OTC options (i.e., the market
value of the option) to be illiquid securities. A Fund may also sell OTC options
and, in connection therewith, segregate assets or cover its obligations with
respect to OTC options written by it. The assets used as cover for OTC options
written by the Fund will be considered illiquid unless the OTC options are sold
to qualified dealers who agree that the Fund may repurchase any OTC option it
writes at a maximum price to be calculated by a formula set forth in the option
agreement. The cover for an OTC option written subject to this procedure would
be considered illiquid only to the extent that the maximum repurchase price
under the formula exceeds the intrinsic value of the option.
INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities
or futures contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price movements in the
securities market or a particular market sector generally) rather than on price
movements in individual securities or futures contracts. The amount of cash is
equal to the difference between the closing price of the index and the exercise
price of the call or put times a specified multiple (the "multiplier"), which
determines the total dollar value for each point of such difference.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Fund writes a call
on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. A Fund can
offset some of the risk of writing a call index option position by holding a
diversified portfolio of securities similar to those on which the underlying
index is based. However, the Fund cannot, as a practical matter, acquire and
hold a portfolio containing exactly the same securities as underlie the index
and, as a result, bears a risk that the value of the securities held will not be
perfectly correlated with the value of the index.
LIMITATIONS ON OPTIONS
A Fund will not write options if, immediately after such sale, the
aggregate value of securities or obligations underlying the outstanding options
exceeds 20% of the Fund's total assets. A Fund will not purchase options if, at
any time of the investment, the aggregate premiums paid for the options will
exceed 5% of the Fund's total assets.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
Each of the Funds may enter into interest rate, currency or stock index
futures contracts (collectively, "Futures" or "Futures Contracts") as a hedge
against changes in prevailing levels of interest rates, currency exchange rates
or stock price levels, respectively, in order to establish more definitely the
effective return on securities or currencies held or intended to be acquired by
it. A Fund's hedging may include sales of Futures as an offset against the
effect of expected increases in interest rates, and decreases in currency
exchange rates and stock prices, and purchases of Futures as an offset against
the effect of expected declines in interest rates, and increases in currency
exchange rates or stock prices.
A Futures Contract is a two party agreement to buy or sell a specified
amount of a specified security or currency (or delivery of a cash settlement
price, in the case of an index future) for a specified price at a designated
date, time and place. A stock index future provides for the delivery, at a
designated date, time and place, of an amount of cash equal to a specified
dollar amount times the difference between the stock index value at the close of
trading on the contract and the price agreed upon in the Futures Contract; no
physical delivery of stocks comprising the index is made. Brokerage fees are
incurred when a Futures Contract is bought or sold, and margin deposits must be
maintained at all times the Future is outstanding.
The Funds will only enter into Futures Contracts that are traded
(either domestically or internationally) on futures exchanges and are
standardized as to maturity date and underlying financial instrument. Futures
exchanges and trading thereon in the United States are regulated under the
Commodity Exchange Act and by the Commodity Futures Trading Commission ("CFTC").
Foreign futures
24
<PAGE> 28
exchanges and trading thereon are not regulated by the CFTC and are not subject
to the same regulatory controls. For a further discussion of the risks
associated with investments in foreign securities, see "Foreign Securities" in
this Statement of Additional Information.
Closing out an open Future is effected by entering into an offsetting
Future for the same aggregate amount of the identical financial instrument or
currency and the same delivery date. There can be no assurance, however, that a
Fund will be able to enter into an offsetting transaction with respect to a
particular Future at a particular time. If a Fund is not able to enter into an
offsetting transaction, it will continue to be required to maintain the margin
deposits on the Future.
A Fund's Futures transactions will be entered into for hedging purposes
only; that is, Futures will be sold to protect against a decline in the price of
securities or currencies that the Fund owns, or Futures will be purchased to
protect the Fund against an increase in the price of securities or currencies it
has committed to purchase or expects to purchase.
"Margin" with respect to Futures is the amount of funds that must be
deposited by a Fund in order to initiate Futures trading and maintain its open
positions in Futures. A margin deposit made when the Futures Contract is entered
("initial margin") is intended to ensure the Fund's performance under the
Futures Contract. The margin required for a particular Future is set by the
exchange on which the Future is traded and may be significantly modified from
time to time by the exchange during the term of the Futures Contract.
Subsequent payments, called "variation margin," to and from the futures
commission merchant through which a Fund entered into the Futures Contract will
be made on a daily basis as the price of the underlying security, currency or
index fluctuates making the Futures more or less valuable, a process known as
marking-to-market.
If a Fund were unable to liquidate a Future or an option on a Futures
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. The Fund would continue to be
subject to market risk with respect to the position. In addition, except in the
case of purchased options, the Fund would continue to be required to make daily
variation margin payments and might be required to maintain the position being
hedged by the Future or option or to maintain cash or securities in a segregated
account.
OPTIONS ON FUTURES CONTRACTS
Options on Futures Contracts are similar to options on securities or
currencies except that options on Futures Contracts give the purchaser the
right, in return for the premium paid, to assume a position in a Futures
Contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. Upon exercise of the option, the delivery of the Futures position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's Futures margin account.
FORWARD CONTRACTS
A forward contract is an obligation, usually arranged with a commercial
bank or other currency dealer, to purchase or sell a currency against another
currency at a future date and price as agreed upon by the parties. A Fund either
may accept or make delivery of the currency at the maturity of the forward
contract. A Fund may also, if its contra party agrees prior to maturity, enter
into a closing transaction involving the purchase or sale of an offsetting
contract. Forward contracts are traded over-the-counter, and not on organized
commodities or securities exchanges. As a result, it may be more difficult to
value such contracts, and it may be difficult to enter into closing
transactions.
Each of the Funds may engage in forward currency transactions in
anticipation of, or to protect itself against, fluctuations in exchange rates. A
Fund may enter into forward contracts with respect to a specific purchase or
sale of a security, or with respect to its portfolio positions generally. When a
Fund
25
<PAGE> 29
purchases a security denominated in a foreign currency for settlement in the
near future, it may immediately purchase in the forward market the currency
needed to pay for and settle the purchase. By entering into a forward contract
with respect to the specific purchase or sale of a security denominated in a
foreign currency, the Fund can secure an exchange rate between the trade and
settlement dates for that purchase or sale transaction. This practice is
sometimes referred to as "transaction hedging." Position hedging is the purchase
or sale of foreign currency with respect to portfolio security positions
denominated or quoted in a foreign currency.
The cost to a Fund of engaging in forward contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because forward contracts are usually entered
into on a principal basis, no fees or commissions are involved. The use of
forward contracts does not eliminate fluctuations in the prices of the
underlying securities a Fund owns or intends to acquire, but it does establish a
rate of exchange in advance. In addition, while forward contract sales limit the
risk of loss due to a decline in the value of the hedged currencies, they also
limit any potential gain that might result should the value of the currencies
increase.
LIMITATIONS ON USE OF FUTURES, OPTIONS ON FUTURES AND CERTAIN OPTIONS ON
CURRENCIES
To the extent that a Fund enters into Futures Contracts, options on
Futures Contracts and options on foreign currencies traded on a CFTC-regulated
exchange, in each case other than for bona fide hedging purposes (as defined by
the CFTC), the aggregate initial margin and premiums required to establish those
positions (excluding the amount by which options are "in-the-money") will not
exceed 5% of the total assets of the Fund, after taking into account unrealized
profits and unrealized losses on any contracts it has entered into. This
guideline may be modified by the Board, without a shareholder vote. This
limitation does not limit the percentage of the Fund's assets at risk to 5%.
INVESTMENT RESTRICTIONS
FUNDAMENTAL RESTRICTIONS
Each Fund is subject to the following investment restrictions, which
may be changed only by a vote of a majority of such Fund's outstanding shares,
except that AIM GLOBAL UTILITIES FUND is not subject to restrictions (1) or (4).
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.
(1) The Fund is a "diversified company" as defined in the 1940 Act. The
Fund will not purchase the securities of any issuer if, as a result, the Fund
would fail to be a diversified company within the meaning of the 1940 Act, and
the rules and regulations promulgated thereunder, as such statute, rules and
regulations are amended from time to time or are interpreted from time to time
by the SEC staff (collectively, the "1940 Act Laws and Interpretations") or
except to the extent that the Fund may be permitted to do so by exemptive order
or similar relief (collectively, with the 1940 Act Laws and Interpretations, the
"1940 Act Laws, Interpretations and Exemptions"). In complying with this
restriction, however, the Fund may purchase securities of other investment
companies to the extent permitted by the 1940 Act Laws, Interpretations and
Exemptions.
(2) The Fund may not borrow money or issue senior securities, except as
permitted by the 1940 Act Laws, Interpretations and Exemptions.
(3) The Fund may not underwrite the securities of other issuers. This
restriction does not prevent the Fund from engaging in transactions involving
the acquisition, disposition or resale of its
26
<PAGE> 30
portfolio securities, regardless of whether the Fund may be considered to be an
underwriter under the Securities Act of 1933.
(4) The Fund will not make investments that will result in the
concentration (as that term may be defined or interpreted by the 1940 Act Laws,
Interpretations and Exemptions) of its investments in the securities of issuers
primarily engaged in the same industry. This restriction does not limit the
Fund's investments in (i) obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, or (ii) tax-exempt obligations
issued by governments or political subdivisions of governments. In complying
with this restriction, the Fund will not consider a bank-issued guaranty or
financial guaranty insurance as a separate security.
(5) The Fund may not purchase real estate or sell real estate unless
acquired as a result of ownership of securities or other instruments. This
restriction does not prevent the Fund from investing in issuers that invest,
deal, or otherwise engage in transactions in real estate or interests therein,
or investing in securities that are secured by real estate or interests therein.
(6) The Fund may not purchase physical commodities or sell physical
commodities unless acquired as a result of ownership of securities or other
instruments. This restriction does not prevent the Fund from engaging in
transactions involving futures contracts and options thereon or investing in
securities that are secured by physical commodities.
(7) The Fund may not make personal loans or loans of its assets to
persons who control or are under common control with the Fund, except to the
extent permitted by 1940 Act Laws, Interpretations and Exemptions. This
restriction does not prevent the Fund from, among other things, purchasing debt
obligations, entering into repurchase agreements, loaning its assets to
broker-dealers or institutional investors, or investing in loans, including
assignments and participation interests.
(8) The Fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same fundamental
investment objectives, policies and restrictions as the Fund.
AIM GLOBAL UTILITIES FUND will concentrate (as such term may be defined
or interpreted by the 1940 Act Laws, Interpretations and Exemptions) its
investments in the securities of domestic and foreign public utility companies.
The investment restrictions set forth above provide each of the Funds
with the ability to operate under new interpretations of the 1940 Act or
pursuant to exemptive relief from the SEC without receiving prior shareholder
approval of the change. Even though each of the Funds has this flexibility, the
Board of Trustees has adopted non-fundamental restrictions for each of the Funds
relating to certain of these restrictions which the advisor must follow in
managing the Funds. Any changes to these non-fundamental restrictions, which are
set forth below, require the approval of the Board of Trustees.
NON-FUNDAMENTAL RESTRICTIONS
The following non-fundamental investment restrictions apply to each of
the Funds, except AIM GLOBAL UTILITIES FUND is not subject to restrictions (1)
or (3). They may be changed for any Fund without approval of that Fund's voting
securities.
(1) In complying with the fundamental restriction regarding issuer
diversification, the Fund will not, with respect to 75% of its total assets,
purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government or any of its agencies or instrumentalities),
if, as a result, (i) more than 5% of the Fund's total assets would be invested
in the securities of that issuer, or (ii) the Fund would hold more than 10% of
the outstanding voting securities of that issuer. The Fund may (i) purchase
securities of other investment companies as permitted by Section 12(d)(1) of the
1940 Act and (ii) invest its assets in securities of other money market funds
and lend money to other investment
27
<PAGE> 31
companies and their series portfolios that have AIM or an affiliate of AIM as an
investment advisor (an "AIM Advised Fund"), subject to the terms and conditions
of any exemptive orders issued by the SEC.
(2) In complying with the fundamental restriction regarding borrowing
money and issuing senior securities, the Fund may borrow money in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). The Fund may borrow from banks,
broker-dealers or an AIM Advised Fund. The Fund may not borrow for leveraging,
but may borrow for temporary or emergency purposes, in anticipation of or in
response to adverse market conditions, or for cash management purposes. The Fund
may not purchase additional securities when any borrowings from banks exceed 5%
of the Fund's total assets.
(3) In complying with the fundamental restriction regarding industry
concentration, the Fund may invest up to 25% of its total assets in the
securities of issuers whose principal business activities are in the same
industry.
(4) In complying with the fundamental restriction with regard to making
loans, the Fund may lend up to 33 1/3% of its total assets and may lend money to
an AIM Advised Fund, on such terms and conditions as the SEC may require in an
exemptive order.
(5) Notwithstanding the fundamental restriction with regard to
investing all assets in an open-end fund, the Fund may not invest all of its
assets in the securities of a single open-end management investment company with
the same fundamental investment objectives, policies and restrictions as the
Fund.
For purposes of AIM GLOBAL UTILITIES FUND's fundamental restriction
regarding industry concentration, public utility companies shall consist of
companies that produce or supply electricity, natural gas, water, sanitary
services, and telephone, cable, satellite, telegraph or other communication or
information transmission services, as well as developing utility technology
companies and holding companies which derive at least 40% of their revenues from
utility-related activities.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of May 18, 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 names and addresses of the
holders of 5% or more of the outstanding shares of each class of the Trust's
equity securities as of May 18, 2000, and the percentage of the outstanding
shares held by such holders are set forth below:
28
<PAGE> 32
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address of Owned of and
Beneficial Owner Record* Beneficially
---------------- ------- ------------
<S> <C> <C>
AIM BALANCED FUND -
Class A shares
Merrill Lynch Pierce Fenner & Smith 10.57% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
American Express Trust Co. 8.70% - 0 -
FBO American Express Trust
Retirement Service Plans
1200 Northstar
West P.O. Box 534
Minneapolis, MN 55440-0534
Class B shares
Merrill Lynch Pierce Fenner & Smith 10.47% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Class C shares
Merrill Lynch Pierce Fenner & Smith 23.84% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
AIM GLOBAL UTILITIES FUND -
Class B shares
Merrill Lynch Pierce Fenner & Smith 7.97% - 0 -
FBO The Sole Benefit of Customers
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.
29
<PAGE> 33
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address of Owned of and
Beneficial Owner Record* Beneficially
---------------- ------- ------------
<S> <C> <C>
Class C shares
Merrill Lynch Pierce Fenner & Smith 7.84% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
AIM SELECT GROWTH FUND -
Class B shares
Merrill Lynch Pierce Fenner & Smith 15.11% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Class C shares
Merrill Lynch Pierce Fenner & Smith 13.53% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
AIM VALUE FUND -
Class A shares
Merrill Lynch Pierce Fenner & Smith 11.20% - 0 -
FBO The Sole Benefit of Customers
ATTN: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Class B shares
Merrill Lynch Pierce Fenner & Smith 14.18% - 0 -
FBO The Sole Benefit of Customers
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.
30
<PAGE> 34
<TABLE>
<CAPTION>
Percent
Owned of
Percent Record
Name and Address of Owned of and
Beneficial Owner Record* Beneficially
---------------- ------- ------------
<S> <C> <C>
Class C shares
Merrill Lynch Pierce Fenner & Smith 27.33% - 0 -
FBO The Sole Benefit of Customers
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.
MANAGEMENT
The overall management of the business and affairs of the Funds and the
Trust is vested in the Board of Trustees. The Board of Trustees approves all
significant agreements between the Trust, on behalf of one or more of the Funds,
and persons or companies furnishing services to the Funds. The day-to-day
operations of each Fund are delegated to the officers of the Trust and to AIM,
subject always to the objective(s), restrictions and policies of the applicable
Fund and to the general supervision of the Board of Trustees. Certain trustees
and officers of the Trust are affiliated with AIM and A I M Management Group
Inc. ("AIM Management"), the parent corporation of AIM.
TRUSTEES AND OFFICERS
The trustees and officers of the Trust and their principal occupations
during at least 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, Texas 77046.
<TABLE>
<CAPTION>
POSITIONS
NAME, ADDRESS AND AGE HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST
REGISTRANT THE PAST 5 YEARS
====================================== =================== ===============================================================
<S> <C> <C> <C>
*CHARLES T. BAUER (81) Trustee and Director and Chairman , A I M Management Group Inc.,
Chairman A I M Advisors, Inc., A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund Services, Inc. and
Fund Management Company; and Executive Vice
Chairman and Director, AMVESCAP PLC.
-------------------------------------- ------------------- ---------------------------------------------------------------
BRUCE L. CROCKETT (55) Trustee Director, ACE Limited (insurance company). Formerly,
906 Frome Lane Director, President and Chief Executive Officer, COMSAT
McLean, VA 22102 Corporation; and Chairman, Board of Governors of
INTELSAT (international communications company).
-------------------------------------- ------------------- ---------------------------------------------------------------
</TABLE>
-------------------
* A trustee who is an "interested person" of the Trust and A I M Advisors,
Inc. as defined in the 1940 Act.
31
<PAGE> 35
<TABLE>
<CAPTION>
POSITIONS
NAME, ADDRESS AND AGE HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST
REGISTRANT THE PAST 5 YEARS
====================================== =================== ===============================================================
<S> <C> <C> <C>
OWEN DALY II (75) Trustee Formerly, Director, Cortland Trust Inc. (investment
Six Blythewood Road company), CF & I Steel Corp., Monumental Life
Baltimore, MD 21210 Insurance Company and Monumental General Insurance
Company; and Chairman of the Board of Equitable
Bancorporation.
-------------------------------------- ------------------- ---------------------------------------------------------------
EDWARD K. DUNN, JR. (64) Trustee Chairman of the Board of Directors, Mercantile Mortgage
2 Hopkins Plaza Corp. Formerly, Vice Chairman of the Board of Directors,
8th Floor, Suite 805 President and Chief Operating Officer, Mercantile-Safe
Baltimore, MD 21201 Deposit & Trust Co.; and President, Mercantile
Bankshares.
-------------------------------------- ------------------- ---------------------------------------------------------------
JACK FIELDS (48) Trustee Chief Executive Officer, Texana Global, Inc. (foreign
Jetero Plaza, Suite E trading company) and Twenty First Century Group, Inc.
8810 Will Clayton Parkway (governmental affairs company). Formerly, Member of the
U.S. House of Representatives.
-------------------------------------- ------------------- ---------------------------------------------------------------
**CARL FRISCHLING (63) Trustee Partner, Kramer, Levin, Naftalis & Frankel LLP (law firm).
919 Third Avenue
New York, NY 10022
-------------------------------------- ------------------- ---------------------------------------------------------------
*ROBERT H. GRAHAM (53) Trustee and Director, President and Chief Executive Officer,
President A I M Management Group Inc.; Director and President,
A I M Advisors, Inc.; Director and Senior Vice President,
A I M Capital Management, Inc., A I M Distributors, Inc.,
A I M Fund Services, Inc. and Fund Management
Company; and Director and Chief Executive Officer,
Managed Products, AMVESCAP PLC.
-------------------------------------- ------------------- ---------------------------------------------------------------
PREMA MATHAI-DAVIS (49) Trustee Chief Executive Officer, YWCA of the U.S.A.
350 Fifth Avenue, Suite 301
New York, NY 10118
====================================== =================== ===============================================================
</TABLE>
-------------------
** A trustee who is an "interested person" of the Trust and A I M Advisors,
Inc. as defined in the 1940 Act.
* A trustee who is an "interested person" of the Trust as defined in the 1940
Act.
32
<PAGE> 36
<TABLE>
<CAPTION>
POSITIONS
NAME, ADDRESS AND AGE HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST
REGISTRANT THE PAST 5 YEARS
====================================== =================== ===============================================================
<S> <C> <C> <C>
LEWIS F. PENNOCK (57) Trustee Partner, Pennock & Cooper (law firm).
6363 Woodway, Suite 825
Houston, TX 77057
-------------------------------------- ------------------- ---------------------------------------------------------------
LOUIS S. SKLAR (60) Trustee Executive Vice President, Development and Operations,
The Williams Tower Hines Interests Limited Partnership (real
50th Floor estate development).
2800 Post Oak Blvd.
Houston, TX 77056
-------------------------------------- ------------------- ---------------------------------------------------------------
GARY T. CRUM (52) Senior Vice Director and President, A I M Capital Management,
President Inc.; Director and Executive Vice President,
A I M Management Group Inc.; Director and Senior Vice
President, A I M Advisors, Inc.; and Director,
A I M Distributors, Inc. and AMVESCAP PLC.
-------------------------------------- ------------------- ---------------------------------------------------------------
CAROL F. RELIHAN (45) Senior Vice Director, Senior Vice President, General Counsel and
President Secretary, A I M Advisors, Inc.; Senior Vice President,
and Secretary General Counsel and Secretary, A I M Management
Group Inc.; Director, Vice President and General
Counsel, Fund Management Company; 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 Vice President and Fund Controller, A I M Advisors, Inc.;
and Treasurer and Assistant Vice President and Assistant Treasurer,
Fund Management Company.
-------------------------------------- ------------------- ---------------------------------------------------------------
ROBERT G. ALLEY (51) Vice President Senior Vice President, A I M Capital Management, Inc.;
and Vice President, A I M Advisors, Inc.
-------------------------------------- ------------------- ---------------------------------------------------------------
STUART W. COCO (44) Vice President Senior Vice President, A I M Capital Management, Inc.;
and Vice President, A I M Advisors, Inc.
-------------------------------------- ------------------- ---------------------------------------------------------------
MELVILLE B. COX (56) Vice President Vice President and Chief Compliance Officer,
A I M Advisors, Inc., A I M Capital Management, Inc.
====================================== =================== ===============================================================
</TABLE>
33
<PAGE> 37
<TABLE>
<CAPTION>
POSITIONS
NAME, ADDRESS AND AGE HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST
REGISTRANT THE PAST 5 YEARS
====================================== =================== ===============================================================
<S> <C> <C> <C>
KAREN DUNN KELLEY (39) Vice President Senior Vice President, A I M Capital Management, Inc.;
and Vice President, A I M Advisors, Inc.
-------------------------------------- ------------------- ---------------------------------------------------------------
EDGAR M. LARSEN (59) Vice President Vice President, A I M Capital Management, Inc.
====================================== =================== ===============================================================
</TABLE>
The standing committees of the Board of Trustees are the Audit
Committee, the Investments Committee and the Nominating and Compensation
Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Dunn
(Chairman), Fields, Frischling, Pennock and Sklar and Dr. Mathai-Davis. The
Audit Committee is responsible for: (i) considering management's recommendations
of independent accountants for each Fund and evaluating such accountants'
performance, costs and financial stability; (ii) with AIM, reviewing and
coordinating audit plans prepared by the Funds' independent accountants and
management's internal audit staff; and (iii) reviewing financial statements
contained in periodic reports to shareholders with the Funds' independent
accountants and management.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly, Dunn, Fields, Frischling, Pennock and Sklar (Chairman) and Dr.
Mathai-Davis. The 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 policies and pricing matters.
The members of the Nominating and Compensation Committee are Messrs.
Crockett (Chairman), Daly, Dunn, Fields, Pennock and Sklar and Dr. Mathai-Davis.
The Nominating and Compensation Committee is responsible for: (i) considering
and nominating individuals to stand for election as dis-interested 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
dis-interested trustees; and (iii) making recommendations to the Board regarding
matters related to compensation, including deferred compensation plans and
retirement plans for the dis-interested trustees.
The Nominating and Compensation Committee will consider nominees
recommended by a shareholder to serve as trustees, provided (i) that such person
is a shareholder of record at the time he or she submits such names and is
entitled to vote at the meeting of shareholders at which trustees will be
elected, and (ii) that the Nominating and Compensation Committee or the Board,
as applicable, shall make the final determination of persons to be nominated.
All of the Trust's trustees also serve as directors or trustees of some
or all of the other investment companies managed or advised by AIM. All of the
Trust's executive officers hold similar offices with some or all of the other
investment companies managed or advised by AIM.
Remuneration of Trustees
Each trustee is reimbursed for expenses incurred in connection with
each meeting of the Board of Trustees or any committee thereof. Each trustee who
is not also an officer of the Trust is compensated for his or her services
according to a fee schedule which recognizes the fact that such trustee also
serves as a director or trustee of other AIM Funds. Each such trustee receives a
fee, allocated among the AIM Funds for which he or she serves as a director or
trustee, which consists of an annual retainer component and a meeting fee
component.
34
<PAGE> 38
Set forth below is information regarding compensation paid or accrued
for each trustee of the Trust during the year ended December 31, 1999:
<TABLE>
<CAPTION>
RETIREMENT
AGGREGATE BENEFITS TOTAL
COMPENSATION ACCRUED COMPENSATION
FROM THE BY ALL FROM ALL AIM
TRUSTEE TRUST(1) AIM FUNDS(2) FUNDS(3)
----------------------- ------------ ----------- -------------
<S> <C> <C> <C>
Charles T. Bauer $ 0 $ 0 $ 0
Bruce L. Crockett 23,116 37,485 103,500
Owen Daly II 23,116 122,898 103,500
Edward K. Dunn, Jr 21,954 55,565 103,500
Jack Fields 22,660 15,826 101,500
Carl Frischling(4) 23,116 97,791 103,500
Robert H. Graham 0 0 0
Prema Mathai-Davis 21,474 11,870 101,500
Lewis F. Pennock 23,116 45,766 103,500
Ian W. Robinson(5) 5,618 94,442 25,000
Louis S. Sklar 22,664 90,232 101,500
========== ========== ==========
</TABLE>
-------------------
(1) The total amount of compensation deferred by all trustees of the Trust
during the fiscal year ended December 31, 1999, including earnings thereon,
was $176,057.
(2) During the fiscal year ended December 31, 1999, the total amount of
expenses allocated to the Trust in respect of such retirement benefits was
$54,659. Data reflects compensation estimated for the calendar year ended
December 31, 1999.
(3) Each trustee serves as a director or trustee of at least 12 registered
investment companies advised by AIM. Data reflects total compensation for
the calendar year ended December 31, 1999.
(4) During the fiscal year ended December 31, 1999, the Trust paid $93,776
in legal fees to Mr. Frischling's law firm, Kramer, Levin, Naftalis &
Frankel LLP, for services rendered to the dis-interested trustees of
the Trust.
(5) 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 or her date of retirement equal to a maximum of 75% of the annual retainer
paid or accrued by the Applicable AIM Funds for such trustee during the
twelve-month
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<PAGE> 39
period immediately preceding the trustee's retirement (including amounts
deferred under a separate agreement between the Applicable AIM Funds and the
trustee) and based on the number of such trustee's years of service (not in
excess of 10 years of service) completed with respect to any of the Applicable
AIM Funds. Such benefit is payable to each eligible trustee in quarterly
installments. If an eligible trustee dies after attaining the normal retirement
date but before receipt of all benefits under the Plan, the trustee's surviving
spouse (if any) shall receive a quarterly survivor's benefit equal to 50% of the
amount payable to the deceased trustee for no more than ten years beginning the
first day of the calendar quarter following the date of the trustee's death.
Payments under the Plan are not secured or funded by any Applicable AIM Fund.
Set forth below is a table that shows the estimated annual benefits
payable to an eligible trustee upon retirement assuming the retainer amount
reflected below and various years of service. The estimated credited years of
service for Messrs. Crockett, Daly, Dunn, Fields, Frischling, Pennock, Robinson
and Sklar and Dr. Mathai-Davis are 13, 13, 2, 3, 23, 18, 11, 10, and 1 years,
respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
Number of Years Annual Retirement
of Service With Compensation
Applicable AIM Paid By All
Funds Applicable
AIM Funds
--------------- -----------------
<S> <C>
10 $ 67,500
9 $ 60,750
8 $ 54,000
7 $ 47,250
6 $ 40,500
5 $ 33,750
</TABLE>
Deferred Compensation Agreements
Messrs. Daly, Dunn, Fields, Frischling and Sklar and Dr. Mathai-Davis
(for purposes of this paragraph only, the "Deferring Trustees") have each
executed a Deferred Compensation Agreement (collectively, the "Compensation
Agreements"). Pursuant to the Agreements, the Deferring Trustees may elect to
defer receipt of up to 100% of their compensation payable by the Trust, and such
amounts are placed into a deferral account. Currently, the Deferring Trustees
may select various AIM Funds in which all or part of their deferral accounts
shall be deemed to be invested. Distributions from the Deferring Trustees'
deferral accounts will be paid in cash, generally in equal quarterly
installments over a period of five (5) or ten (10) years (depending on the
Compensation Agreement) beginning on the date the Deferring Trustee's retirement
benefits commence under the Plan. The Trust's Board of Trustees, in its sole
discretion, may accelerate or extend the distribution of such deferral accounts
after the Deferring Trustee's termination of service as a trustee of the Trust.
If a Deferring Trustee dies prior to the distribution of amounts in his or her
deferral account, the balance of the deferral account will be distributed to his
or her designated beneficiary in a single lump sum payment as soon as
practicable after such Deferring Trustee's death. The Compensation Agreements
are not funded and, with respect to the payments of amounts held in the deferral
accounts, the Deferring Trustees have the status of unsecured creditors of the
Trust and of each other AIM Fund from which they are deferring compensation.
INVESTMENT ADVISORY AND OTHER SERVICES
AIM was organized in 1976, and along with its subsidiaries, manages or
advises over 120 investment portfolios encompassing a broad range of investment
objectives. The address of AIM is 11
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<PAGE> 40
Greenway Plaza, Suite 100, Houston, Texas 77046. AIM is a direct, wholly owned
subsidiary of AIM Management, a holding company that has been engaged in the
financial services business since 1976. AIM is the sole shareholder of the
Funds' principal underwriter, A I M Distributors, Inc. ("AIM Distributors"). AIM
Management is an indirect wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire
Square, London, EC2M 4YR, England. AMVESCAP PLC and its subsidiaries are an
independent investment management group engaged in institutional investment
management and retail mutual fund businesses in the United States, Europe and
the Pacific Region. Certain of the directors and officers of AIM are also
executive officers of the Trust and their affiliations are shown under
"Management" herein.
AIM and the Trust have adopted a Code of Ethics which requires
investment personnel and certain other employees to (a) pre-clear all personal
securities transactions subject to the Code of Ethics; (b) file reports
regarding such transactions; (c) refrain from personally engaging in (i)
short-term trading of a security, (ii) transactions involving a security within
seven days of an AIM Fund transaction involving the same security (subject to a
de minimis exception), and (iii) transactions involving securities being
considered for investment by an AIM Fund (subject to the de minimis exception);
and (d) abide by certain other provisions of the Code of Ethics. The de minimis
exception under the Code of Ethics covers situations where there is no material
conflict of interest because of the large market capitalization of a security
and the relatively small number of shares involved in a personal transaction.
The Code of Ethics also generally prohibits AIM employees from purchasing
securities in initial public offerings. Personal trading reports are
periodically reviewed by AIM, and the Board of Trustees reviews quarterly and
annual reports (which summarize any significant violations of the Code of
Ethics). Sanctions for violating the Code of Ethics may include censure,
monetary penalties, suspension or termination of employment.
The Trust, on behalf of each Fund, has entered into a Master Investment
Advisory Agreement, dated June 1, 2000. A prior investment advisory agreement
with substantially similar terms to the Master Investment Advisory Agreement was
in effect prior to June 1, 2000. The Master Investment Advisory Agreement will
remain in effect until June 30, 2001, and continue from year to year only if
such continuance is specifically approved at least annually by the Trust's Board
of Trustees and by the affirmative vote of a majority of the trustees who are
not parties to the agreement or "interested persons" of any such party by votes
cast in person at a meeting called for such purpose. The agreement provides that
either party may terminate such agreement on 60 days' written notice without
penalty. The agreement terminates automatically in the event of its assignment.
In addition, if a Fund engages in securities lending, AIM will provide
the Fund investment advisory services and related administrative services. The
Master Investment Advisory Agreement describes the administrative services to be
rendered by AIM if a Fund engages in securities lending activities, as well as
the compensation AIM may receive for such administrative services. Services to
be provided include: (a) overseeing participation in the securities lending
program to ensure compliance with all applicable regulatory and investment
guidelines; (b) assisting the securities lending agent or principal (the agent)
in determining which specific securities are available for loan; (c) monitoring
the agent to ensure that securities loans are effected in accordance with AIM's
instructions and with procedures adopted by the Board; (d) preparing appropriate
periodic reports for, and seeking appropriate approvals from, the Board with
respect to securities lending activities; (e) responding to agent inquiries; and
(f) performing such other duties as may be necessary.
AIM's compensation for advisory services rendered in connection with
securities lending is included in the advisory fee schedule. As compensation for
the related administrative services AIM will provide, a lending Fund will pay
AIM a fee equal to 25% of the net monthly interest or fee income retained or
paid to the Fund from such activities. AIM currently intends to waive such fee,
and has agreed to seek Board approval prior to its receipt of all or a portion
of such fee.
Under the terms of the Master Investment Advisory Agreement, AIM
supervises all aspects of the Funds' operations and provides investment advisory
services to the Funds. AIM obtains and evaluates economic, statistical and
financial information to formulate and implement investment programs for the
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<PAGE> 41
Funds. AIM will not be liable to the Funds or their shareholders except in the
case of AIM's willful misfeasance, bad faith, gross negligence or reckless
disregard of duty.
Pursuant to the Master Investment Advisory Agreement, AIM receives a fee
from AIM BALANCED FUND calculated at the following annual rates, based on the
average daily net assets of the Fund during the year:
NET ASSETS ANNUAL RATE
---------- -----------
First $150 million 0.75%
Amount over $150 million 0.50%
Pursuant to the Master Investment Advisory Agreement, AIM receives a fee
from AIM SELECT GROWTH FUND and AIM VALUE FUND calculated at the following
annual rates, based on the average daily net assets of the Fund during the year:
NET ASSETS ANNUAL RATE
---------- -----------
First $150 million 0.80%
Amount over $150 million 0.625%
Pursuant to the Master Investment Advisory Agreement, AIM
receives a fee from AIM GLOBAL UTILITIES FUND calculated at the following annual
rates, based on the average daily net assets of the Fund during the year:
NET ASSETS ANNUAL RATE
---------- -----------
First $200 million 0.60%
Next $300 million 0.50%
Next $500 million 0.40%
Amount over $1 billion 0.30%
AIM may from time to time waive or reduce its fee. Voluntary fee
waivers or reductions may be rescinded at any time without further notice to
investors. During periods of voluntary fee waivers or reductions, AIM will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions set forth in the Fee Table in a
Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM and the Fund.
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<PAGE> 42
AIM has contractually agreed through June 30, 2000 to waive a portion
of its advisory fees payable by AIM VALUE FUND, so that the effective fee
schedule is as follows: 0.80% of the first $150 million of the Fund's average
daily net assets, plus 0.625% of the Fund's average daily net assets in excess
of $150 million to and including $2 billion, plus 0.60% of the Fund's average
daily net assets in excess of $2 billion. During the year ended December 31,
1999, AIM VALUE FUND waived 0.02% in advisory fees.
Each Fund paid to AIM the following management fees net of any expense
limitations and fee waivers for the years ended December 31, 1999, 1998 and
1997:
<TABLE>
<CAPTION>
1999 1998 1997
--------- ----------- -----------
<S> <C> <C> <C>
AIM Balanced Fund .................... $ 13,624,208 $ 9,043,320 $ 4,789,939
AIM Global Utilities Fund ............ 1,802,726 1,652,662 1,440,692
AIM Select Growth Fund ............... 5,507,389 4,362,261 3,901,342
AIM Value Fund ....................... $136,059,101 94,937,000 72,810,450
</TABLE>
For the fiscal years ended December 31, 1999, 1998 and 1997, AIM waived
advisory fees for each Fund as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
AIM Balanced Fund .................... -0- -0- -0-
AIM Global Utilities Fund ............ -0- -0- -0-
AIM Select Growth Fund ............... -0- -0- -0-
AIM Value Fund ....................... $5,137,356 $3,423,939 $2,501,999
</TABLE>
For the fiscal years ended December 31, 1999, 1998 and 1997, AIM did not
reimburse expenses of any of the Funds.
The Trust pays all expenses not specifically assumed by AIM or AIM
Distributors including compensation and expenses of trustees who are not
directors, officers or employees of AIM, AIM Distributors or any other
affiliates of AIM Management; registration, filing and other fees in connection
with filings with regulatory authorities; the fees and expenses of independent
accountants; costs of printing and mailing registration statements,
prospectuses, proxy statements, and annual and periodic reports to shareholders;
custodian and transfer agent fees; brokerage commissions and securities
transactions costs incurred by the Funds; taxes and corporate fees; legal fees
incurred in connection with the affairs of the Funds; and expenses of meetings
of shareholders and trustees.
AIM and the Trust have entered into a Master Administrative Services
Agreement pursuant to which AIM is entitled to receive from the Funds
reimbursement or its costs or such reasonable compensation as may be
approved by the Board of Trustees. Currently, AIM is reimbursed for the
services of the Trust's principal financial officer and her staff, and any
expenses related to fund accounting services.
AIM, at its own expense, furnishes to the Trust office space and
facilities. AIM furnishes to the Trust all personnel for managing the affairs of
the Trust and each of its series of shares and is reimbursed under the Master
Administrative Services Agreement for the services of a principal financial
officer of the Trust and her staff. The Master Administrative Services Agreement
between the Trust and AIM provides that AIM may perform or arrange for the
provision of certain accounting, and other administrative services to each Fund
which are not required to be performed by AIM under the Master Investment
Advisory Agreement. The Master Administrative Services Agreement will continue
from year to year only if such continuance is specifically approved at least
annually by the Trust's Board of Trustees, including the "dis-interested"
trustees, by votes cast in person at a meeting called for such purpose.
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<PAGE> 43
The Funds paid AIM the following amounts, which represented the
indicated annualized percentage of average net assets for such period, as
reimbursement of administrative services costs for the years ended December 31,
1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
AVERAGE AVERAGE AVERAGE
AMOUNT PAID NET ASSETS AMOUNT PAID NET ASSETS AMOUNT PAID NET ASSETS
----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
AIM Balanced Fund ............ $ 158,046 0.006% $ 104,952 0.006% $ 87,375 .01%
AIM Global Utilities Fund .... 88,999 0.03% 85,383 0.03% 77,375 .03%
AIM Select Growth Fund ....... 110,205 0.01% 78,567 0.01% 74,201 .01%
AIM Value Fund ............... 631,457 0.003% 323,939 0.002% 225,784 .002%
</TABLE>
In addition, the Transfer Agency and Service Agreement between the
Trust and A I M Fund Services, Inc. ("AFS"), a registered transfer agent and
wholly-owned subsidiary of AIM, provides that AFS 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.
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"). Such plan provides that the
Class A shares pay 0.25% per annum of their average daily net assets as
compensation to AIM Distributors for the purpose of financing any activity which
is primarily intended to result in the sale of the Class A shares. Under the
Class A and C Plan, Class C shares of the Funds pay compensation to AIM
Distributors at an annual rate of 1.00% per annum of the average daily net
assets attributable to Class C shares for the purpose of financing any activity
which is primarily intended to result in the sale of Class C shares. The Class A
and C Plan is designed to compensate AIM Distributors, on a quarterly basis, for
certain promotional and other sales-related costs, and to implement a dealer
incentive program which provides for periodic payments to selected dealers who
furnish continuing personal shareholder services to their customers who purchase
and own Class A or Class C shares of a Fund. Payments can also be directed by
AIM Distributors to selected institutions who have entered into service
agreements with respect to Class A and Class C shares of each Fund and who
provide continuing personal services to their customers who own such shares of a
Fund. Activities appropriate for financing under the Class A and C Plan include,
but are not limited to, the following: printing of prospectuses and statements
of additional information and reports for other than existing shareholders;
overhead; preparation and distribution of advertising material and sales
literature; expenses of organizing and conducting sales seminars; supplemental
payments to dealers and other institutions such as asset-based sales charges or
as payments of service fees under shareholder service arrangements; and costs of
administering the Class A and C Plan.
Of the aggregate amount payable under the Class A and C Plan, payments
to dealers and other financial institutions that provide continuing personal
shareholder services to their customers who purchase and own shares of a Fund,
in amounts of up to 0.25% of the average daily net assets of the Fund
attributable to the customers of such dealers or financial institutions are
characterized as a service fee, and payments to dealers and other financial
institutions in excess of such amount and payments to AIM Distributors would be
characterized as an asset-based sales charge pursuant to the Class A and C Plan.
THE CLASS B PLAN. The Trust has also adopted a Master Distribution Plan
pursuant to Rule 12b-1 under the 1940 Act relating to Class B shares of the
Funds (the "Class B Plan", and collectively with the Class A and C Plan, the
"Plans"). Under the Class B Plan, each Fund pays
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<PAGE> 44
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, each Fund pays a
service fee of 0.25% of the average daily net assets attributable to Class B
shares to selected dealers and other institutions which furnish continuing
personal shareholder services to their customers who purchase and own Class B
shares. Any amounts not paid as a service fee would constitute an asset-based
sales charge. Amounts paid in accordance with the Class B Plan may be used to
finance any activity primarily intended to result in the sale of Class B shares,
including but not limited to printing of prospectuses and statements of
additional information and reports for other than existing shareholders;
overhead; preparation and distribution of advertising material and sales
literature; expenses of organizing and conducting sales seminars; supplemental
payments to dealers and other institutions such as asset-based sales charges or
as payments of service fees under shareholder service arrangements; and costs of
administering the Class B Plan.
BOTH PLANS. Pursuant to an incentive program, AIM Distributors may
enter into agreements ("Shareholder Service Agreements") with investment dealers
selected from time to time by AIM Distributors for the provision of distribution
assistance in connection with the sale of the Funds' shares to such dealers'
customers, and for the provision of continuing personal shareholder services to
customers who may from time to time directly or beneficially own shares of the
Funds. The distribution assistance and continuing personal shareholder services
to be rendered by dealers under the Shareholder Service Agreements may include,
but shall not be limited to, the following: distributing sales literature;
answering routine customer inquiries concerning the Funds; assisting customers
in changing dividend options, account designations and addresses, and in
enrolling in any of several special investment plans offered in connection with
the purchase of the Funds' shares; assisting in the establishment and
maintenance of customer accounts and records and in the processing of purchase
and redemption transactions; investing dividends and any capital gains
distributions automatically in the Funds' shares; and providing such other
information and services as the Funds or the customer may reasonably request.
Under the Plans, in addition to the Shareholder Service Agreements
authorizing payments to selected dealers, banks may enter into Shareholder
Service Agreements authorizing payments under the Plans to be made to banks
which provide services to their customers who have purchased shares. Services
provided pursuant to Shareholder Service Agreements with banks may include some
or all of the following: answering shareholder inquiries regarding a Fund and
the Trust; performing sub-accounting; establishing and maintaining shareholder
accounts and records; processing customer purchase and redemption transactions;
providing periodic statements showing a shareholder's account balance and the
integration of such statements with those of other transactions and balances in
the shareholder's other accounts serviced by the bank; forwarding applicable
prospectuses, proxy statements, reports and notices to bank clients who hold
Fund shares; and such other administrative services as a Fund reasonably may
request, to the extent permitted by applicable statute, rule or regulation.
Similar agreements may be permitted under the Plans for institutions which
provide recordkeeping for and administrative services to 401(k) plans.
Financial intermediaries and any other person entitled to receive
compensation for selling Fund shares may receive different compensation for
selling shares of one particular class over another.
The Trust may also enter into Variable Group Annuity Contractholder
Service Agreements ("Variable Contract Agreements") on behalf of the Funds
authorizing payments to selected insurance companies offering variable annuity
contracts to employers as funding vehicles for retirement plans qualified under
Section 401(a) of the Code. Services provided pursuant to such Variable Contract
Agreements may include some or all of the following: answering inquiries
regarding the Fund and the Trust; performing sub-accounting; establishing and
maintaining contractholder accounts and records; processing and bunching
purchase and redemption transactions; providing periodic statements of contract
account balances; forwarding such reports and notices to contractholders
relative to the Fund as deemed necessary; generally, facilitating communications
with contractholders concerning investments in a Fund on behalf of plan
participants; and performing such other administrative services as deemed to be
necessary or desirable, to the extent permitted by applicable statute, rule or
regulation to provide such services.
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<PAGE> 45
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 will be calculated at the end of each payment period for each
business day of the Funds during such period at the annual rate of 0.25% of the
average daily net asset value of the Funds' shares purchased or acquired through
exchange. Fees calculated in this manner shall be paid only to those selected
dealers or other institutions who are dealers or institutions of record at the
close of business on the last business day of the applicable payment period for
the account in which such Fund's shares are held.
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 the Funds
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 Funds and their respective classes.
AIM Distributors may from time to time waive or reduce any portion of
its 12b-1 fee for Class A shares and Class C shares. Voluntary fee waivers or
reductions may be rescinded at any time without further notice to investors.
During periods of voluntary fee waivers or reductions, AIM Distributors will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions set forth in the Fee Table in a
Prospectus may not be terminated or amended to the Funds' detriment during the
period stated in the agreement between AIM Distributors and the Fund.
Under the Plans, certain financial institutions which have entered into
service agreements and which sell shares of the Funds on an agency basis, may
receive payments from the Funds pursuant to the respective Plans. AIM
Distributors does not act as principal, but rather as agent for the Funds, in
making dealer incentive and shareholder servicing payments under the Plans.
These payments are an obligation of the Funds and not of AIM Distributors.
For the year ended December 31, 1999, the various classes of the Funds
paid 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>
AIM Balanced Fund.......................... $ 3,755,133 $ 10,013,693 $1,464,190
AIM Global Utilities Fund.................. 500,106 1,165,993 39,036
AIM Select Growth Fund..................... 896,196 4,672,685 134,325
AIM Value Fund............................. 26,140,479 116,152,779 4,781,281
</TABLE>
An estimate by category of the allocation of actual fees paid by Class
A shares of the Funds under the Class A and C Plan during the year ended
December 31, 1999, was as follows:
<TABLE>
<CAPTION>
PRINTING COMPENSATION
ADVERTISING AND MAILING SEMINARS TO DEALERS
----------- ----------- -------- ----------
<S> <C> <C> <C> <C>
AIM Balanced Fund.......................... $118,519 $11,106 $28,773 $ 3,596,735
AIM Global Utilities Fund.................. 3,311 311 836 495,648
AIM Select Growth Fund..................... 11,864 1,102 2,881 880,350
AIM Value Fund............................. 401,488 37,437 97,758 25,603,796
</TABLE>
An estimate by category of the allocation of actual fees paid by the
Funds under the Class B Plan during the year ended December 31, 1999, was as
follows:
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<PAGE> 46
<TABLE>
<CAPTION>
COMPENSATION COMPENSATION
PRINTING AND TO TO
ADVERTISING MAILING SEMINARS UNDERWRITERS DEALERS
----------- ------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C>
AIM Balanced Fund........................ $ 404,810 $ 38,350 $103,333 $ 7,510,270 $ 1,956,931
AIM Global Utilities Fund................ 19,626 1,823 4,766 874,495 265,284
AIM Select Growth Fund................... 62,281 5,914 15,431 3,504,514 1,084,546
AIM Value Fund........................... 2,728,649 254,704 666,084 87,113,351 25,388,347
</TABLE>
An estimate by category of the allocation of actual fees paid by Class
C shares of the Funds under the Class A and C Plan during the year ended
December 31, 1999, was as follows:
<TABLE>
<CAPTION>
COMPENSATION COMPENSATION
PRINTING AND TO TO
ADVERTISING MAILING SEMINARS UNDERWRITERS DEALERS
----------- ------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
AIM Balanced Fund........................ $ -0- $ -0- $ -0- $ 835,196 $ 628,994
AIM Global Utilities Fund................ -0- -0- -0- 24,428 14,608
AIM Select Growth Fund................... -0- -0- -0- 68,795 65,530
AIM Value Fund........................... -0- -0- -0- 3,259,285 1,521,996
</TABLE>
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 (the "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 class of the Funds and
its respective shareholders.
Amounts payable by a Fund under the Plans need not be directly related
to the expenses actually incurred by AIM Distributors on behalf of each Fund.
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.
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.
Unless terminated earlier in accordance with their terms, the Plans
continue from year to year as long as such continuance is specifically approved
at least annually by the Board of Trustees, including a majority of the
Independent Trustees.
The Plans may be terminated by the vote of a majority of the
Independent Trustees, or, with respect to a particular class, by the vote of a
majority of the outstanding voting securities of that class.
Any change in the Plans that would increase materially the distribution
expenses paid by the applicable class requires shareholder approval; otherwise,
it may be amended by the trustees, including a 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
43
<PAGE> 47
shares of the Funds will no longer convert into Class A shares of the Funds
unless the Class B shares, voting separately, approve such amendment. If the
Class B shareholders do not approve such amendment, the Board of Trustees will
(i) create a new class of shares of the Funds 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 Funds
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: The Class A and C Plan allows payment to AIM Distributors or to
dealers or financial institutions of up to 0.25% of average daily net assets of
each Fund's Class A shares as compared to 1.00% of such assets of each Fund's
Class B and Class C shares; (ii) the Class B Plan obligates 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 master distribution agreements relating to
the Funds (the "Distribution Agreements") with A I M Distributors, Inc. ("AIM
Distributors"), a registered broker-dealer and a wholly owned subsidiary of AIM,
pursuant to which AIM Distributors acts as the distributor of Class A, Class B
and Class C shares of the Funds. The address of AIM Distributors is P.O. Box
4739, Houston, Texas 77210-4739. Certain trustees and officers of the Trust are
affiliated with AIM Distributors.
The Distribution Agreements provide AIM Distributors with the exclusive
right to distribute shares of the Funds directly and through institutions with
whom AIM Distributors has entered into selected dealer agreements. Under the
Distribution Agreement for the Class B shares, AIM Distributors sells Class B
shares at net asset value subject to a contingent deferred sales charge
established by AIM Distributors. AIM Distributors is authorized to advance to
institutions through whom Class B shares are sold a sales commission under
schedules established by AIM Distributors. The Distribution Agreement for the
Class B shares provides that AIM Distributors (or its assignee or transferee)
will receive 0.75% (of the total 1.00% payable under the distribution plan
applicable to Class B shares) of each Fund's average daily net assets
attributable to Class B shares attributable to the sales efforts of AIM
Distributors.
The Distribution Agreements provide that AIM Distributors will bear the
expenses of printing from the final proof and distributing the Funds'
prospectuses and statements of additional information relating to public
offerings made by AIM Distributors pursuant to the Distribution Agreements
(other than those prospectuses and statements of additional information
distributed to existing shareholders of the Funds), and any promotional or sales
literature used by AIM Distributors or furnished by AIM Distributors to dealers
in connection with the public offering of the Funds' shares, including expenses
of advertising in connection with such public offerings. AIM Distributors has
not undertaken to sell any specified number of shares of any classes of the
Funds.
AIM Distributors expects to pay sales commissions from its own
resources to dealers and institutions who sell Class B and Class C 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 requires a number of years
to recoup from Class B Plan payments the sales commissions paid to dealers and
44
<PAGE> 48
institutions in connection with sales of Class B shares. In the future, if
multiple distributors serve a Fund, 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 Fund's Class B shares sold by or attributable to the
distribution efforts of that distributor.
AIM Distributors may pay sales commissions to dealers and institutions
who sell Class C shares of the AIM Funds at the time of such sales. Payments
with respect to Class C shares will equal 1.00% of the purchase price of the
Class C shares sold by the dealer or institution, and will consist of a sales
commission of 0.75% of the purchase price of the Class C shares sold plus an
advance of the first year service fee of 0.25% with respect to such shares. AIM
Distributors will retain all payments received by it relating to Class C shares
for the first year after they are purchased. The portion of the payments to AIM
Distributors under the Class A and C Plan attributable to Class C shares which
constitutes an asset-based sales charge (0.75%) is intended in part to permit
AIM Distributors to recoup a portion of on-going sales commissions to dealers
plus financing costs, if any. After the first full year, AIM Distributors will
make such payments quarterly to dealers and institutions based on the average
net asset value of Class C shares which are attributable to shareholders for
whom the dealers and institutions are designated as dealers of record.
The Trust (on behalf of any class of any Fund) 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 the
Distribution Agreement for Class B shares would not affect the obligation of a
Fund and its 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 Agreements relating to Class B shares in order
to finance distribution expenditures in respect of Class B shares.
The following chart reflects the total sales charges paid in connection
with the sale of Class A shares of each Fund and the amount retained by AIM
Distributors for the years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
SALES AMOUNT SALES AMOUNT SALES AMOUNT
CHARGES RETAINED CHARGES RETAINED CHARGES RETAINED
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
AIM Balanced Fund............... $ 4,738,340 $ 823,856 $ 6,719,092 $1,172,743 $ 4,100,493 $ 672,146
AIM Global Utilities Fund....... 363,844 56,996 407,940 71,338 376,255 57,864
AIM Select Growth Fund.......... 1,100,704 176,131 778,128 136,229 895,672 143,669
AIM Value Fund.................. 47,407,647 7,218,373 30,111,088 4,259,204 31,118,672 4,660,735
</TABLE>
The following chart reflects the contingent deferred sales charges paid
by Class A and Class B shareholders for the years ended December 31, 1999, 1998
and 1997, and by Class C shareholders for the years ended December 31, 1999 and
1998, and for the period from August 4, 1997 through December 31, 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
AIM Balanced Fund................................................. $ 150,341 $ 106,255 $ 99,075
AIM Global Utilities Fund......................................... 67,367 71,709 88,250
AIM Select Growth Fund............................................ 75,951 105,783 109,547
AIM Value Fund.................................................... 1,053,955 1,498,642 1,752,662
</TABLE>
45
<PAGE> 49
SALES CHARGES AND DEALER CONCESSIONS
CATEGORY I. Certain AIM Funds are currently sold with a sales charge
ranging from 5.50% to 2.00% of the offering price on purchases of less than
$1,000,000. These AIM Funds include Class A shares of each of AIM Advisor Flex
Fund, AIM Advisor International Value Fund, AIM Advisor Large Cap Value Fund,
AIM Aggressive Growth Fund, AIM Asian Growth Fund, AIM Basic Value Fund, AIM
Blue Chip Fund, AIM Capital Development Fund, AIM Charter Fund, AIM
Constellation Fund, AIM Dent Demographic Trends Fund, AIM Emerging Growth Fund,
AIM European Development Fund, AIM Euroland Growth Fund, AIM Global Utilities
Fund, AIM Global Growth & Income Fund, AIM International Equity Fund, AIM Japan
Growth Fund, AIM Large Cap Basic Value Fund, AIM Large Cap Growth Fund, AIM Mid
Cap Equity Fund, AIM Mid Cap Growth Fund, AIM Mid Cap Opportunities Fund, AIM
New Pacific Growth Fund, AIM Select Growth Fund, AIM Small Cap Growth Fund, AIM
Small Cap Opportunities Fund, AIM Value Fund and AIM Weingarten Fund.
<TABLE>
<CAPTION>
Dealer
Concession
Investor's Sales Charge -----------
------------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction(1) Price Invested Price
----------------------- ------------- ----------- -----------
<S> <C> <C> <C>
Less than $ 25,000 5.50% 5.82% 4.75%
$ 25,000 but less than $ 50,000 5.25 5.54 4.50
$ 50,000 but less than $ 100,000 4.75 4.99 4.00
$100,000 but less than $ 250,000 3.75 3.90 3.00
$250,000 but less than $ 500,000 3.00 3.09 2.50
$500,000 but less than $1,000,000 2.00 2.04 1.60
</TABLE>
----------------
(1) AIM Small Cap Opportunities Fund will not accept any single purchase in
excess of $250,000.
CATEGORY II. Certain AIM Funds are currently sold with a sales charge
ranging from 4.75% to 2.00% of the offering price on purchases of less than
$1,000,000. These AIM Funds are: the Class A shares of each of AIM Advisor Real
Estate Fund, AIM Balanced Fund, AIM Developing Markets Fund, AIM Emerging
Markets Debt Fund, AIM Global Aggressive Growth Fund, AIM Global Consumer
Products and Services Fund, AIM Global Financial Services Fund, AIM Global
Government Income Fund, AIM Global Growth Fund, AIM Global Health Care Fund, AIM
Global Income Fund, AIM Global Infrastructure Fund, AIM Global Resources Fund,
AIM Global Telecommunications and Technology Fund, AIM Global Trends Fund, AIM
High Income Municipal Fund, AIM High Yield Fund, AIM High Yield Fund II, AIM
Income Fund, AIM Intermediate Government Fund, AIM Latin American Growth Fund,
AIM Municipal Bond Fund, AIM Strategic Income Fund and AIM Tax-Exempt Bond Fund
of Connecticut.
46
<PAGE> 50
<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 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.
47
<PAGE> 51
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 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.
48
<PAGE> 52
REDUCTIONS IN INITIAL SALES CHARGES
Reductions in the initial sales charges shown in the sales charge
tables (quantity discounts) apply to purchases of shares of the AIM Funds that
are otherwise subject to an initial sales charge, provided that such purchases
are made by a "purchaser" as hereinafter defined. Purchases of Class A shares of
AIM Tax-Exempt Cash Fund, AIM Cash Reserve Shares of AIM Money Market Fund and
Class B and Class C shares of the AIM Funds will not be taken into account in
determining whether a purchase qualifies for a reduction in initial sales
charges.
The term "purchaser" means:
o an individual and his or her spouse and children, including any
trust established exclusively for the benefit of any such person;
or a pension, profit-sharing, or other benefit plan established
exclusively for the benefit of any such person, such as an IRA,
Roth IRA, a single-participant money-purchase/profit-sharing plan
or an individual participant in a 403(b) Plan (unless such 403(b)
plan qualifies as the purchaser as defined below);
o a 403(b) plan, the employer/sponsor of which is an organization
described under Section 501(c)(3) of the Internal Revenue Code of
1986, as amended (the "Code"), if:
a. the employer/sponsor must submit contributions for all
participating employees in a single contribution transmittal
(i.e., the Funds will not accept contributions submitted with
respect to individual participants);
b. each transmittal must be accompanied by a single check or wire
transfer; and
c. all new participants must be added to the 403(b) plan by
submitting an application on behalf of each new participant
with the contribution transmittal;
o a trustee or fiduciary purchasing for a single trust, estate or
single fiduciary account (including a pension, profit-sharing or
other employee benefit trust created pursuant to a plan qualified
under Section 401 of the Code) and 457 plans, although more than
one beneficiary or participant is involved;
o a Simplified Employee Pension (SEP), Salary Reduction and other
Elective Simplified Employee Pension account (SAR-SEP) or a
Savings Incentive Match Plans for Employees IRA (SIMPLE IRA),
where the employer has notified the distributor in writing that
all of its related employee SEP, SAR-SEP or SIMPLE IRA accounts
should be linked; or
o any other organized group of persons, whether incorporated or not,
provided the organization has been in existence for at least six
months and has some purpose other than the purchase at a discount
of redeemable securities of a registered investment company.
Investors or dealers seeking to qualify orders for a reduced initial
sales charge must identify such orders and, if necessary, support their
qualification for the reduced charge. AIM Distributors reserves the right to
determine whether any purchaser is entitled, by virtue of the foregoing
definition, to the reduced sales charge. No person or entity may distribute
shares of the AIM Funds without payment of the applicable sales charge other
than to persons or entities who qualify for a reduction in the sales charge as
provided herein.
1. LETTERS OF INTENT. A purchaser, as previously defined, may pay
reduced initial sales charges by completing the appropriate section of the
account application and by fulfilling a Letter of Intent ("LOI"). The LOI
privilege is also available to holders of the Connecticut General Guaranteed
Account, established for tax qualified group annuities, for contracts purchased
on or before June 30, 1992. The LOI confirms such purchaser's intention as to
the total investment to be made in shares of the AIM Funds (except for (i) Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
49
<PAGE> 53
Money Market Fund, (ii) Class B and Class C shares of the AIM Funds and (iii)
Class B and Class C 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) Class
B and Class C shares of AIM Floating Rate Fund) at the time of the proposed
purchase. Rights of Accumulation are also available to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992. To determine
whether or not a reduced initial sales charge applies to a proposed purchase,
AIM Distributors takes into account not only the money which is invested upon
such proposed purchase, but also the value of all shares of the AIM Funds
(except for (i) Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve
Shares of AIM Money Market Fund, (ii) Class B and Class C shares of the AIM
Funds and (iii) Class B and Class C shares of AIM Floating Rate Fund) owned by
such purchaser, calculated at their then current
50
<PAGE> 54
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 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 agreement 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 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 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;
51
<PAGE> 55
o Unitholders of G/SET series unit investment trusts investing
proceeds from such trusts in shares of AIM Weingarten Fund or
AIM Constellation Fund; provided, however, prior to the
termination date of the trusts, a unitholder may invest
proceeds from the redemption or repurchase of his units only
when the investment in shares of AIM Weingarten Fund and AIM
Constellation Fund is effected within 30 days of the redemption
or repurchase;
o A shareholder of a fund that merges or consolidates with an AIM
Fund or that sells its assets to an AIM Fund in exchange for
shares of an AIM Fund;
o Shareholders of the GT Global funds as of April 30, 1987 who
since that date continually have owned shares of one or more of
these funds;
o Certain former AMA Investment Advisers' shareholders who became
shareholders of the AIM Global Health Care Fund in October
1989, and who have continuously held shares in the GT Global
funds since that time; and
o Shareholders of record of Advisor Class shares of an AIM Fund
on February 11, 2000 who have continuously owned shares of that
AIM Fund, and who purchase additional shares of that AIM Fund.
As used above, immediate family includes an individual and his or her
spouse, children, parents and parents of spouse.
CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS
Former GT Global funds Class A shares that are subject to a contingent
deferred sales charge and that were purchased before June 1, 1998 are entitled
to the following waivers from the contingent deferred sales charge otherwise due
upon redemption: (1) minimum required distributions made in connection with an
IRA, Keogh Plan or custodial account under Section 403(b) of the Code or other
retirement plan following attainment of age 70 1/2; (2) total or partial
redemptions resulting from a distribution following retirement in the case of a
tax-qualified employer-sponsored retirement plan; (3) when a redemption results
from a tax-free return of an excess contribution pursuant to Section 408(d)(4)
or (5) of the Code or from the death or disability of the employee; (4)
redemptions pursuant to a Fund's right to liquidate a shareholder's account
involuntarily; (5) redemptions pursuant to distributions from a tax-qualified
employer-sponsored retirement plan, which is invested in the former GT Global
funds, which are permitted to be made without penalty pursuant to the Code,
other than tax-free rollovers or transfers of assets, and the proceeds of which
are reinvested in the former GT Global funds; (6) redemptions made in connection
with participant-directed exchanges between options in an employer-sponsored
benefit plan; (7) redemptions made for the purpose of providing cash to fund a
loan to a participant in a tax-qualified retirement plan; (8) redemptions made
in connection with a distribution from any retirement plan or account that is
permitted in accordance with the provisions of Section 72(t)(2) of the Code, and
the regulations promulgated thereunder; (9) redemptions made in connection with
a distribution from any retirement plan or account that involves the return of
an excess deferral amount pursuant to Section 401(k)(8) or Section 402(g)(2) of
the Code; (10) redemptions made in connection with a distribution from a
qualified profit-sharing or stock bonus plan described in Section 401(k) of the
Code to a participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code
upon hardship of the covered employee (determined pursuant to Treasury
Regulation Section 1.401(k)-1(d)(2)); and (11) redemptions made by or for the
benefit of certain states, counties or cities, or any instrumentalities,
departments or authorities thereof where such entities are prohibited or limited
by applicable law from paying a sales charge or commission.
Former GT Global funds Class B shares purchased before June 1, 1998 are
subject to the following waivers from the contingent deferred sales charge
otherwise due upon redemption: (1) total or partial redemptions resulting from a
distribution following retirement in the case of a tax-qualified
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employer-sponsored retirement; (2) minimum required distributions made in
connection with an IRA, Keogh Plan or custodial account under Section 403(b) of
the Code or other retirement plan following attainment of age 70 1/2; (3)
redemptions pursuant to distributions from a tax-qualified employer-sponsored
retirement plan, which is invested in the former GT Global funds, which are
permitted to be made without penalty pursuant to the Code, other than tax-free
rollovers or transfers of assets, and the proceeds of which are reinvested in
the former GT Global funds; (4) redemptions made in connection with
participant-directed exchanges between options in an employer-sponsored benefit
plan; (5) redemptions made for the purpose of providing cash to fund a loan to a
participant in a tax-qualified retirement plan; (6) redemptions made in
connection with a distribution from any retirement plan or account that is
permitted in accordance with the provisions of Section 72(t)(2) of the Code, and
the regulations promulgated thereunder; (7) redemptions made in connection with
a distribution from a qualified profit-sharing or stock bonus plan described in
Section 401(k) of the Code to a participant or beneficiary under Section
401(k)(2)(B)(IV) of the Code upon hardship of the covered employee (determined
pursuant to Treasury Regulation Section 1.401(k)-1(d)(2)); and (8) redemptions
made by or for the benefit of certain states, counties or cities, or any
instrumentalities, departments or authorities thereof where such entities are
prohibited or limited by applicable law from paying a sales charge or
commission.
CDSCs will not apply to the following:
o Additional purchases of Class C shares of AIM Advisor Flex Fund, AIM
Advisor International Value Fund, AIM Advisor Large Cap Value Fund and
AIM Advisor Real Estate Fund by shareholders of record on April 30,
1995, of these Funds, except that shareholders whose broker-dealers
maintain a single omnibus account with AFS on behalf of those
shareholders, perform sub-accounting functions with respect to those
shareholders, and are unable to segregate shareholders of record prior
to April 30, 1995, from shareholders whose accounts were opened after
that date will be subject to a CDSC on all purchases made after March
1, 1996;
o Redemptions following the death or post-purchase disability of (1) any
registered shareholders on an account or (2) a settlor of a living
trust, of shares held in the account at the time of death or initial
determination of post-purchase disability;
o Certain distributions from individual retirement accounts, Section
403(b) retirement plans, Section 457 deferred compensation plans and
Section 401 qualified plans, where redemptions result from (i)
required minimum distributions to plan participants or beneficiaries
who are age 70 1/2 or older, and only with respect to that portion of
such distributions that does not exceed 12% annually of the
participant's or beneficiary's account value in a particular AIM Fund;
(ii) in kind transfers of assets where the participant or beneficiary
notifies the distributor of the transfer no later than the time the
transfer occurs; (iii) tax-free rollovers or transfers of assets to
another plan of the type described above invested in Class B or Class
C shares of one or more of the AIM Funds; (iv) tax-free returns of
excess contributions or returns of excess deferral amounts; and (v)
distributions on the death or disability (as defined in the Internal
Revenue Code of 1986, as amended) of the participant or beneficiary;
o Amounts from a Systematic Withdrawal Plan of up to an annual amount of
12% of the account value on a per fund basis, at the time the
withdrawal plan is established, provided the investor reinvests his
dividends;
o Liquidation by the Fund when the account value falls below the minimum
required account size of $500;
o Investment account(s) of AIM; and
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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 description of the manner in which shares of the Funds may be purchased
appears in the Prospectus under the headings "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 the Funds' Class A
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, and
certain other persons whose purchases result in relatively low expenses of
distribution, be permitted to purchase Class A shares of the Funds through AIM
Distributors without payment of a sales charge. The persons who may purchase
Class A shares of the Funds without a sales charge are listed under the caption
"Reductions in Initial Sales Charges - Purchases at Net Asset Value."
Complete information concerning the method of exchanging shares of the
Funds for shares of the other mutual funds managed or advised by AIM is set
forth in each Prospectus under the caption "Exchanging Shares."
Information concerning redemption of the Funds' shares is set forth in the
Prospectuses under the caption "Redeeming Shares - How to Redeem Shares." Shares
of the AIM Funds may be redeemed directly through AIM Distributors or through
any dealer who has entered into an agreement with AIM Distributors. In addition
to the Funds' obligation to redeem shares, AIM Distributors may also repurchase
shares as an accommodation to shareholders. To effect a repurchase, those
dealers who have executed Selected Dealer Agreements with AIM Distributors must
phone orders to the order desk of the Funds at
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(800) 959-4246 and guarantee delivery of all required documents in good order. A
repurchase is effected at the net asset value per share of the applicable Fund
next determined after the repurchase order is received. Such an arrangement is
subject to timely receipt by AFS, the Funds' transfer agent, 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 a Fund or by AIM Distributors (other than any
applicable contingent deferred sales charge) 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 a Fund not reasonably practicable.
A Fund's net asset value is calculated by dividing the number of
outstanding shares into the net assets of the Fund. Net assets are the excess of
a Fund's assets over its liabilities.
The following formula may be used to determine the public offering price
per Class A share of an investor's investment:
Net Asset Value / (1 - Sales Charge as % of Offering Price) = Offering
Price.
For example, at the close of business on December 31, 1999, AIM VALUE
FUND - Class A shares had 258,850,990 shares outstanding, net assets of
$12,640,072,795 and a net asset value per share of $48.83. The offering price,
therefore, was $51.67.
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 backup withholding in all
five situations discussed above. Redemption proceeds and long-term gain
distributions are subject to backup withholding only if (1), (2) or (5) above
applies.
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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
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 share of each 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 of the NYSE will generally be used.
Net asset value per share is determined by dividing the value of a Fund's
securities, cash and other assets (including interest accrued but not collected)
attributable to a particular class, less all its liabilities (including accrued
expenses and dividends payable) attributable to that class, by the total number
of shares outstanding of that class. Determination of a Fund's net asset value
per share is made in accordance with generally accepted accounting principles.
Each equity security held by a Fund 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 at the closing bid price furnished by
independent pricing services or market makers. Each security reported on the
NASDAQ National Market System is valued at the last sales price on the valuation
date or absent a last sales price, at the closing bid price 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 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 on the
basis of amortized cost, which approximates market value.
Generally, trading in foreign securities, corporate bonds, U.S. Government
securities and money market instruments is substantially completed each day at
various times prior to the close of the NYSE. The values of such securities used
in computing the net asset value of each Fund's shares are determined at 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 such
values 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 Fund. Because the net asset
value per share of each Fund is determined only on business days of the Fund,
the net asset value per share of a Fund may be significantly affected on days
when an investor cannot exchange or redeem shares of the Fund.
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TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of each Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning.
Each Fund is treated as a separate association taxable as a corporation.
Each Fund intends to qualify under the Internal Revenue Code of 1986, as amended
(the "Code"), as a regulated investment company ("RIC") for each taxable year.
Accordingly, each Fund must, among other things, generally derive at least 90%
of its gross income from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock, securities,
foreign currencies, or other income derived with respect to its business of
investing in such stock, securities or currencies. Each Fund must diversify its
holdings so that, at the end of each fiscal quarter: (i) at least 50% of the
market value of the Fund's assets is represented by cash, U.S. Government
securities and other securities, with such other securities limited, with
respect to any one issuer, to an amount not greater than 5% of the Fund's assets
and not more than 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of its assets is invested in the securities
of any one issuer (other than U.S. Government securities).
As a RIC, each Fund will generally not be subject to federal income tax
("FIT") on its income and gains distributed to shareholders if it currently
distributes the sum of (i) at least 90% of its investment company taxable income
(net investment taxable income and the excess of net short-term capital gains
over net long-term capital losses) for the taxable year and (ii) at least 90% of
the excess of its tax-exempt interest income under Code Section 103(a) over its
deductions disallowed under Code Sections 265 and 171(a)(2) (the "Distribution
Requirement"). Distributions made by a Fund during its taxable year, or under
certain circumstances within 12 months after the end of its taxable year, will
be considered distributions made during the taxable year and will therefore
satisfy the Distribution Requirement.
Each Fund may use "equalization accounting" in determining the portion of
its net investment income and capital gain net income that has been distributed.
A Fund that elects to use equalization accounting will allocate a portion of its
realized investment income and capital gains to redemptions of Fund shares and
will reduce the amount of such income and gains that it distributes in cash.
However, each Fund intends to make cash distributions for each taxable year in
an aggregate amount that is sufficient to satisfy the Distribution Requirement
without taking into account its use of equalization accounting. The IRS has not
published any guidance concerning the methods to be used in allocating
investment income and capital gains to redemptions of shares. In the event that
the IRS determines that a Fund is using an improper method of allocation and has
underdistributed its net investment income and capital gain net income for any
taxable year, such Fund may be liable for additional federal income tax.
Each Fund is subject to a nondeductible 4% excise tax if it does not meet
certain distribution requirements under the Code. To avoid this excise tax,
during each calendar year, each Fund must distribute: (1) at least 98% of its
ordinary income (not taking into account any capital gains or losses) for the
calendar year (except that any foreign currency gain or loss occurring after
October 31 shall be taken into account the following year), (2) at least 98% of
its capital gains in excess of its capital losses for the 12-month period ending
on October 31, and (3) all ordinary income and capital gains from previous
calendar years that were not distributed during such years. Dividends declared
to shareholders of record on a date in October, November or December will be
taxable to shareholders on December 31 in the year declared as long as the Fund
pays the dividends no later than January 31 of the following year.
The Code and the regulations promulgated thereunder are subject to change,
and interpretations of the Code and the regulations may be modified or affected
at any time by Congress, the Department of the Treasury or judicial decision. It
should be noted that any such change could be applied retroactively.
Section 1092 of the Code affects the taxation of certain transactions
involving futures or options contracts. If a futures or options contract is part
of a "straddle" (which could include another futures contract or underlying
stock or securities), as defined in Section 1092 of the Code, then, generally,
losses
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are deferred first to the extent that the modified "wash sale" rules of the
Section 1092 regulations apply, and second to the extent of unrecognized gains
on offsetting positions. Further, the Funds may be required to capitalize,
rather than deduct currently, any interest expense on indebtedness incurred or
continued to purchase or carry any positions that are part of a straddle.
Sections 1092 and 246 of the Code and the regulations thereunder also suspend
the holding periods for straddle positions with possible adverse effects
regarding long-term capital gain treatment and the corporate dividends received
deduction.
Section 1256 of the Code generally requires that futures contracts and
options on future contracts be "marked-to-market" at the end of each year for
FIT purposes. Code Section 1256 further characterizes 60% of any capital gain or
loss with respect to such futures and options contracts as long-term capital
gain (taxable to noncorporate shareholders at a maximum rate of 20%) or loss and
40% as short-term capital gain or loss. If such a future or option is held as an
offsetting position and can be considered a straddle under Section 1092 of the
Code, such a straddle will constitute a mixed straddle. A mixed straddle will be
subject to both Section 1256 and Section 1092 unless certain elections are made
by the Fund.
The Funds may have invested in certain foreign currency transactions, the
gain or loss from which may be subject to taxation as ordinary income or loss
under Code Section 988.
For federal income tax purposes, exercise of the reinstatement privilege
with respect to Class A shares of a Fund that have not been held for more than
ninety days may increase the amount of gain or reduce the amount of loss
recognized in the original redemption transaction because the initial sales
charge will not be taken into account in determining such gain or loss to the
extent there has been a reduction in the initial sales charge that would
otherwise be imposed upon reinvestment. Wash sale rules may defer any loss
recognized.
The Funds may engage in certain hedging transactions (such as short sales
"against the box") that may result in "constructive sales" of offsetting
appreciated positions under section 1259 of the Code. In the event of such a
constructive sale, a Fund will be deemed to recognize gain as if the offsetting
position were sold or otherwise terminated at its fair market value and will
take such gain into account in the taxable year in which the appreciated
position was hedged unless the closed transaction exception applies.
AIM GLOBAL UTILITIES FUND: Pursuant to the investment objectives of the
Fund, the Fund may invest up to 80% of its total assets in foreign securities.
Dividends and interest received by the Fund with respect to these investments
may give rise to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. If more than 50% in value of the Fund's total assets at
the close of its taxable year consists of stock or securities of foreign
corporations, the Fund will be eligible to file an election with the IRS
pursuant to which shareholders of the Fund will be required to include their
proportionate share of such withholding taxes in their United States income tax
returns as gross income, treat such proportionate share as taxes paid by them,
and deduct such proportionate share in computing their taxable income or,
alternatively, use them as foreign tax credits to the extent allowed against
their United States income taxes subject to certain provisions and limitations
contained in the Code. If the election is made, the Fund will report annually to
its shareholders the amount per share of such withholding taxes. Please note
that such foreign tax credits are non-refundable and therefore cannot be claimed
by certain retirement accounts and other persons not otherwise subject to United
States income taxation.
SHAREHOLDER INFORMATION
This information supplements the discussion in each Fund's Prospectus under
the title "Shareholder Information."
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TIMING OF PURCHASE ORDERS. It is the responsibility of the dealer to ensure
that all orders are transmitted on a timely basis to AFS. Any loss resulting
from the dealer's failure to submit an order within the prescribed time frame
will be borne by that dealer. If a check used to purchase shares does not clear,
or if any investment order must be canceled due to nonpayment, the investor will
be responsible for any resulting loss to an AIM Fund or to AIM Distributors.
SHARE CERTIFICATES. AIM Funds will issue share certificates upon written
request to AFS. Otherwise, shares are held on the shareholder's behalf and
recorded on the Fund books. AIM Funds will not issue certificates for shares
held in prototype retirement plans.
SYSTEMATIC WITHDRAWAL PLAN. Under a Systematic Withdrawal Plan, all shares
are to be held by AFS and all dividends and distributions are reinvested in
shares of the applicable AIM Fund by AFS. To provide funds for payments made
under the Systematic Withdrawal Plan, AFS 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 Funds), it is disadvantageous to
effect such purchases while a Systematic Withdrawal Plan is in effect.
Each AIM Fund bears its share of the cost of operating the Systematic
Withdrawal Plan.
TERMS AND CONDITIONS OF EXCHANGES. Normally, shares of an AIM Fund to be
acquired by exchange are purchased at their net asset value or applicable
offering price, as the case may be, determined on the date that such request is
received, but under unusual market conditions such purchases may be delayed for
up to five business days if it is determined that a fund would be materially
disadvantaged by an immediate transfer of the proceeds of the exchange. If a
shareholder is exchanging into a fund paying daily dividends, and the release of
the exchange proceeds is delayed for the foregoing five-day period, such
shareholder will not begin to accrue dividends until the sixth business day
after the exchange.
EXCHANGES BY TELEPHONE. AIM Distributors has made arrangements with certain
dealers and investment advisory firms to accept telephone instructions to
exchange shares between any of the AIM Funds. AIM Distributors reserves the
right to impose conditions on dealers or investment advisors who make telephone
exchanges of shares of the funds, including the condition that any such dealer
or investment advisor enter into an agreement (which contains additional
conditions with respect to exchanges of shares) with AIM Distributors. To
exchange shares by telephone, a shareholder, dealer or investment advisor who
has satisfied the foregoing conditions must call AFS at (800) 959-4246. If a
shareholder is unable to reach AFS by telephone, he may also request exchanges
by telegraph or use overnight courier services to expedite exchanges by mail,
which will be effective on the business day received by AFS as long as such
request is received prior to the close of the customary trading session of the
NYSE. AFS 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 AFS as his
true and lawful attorney-in-fact to surrender for redemption any and all
unissued shares held by AFS 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. AFS 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
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registration of the shares being redeemed. An investor acknowledges by signing
the form that he understands and agrees that AFS 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 conformations promptly after the transaction. AFS 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 AFS as his true and lawful attorney-in-fact to surrender for
redemption any and all unissued shares held by AFS in the designated account(s),
present or future, with full power of substitution in the premises. AFS 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 AFS and AIM Distributors may not be liable
for any loss, expense or cost arising out of any telephone redemption requests
effected in accordance with the authorization set forth in these instructions if
they reasonably believe such request to be genuine, but may in certain cases be
liable for losses due to unauthorized or fraudulent transactions. Procedures for
verification of telephone transactions may include recordings of telephone
transactions (maintained for six months), requests for confirmation of the
shareholder's Social Security Number and current address, and mailings of
confirmations promptly after the transactions. AFS reserves the right to cease
to act as attorney-in-fact subject to this appointment, and AIM Distributors
reserves the right to modify or terminate the telephone redemption privilege at
any time without notice. An investor may elect not to have this privilege by
marking the appropriate box on the application. Then any redemptions must be
effected in writing by the investor.
SIGNATURE GUARANTEES. In addition to those circumstances listed in the
"Shareholder Information" section of each Fund's prospectus, signature
guarantees are required in the following situations: (1) requests to transfer
the registration of shares to another owner; (2) telephone exchange and
telephone redemption authorization forms; (3) changes in previously designated
wiring or electronic funds transfer instructions; and (4) written redemptions or
exchanges of shares previously reported as lost, whether or not the redemption
amount is under $50,000 or the proceeds are to be sent to the address of record.
AIM Funds may waive or modify any signature guarantee requirements at any time.
Acceptable guarantors include banks, broker-dealers, credit unions,
national securities exchanges, savings associations and any other organization,
provided that such institution or organization qualifies as an "eligible
guarantor institution" as that term is defined in rules adopted by the SEC, and
further provided that such guarantor institution is listed in one of the
reference guides contained in AFS' current Signature Guarantee Standards and
Procedures, such as certain domestic banks, credit unions, securities dealers,
or securities exchanges. AFS 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 AFS 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
61
<PAGE> 65
wants the AIM Internet Connect option, he will notify AFS 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 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 AFS and are effective as to any
subsequent payment if such notice is received by AFS prior to the record date of
such payment. Any dividend and distribution election remains in effect until AFS
receives a revised written election by the shareholder.
Any dividend or distribution paid by a fund which does not declare
dividends daily has the effect of reducing the net asset value per share on the
ex-dividend date by the amount of the dividend or distribution. Therefore, a
dividend or distribution declared shortly after a purchase of shares by an
investor would represent, in substance, a return of capital to the shareholder
with respect to such shares even though it would be subject to income taxes.
MISCELLANEOUS INFORMATION
CHARGES FOR CERTAIN ACCOUNT INFORMATION
AFS may impose certain copying charges for requests for copies of
shareholder account statements and other historical account information older
than the current year and the immediately preceding year.
AUDIT REPORTS
The Board of Trustees will issue to shareholders semi-annually the Funds'
financial statements. Financial statements, audited by independent auditors,
will be issued annually. The firm of KPMG LLP, 700 Louisiana, Bank of America
Building, Houston, Texas 77002, currently serves as the auditors of each Fund.
LEGAL MATTERS
Certain legal matters for the Trust have been passed upon by Ballard Spahr
Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, Pennsylvania 19103.
CUSTODIANS 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. Under its contract with the Trust, the Custodian maintains the portfolio
securities of the Funds, administers the purchases and sales of portfolio
securities, collects interest and dividends and other distributions made on the
securities held in the portfolios of the Funds and performs other ministerial
duties. A I M Fund Services, Inc. (a wholly owned subsidiary of AIM), P.O. Box
4739, Houston, Texas 77210-4739 acts as transfer and dividend
62
<PAGE> 66
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 Custodians and AFS such compensation
as may be agreed upon from time to time.
Chase Bank of Texas, N. A., 712 Main, Houston, Texas 77002, serves as
Sub-Custodian for retail purchases of the AIM Funds.
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") has entered
into an agreement with the Trust (and certain other AIM Funds), First Data
Investor Service Group and Financial Data Services, Inc., pursuant to which
MLPF&S has agreed to perform certain shareholder sub-accounting services for its
customers who beneficially own shares of the Fund(s).
RATINGS OF SECURITIES
The following is a description of the factors underlying the debt ratings
of Moody's, S&P, Fitch IBCA, Inc. ("Fitch") and Duff & Phelps:
MOODY'S BOND RATINGS
Moody's describes its ratings for corporate bonds as follows:
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. These 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 risk appear somewhat larger than the Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper-medium-grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
63
<PAGE> 67
Ca: Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from Aa to B. The modifier 1 indicates that the company
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the company ranks in the
lower end of its generic rating category.
S&P BOND RATINGS
S&P describes its ratings for corporate bonds as follows:
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB-B-CCC-CC-C: Debt rated BB, B, CCC, CC and C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the lowest degree of speculation and
C the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or large exposure
to adverse conditions.
S&P DUAL RATINGS
S&P assigns "dual" ratings to all debt issues that have a put option or
demand feature as part of their structure.
The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols for the put option (for
example, AAA/A-1+). With short-term demand debt, the note rating symbols are
used with the commercial paper rating symbols (for example, SP-1+/A-1+).
FITCH INVESTMENT GRADE BOND RATINGS
Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue in a timely manner.
64
<PAGE> 68
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guaranties unless otherwise indicated.
Bonds carrying the same rating are of similar but not necessarily identical
credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell or hold any security.
Ratings do not comment on the adequacy of market price, the suitability of any
security for a particular investor, or the tax-exempt nature or taxability of
payments made in respect of any security.
Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+."
A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds and, therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "AAA" category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of a
project or the occurrence of a specific event.
SUSPENDED: A rating is suspended when Fitch deems the amount of information
available from the issuer to be inadequate for rating purposes.
WITHDRAWN: A rating will be withdrawn when an issue matures or is called or
refinanced, and, at Fitch's discretion, when an issuer fails to furnish proper
and timely information.
FITCHALERT: Ratings are placed on FitchAlert to notify investors of an
occurrence that is likely to result in a rating change and the likely direction
of such change. These are designated as "Positive," indicating a
65
<PAGE> 69
potential upgrade, "Negative," for potential downgrade, or "Evolving," where
ratings may be raised or lowered. FitchAlert is relatively short-term, and
should be resolved within 12 months.
RATINGS OUTLOOK
An outlook is used to describe the most likely direction of any rating
change over the intermediate term. It is described as "Positive" or "Negative."
The absence of a designation indicates a stable outlook.
FITCH SPECULATIVE GRADE BOND RATINGS
Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
("BB" to "C") represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ("DDD" to "D") is an
assessment of the ultimate recovery value through reorganization or liquidation.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer or possible recovery value in
bankruptcy, the current and prospective financial condition and operating
performance of the issuer and any guarantor, as well as the economic and
political environment that might affect the issuer's future financial strength.
Bonds that have the same rating are of similar but not necessarily
identical credit quality since rating categories cannot fully reflect the
differences in degrees of credit risk.
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified, which could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics that, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "DDD", "DD", or "D" categories.
66
<PAGE> 70
DUFF & PHELPS LONG-TERM RATINGS
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA AND AA-: High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.
A+, A AND A-: Protection factors are average but adequate. However, risk factors
are more variable and greater in periods of economic stress.
BBB+, BBB AND BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB AND BB-: Below investment grade but deemed likely to meet obligations
when due. Present or prospective financial protection factors fluctuate
according to industry conditions or company fortunes. Overall quality may move
up or down frequently within this category.
B+, B AND B-: Below investment grade and possessing risk that obligations will
not be met when due. Financial protection factors will fluctuate widely
according to economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this category or into
a higher or lower rating grade.
CCC: Well below investment grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD: Defaulted debt obligations. Issuer failed to meet scheduled principal and/or
interest payments.
DP: Preferred stock with dividend arrearages.
67
<PAGE> 71
FINANCIAL STATEMENTS
FS
<PAGE> 72
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Balanced Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Balanced Fund (a portfolio of AIM
Funds Group), including the schedule of investments, as
of December 31, 1999, and the related statement of
operations for the year then ended, the statement of
changes in net assets for each of the years in the
two-year period then ended, and the financial highlights
for each of the years in the five-year period then ended.
These financial statements and financial highlights are
the responsibility of the Fund's management. Our
responsibility is to express an opinion on these
financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1999, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Balanced
Fund as of December 31, 1999, the results of its
operations for the year then ended, the changes in its
net assets for each of the years in the two-year period
then ended, and the financial highlights for each of the
years in the five-year period then ended, in conformity
with generally accepted accounting principles.
KPMG LLP
February 4, 2000
Houston, Texas
FS-1
<PAGE> 73
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED BONDS &
NOTES-25.23%
AIRLINES-1.37%
Airplanes Pass Through
Trust-Series D, Gtd. Sub.
Bonds, 10.88%, 03/15/19 $ 500,000 $ 440,000
---------------------------------------------------------------
America West Airlines,
Inc.,-Series C, Pass Through
Ctfs., 6.86%, 07/02/04 4,581,363 4,481,352
---------------------------------------------------------------
American Airlines, Inc.-Series
87-A, Equipment Trust Ctfs.,
9.90%, 01/15/11 2,955,000 3,271,510
---------------------------------------------------------------
AMR Corp., Deb., 10.00%,
04/15/21 4,300,000 4,878,049
---------------------------------------------------------------
Delta Air Lines, Inc.,
Deb., 9.00%, 05/15/16 5,000,000 5,172,100
---------------------------------------------------------------
Deb., 10.38%, 12/15/22 2,300,000 2,702,845
---------------------------------------------------------------
Notes, 7.90%, 12/15/09
(Acquired 12/07/99; Cost
$5,958,360)(a) 6,000,000 5,884,080
---------------------------------------------------------------
Series B, Medium Term Notes,
8.52%, 01/30/04 2,000,000 2,054,980
---------------------------------------------------------------
Series C, Medium Term Notes,
6.65%, 03/15/04 2,900,000 2,781,912
---------------------------------------------------------------
Northwest Airlines Inc.-Series
971B, Pass Through Ctfs.,
7.25%, 07/02/14 4,471,394 4,044,041
---------------------------------------------------------------
United Air Lines, Inc.,
Deb., 9.75%, 08/15/21 3,600,000 3,943,224
---------------------------------------------------------------
Series 95A2, Pass Through
Ctfs., 9.56%, 10/19/18 3,750,000 4,006,237
---------------------------------------------------------------
43,660,330
---------------------------------------------------------------
AUTOMOBILES-0.33%
DaimlerChrysler N.A. Holdings,
Gtd. Notes, 7.20%, 09/01/09 5,950,000 5,853,372
---------------------------------------------------------------
General Motors Corp., Putable
Deb., 8.80%, 03/01/21 400,000 440,096
---------------------------------------------------------------
Rocs Series CHR-1998-1,
Collateral Trust, 6.50%,
08/01/18 4,814,270 4,283,040
---------------------------------------------------------------
10,576,508
---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.20%
Bank One Corp.-Series A, Medium
Term Sub. Notes, 6.00%,
02/17/09 4,750,000 4,218,047
---------------------------------------------------------------
Midland Bank PLC (United
Kingdom), Yankee Sub. Notes,
7.65%, 05/01/25 2,105,000 2,099,990
---------------------------------------------------------------
6,318,037
---------------------------------------------------------------
BANKS (MONEY CENTER)-0.68%
First Union Corp., Putable Sub.
Deb., 7.50%, 04/15/35 5,700,000 5,690,025
---------------------------------------------------------------
Republic New York Corp.,
Sub. Deb., 9.50%, 04/15/14 5,400,000 5,951,232
---------------------------------------------------------------
Sub. Notes, 9.70%, 02/01/09 5,000,000 5,517,800
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
BANKS (MONEY CENTER)-(CONTINUED)
Santander Financial Issuances
Ltd. (Cayman Islands), Unsec.
Gtd. Yankee Sub. Notes, 7.25%,
11/01/15 $ 5,000,000 $ 4,626,300
---------------------------------------------------------------
21,785,357
---------------------------------------------------------------
BANKS (REGIONAL)-0.91%
Marshall & Ilsley Corp.-Series
D, Medium Term Notes, 6.43%,
10/15/02 4,000,000 3,937,840
---------------------------------------------------------------
Mercantile Bancorp., Inc.,
Unsec. Sub. Notes, 7.30%,
06/15/07 8,300,000 8,126,945
---------------------------------------------------------------
Riggs Capital Trust II-Series C,
Gtd. Bonds, 8.88%, 03/15/27 9,550,000 8,711,348
---------------------------------------------------------------
US Bancorp, Sub. Deb., 7.50%,
06/01/26 8,400,000 8,314,068
---------------------------------------------------------------
29,090,201
---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO
& CABLE)-1.98%
British Sky Broadcasting Group
PLC (United Kingdom), Sr.
Unsec. Gtd. Yankee Notes,
8.20%, 07/15/09 11,520,000 11,094,071
---------------------------------------------------------------
Clear Channel Communications,
Inc., Conv. Unsec. Notes,
1.50%, 12/01/02 10,500,000 10,788,750
---------------------------------------------------------------
Comcast Cable Communications,
Unsec. Notes, 8.50%, 05/01/27 3,400,000 3,609,848
---------------------------------------------------------------
Continental Cablevision, Inc.,
Sr. Notes, 8.30%, 05/15/06 8,350,000 8,662,540
---------------------------------------------------------------
Cox Communications, Inc., Unsec.
Notes, 7.75%, 08/15/06 6,300,000 6,347,187
---------------------------------------------------------------
CSC Holdings Inc.,
Sr. Unsec. Deb., 7.63%,
07/15/18 7,100,000 6,626,430
---------------------------------------------------------------
Sr. Unsec. Deb., 7.88%,
02/15/18 1,420,000 1,358,883
---------------------------------------------------------------
Sr. Unsec. Notes, 7.88%,
12/15/07 5,545,000 5,470,420
---------------------------------------------------------------
Lenfest Communications, Inc.,
Sr. Unsec. Sub. Notes, 8.25%,
02/15/08 2,300,000 2,311,500
---------------------------------------------------------------
TCI Communications, Inc., Sr.
Notes, 8.00%, 08/01/05 6,500,000 6,697,925
---------------------------------------------------------------
62,967,554
---------------------------------------------------------------
CHEMICALS-0.40%
Airgas, Inc., Medium Term Notes,
7.14%, 03/08/04 6,700,000 6,317,028
---------------------------------------------------------------
Union Carbide Corp., Deb.,
6.79%, 06/01/25 6,750,000 6,476,760
---------------------------------------------------------------
12,793,788
---------------------------------------------------------------
CHEMICALS (DIVERSIFIED)-0.18%
Equistar Chemical, L.P., Sr.
Unsec. Notes, 8.50%, 02/15/04 5,750,000 5,721,946
---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.83%
Comverse Technology, Inc., Conv.
Unsec. Sub. Deb., 4.50%,
07/01/05 7,700,000 26,266,625
---------------------------------------------------------------
</TABLE>
FS-2
<PAGE> 74
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
COMPUTERS (HARDWARE)-0.31%
Candescent Technology Corp., Sr.
Conv. Sub. Deb., 7.00%,
05/01/03 (Acquired
04/17/98-07/12/99; Cost
$11,901,350)(a) $ 12,670,000 $ 9,882,600
---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-0.85%
VERITAS Software Corp., Conv.
Unsec. Disc. Notes, 1.86%,
08/13/06(b) 10,000,000 26,962,500
---------------------------------------------------------------
CONSUMER FINANCE-1.36%
Capital One Financial Corp.,
Unsec. Notes, 7.25%, 05/01/06 3,890,000 3,674,533
---------------------------------------------------------------
CitiFinancial Credit Co.,
Putable Notes,
6.63%, 06/01/15 2,000,000 1,979,820
---------------------------------------------------------------
7.88%, 02/01/25 4,000,000 3,892,800
---------------------------------------------------------------
Countrywide Capital III-Series
B, Gtd. Bonds, 8.05%, 06/15/27 4,300,000 3,960,171
---------------------------------------------------------------
General Motors Acceptance Corp.,
Notes, 9.00%, 10/15/02 4,175,000 4,367,509
---------------------------------------------------------------
Household Finance Corp., Notes,
7.13%, 09/01/05 4,700,000 4,604,449
---------------------------------------------------------------
Sr. Unsec. Unsub. Notes,
6.40%, 06/17/08 10,900,000 10,060,918
---------------------------------------------------------------
MBNA Capital I-Series A, Gtd.
Bonds, 8.28%, 12/01/26 12,415,000 10,893,418
---------------------------------------------------------------
43,433,618
---------------------------------------------------------------
ELECTRIC COMPANIES-2.53%
Arizona Public Service Co.,
Unsec. Notes, 6.25%, 01/15/05 5,000,000 4,717,850
---------------------------------------------------------------
CMS Energy Corp., Sr. Unsec.
Notes, 8.13%, 05/15/02 4,950,000 4,932,823
---------------------------------------------------------------
Commonwealth Edison Co.-Series
94, First Mortgage Notes,
7.50%, 07/01/13 9,300,000 9,086,100
---------------------------------------------------------------
El Paso Electric Co.-Series E,
Sec. First Mortgage Bonds,
9.40%, 05/01/11 4,000,000 4,237,720
---------------------------------------------------------------
Empire District Electric Co.
(The), Sr. Notes, 7.70%,
11/15/04 8,550,000 8,383,189
---------------------------------------------------------------
Indiana Michigan Power
Co.-Series F, Sec. Lease
Obligation Bonds, 9.82%,
12/07/22 1,357,218 1,501,735
---------------------------------------------------------------
Niagara Mohawk Power Co.,
First Mortgage Notes, 6.63%,
07/01/05 7,200,000 6,881,184
---------------------------------------------------------------
Series G, Sr. Unsec. Notes,
7.75%, 10/01/08 11,700,000 11,716,497
---------------------------------------------------------------
Series H, Sr. Unsec. Disc.
Notes, 8.50%, 07/01/10(c) 12,000,000 8,989,440
---------------------------------------------------------------
Southern Energy, Inc., Sr.
Notes, 7.90%, 07/15/09
(Acquired 07/21/99-12/03/99;
Cost $7,165,447)(a) 7,225,000 6,966,056
---------------------------------------------------------------
Texas-New Mexico Power Co., Sr.
Sec. Notes, 6.25%, 01/15/09 2,750,000 2,365,302
---------------------------------------------------------------
UtiliCorp United, Inc., Sr.
Unsec. Putable Notes, 6.70%,
10/15/06 3,000,000 2,963,820
---------------------------------------------------------------
Western Resources, Inc., Sr.
Unsec. Notes,
6.25%, 08/15/03 2,425,000 2,292,837
---------------------------------------------------------------
7.13%, 08/01/09 6,000,000 5,428,920
---------------------------------------------------------------
80,463,473
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
ENTERTAINMENT-0.62%
Time Warner Inc., Deb.,
9.13%, 01/15/13 $ 10,000,000 $ 10,984,700
---------------------------------------------------------------
9.15%, 02/01/23 7,850,000 8,764,996
---------------------------------------------------------------
19,749,696
---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.01%
BellSouth Capital Funding,
Putable Deb., 6.04%, 11/15/26 4,000,000 3,943,240
---------------------------------------------------------------
Chrysler Financial Corp., Deb.,
8.50%, 02/01/18 150,000 150,219
---------------------------------------------------------------
Dow Capital B.V. (Netherlands),
Gtd. Yankee Deb., 9.20%,
06/01/10 10,250,000 11,282,175
---------------------------------------------------------------
Heller Financial, Inc., Notes,
7.38%, 11/01/09 (Acquired
11/23/99; Cost $9,469,885)(a) 9,500,000 9,265,635
---------------------------------------------------------------
Source One Mortgage Services
Corp., Deb., 9.00%, 06/01/12 5,700,000 6,208,662
---------------------------------------------------------------
Sun Canada Financial Co., Gtd.
Sub. Notes, 6.63%, 12/15/07
(Acquired 10/14/99; Cost
$1,402,095)(a) 1,500,000 1,404,550
---------------------------------------------------------------
32,254,481
---------------------------------------------------------------
FOODS-0.58%
ConAgra, Inc.,
Sr. Putable Notes, 6.70%,
08/01/27 7,500,000 6,981,075
---------------------------------------------------------------
Sr. Unsec. Putable Notes,
7.13%, 10/01/26 7,700,000 7,461,377
---------------------------------------------------------------
Grand Metropolitan Investment
Corp., Gtd. Bonds, 7.45%,
04/15/35 4,000,000 3,967,600
---------------------------------------------------------------
18,410,052
---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-0.20%
Alpharma, Inc., Conv. Sr. Unsec.
Sub. Notes, 3.00%, 06/01/06
(Acquired 05/27/99; Cost
$6,000,000)(a) 6,000,000 6,465,000
---------------------------------------------------------------
HOUSEHOLD PRODUCTS
(NON-DURABLES)-0.19%
Procter & Gamble Co. (The),
Putable Deb., 8.00%, 09/01/24 5,650,000 5,998,718
---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.66%
Conseco, Inc., Unsec. Notes,
6.80%, 06/15/05 6,700,000 6,259,207
---------------------------------------------------------------
9.00%, 10/15/06 2,560,000 2,634,829
---------------------------------------------------------------
Torchmark Corp., Notes,
7.38%, 08/01/13 3,000,000 2,728,560
---------------------------------------------------------------
7.88%, 05/15/23 10,500,000 9,385,215
---------------------------------------------------------------
21,007,811
---------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-0.36%
Florida Windstorm, Underwriting
Association, Sr. Sec. Notes,
7.13%, 02/25/19 (Acquired
03/26/99; Cost $2,834,354)(a) 2,850,000 2,625,449
---------------------------------------------------------------
</TABLE>
FS-3
<PAGE> 75
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
INSURANCE (PROPERTY-CASUALTY)-(CONTINUED)
Terra Nova Insurance PLC (United
Kingdom),
Sr. Unsec. Gtd. Notes, 7.00%,
05/15/08 $ 2,350,000 $ 2,161,483
---------------------------------------------------------------
Sr. Unsec. Gtd. Yankee Notes,
7.20%, 08/15/07 7,000,000 6,553,330
---------------------------------------------------------------
11,340,262
---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-0.52%
HSBC America Capital Trust II,
Gtd. Bonds, 8.38%, 05/15/27
(Acquired 08/12/99; Cost
$1,907,256)(a) 1,990,000 1,842,700
---------------------------------------------------------------
Lehman Brothers Holdings Inc.,
Notes, 8.50%, 08/01/15 5,350,000 5,481,664
---------------------------------------------------------------
Sr. Notes, 8.80%, 03/01/15 4,855,000 5,075,903
---------------------------------------------------------------
Sr. Sub. Notes, 7.38%,
01/15/07 4,400,000 4,272,400
---------------------------------------------------------------
16,672,667
---------------------------------------------------------------
NATURAL GAS-1.38%
CMS Panhandle Holding Co., Sr.
Notes, 6.13%, 03/15/04 6,600,000 6,250,688
---------------------------------------------------------------
Enron Corp., Sr. Sub. Deb.,
6.75%, 07/01/05 4,550,000 4,367,727
---------------------------------------------------------------
8.25%, 09/15/12 4,300,000 4,367,768
---------------------------------------------------------------
Ferrellgas Partners L.P.-Series
B, Sr. Sec. Gtd. Notes, 9.38%,
06/15/06 4,950,000 4,875,750
---------------------------------------------------------------
Kinder Morgan, Inc., Unsec.
Deb., 7.35%, 08/01/26 7,800,000 7,591,116
---------------------------------------------------------------
National Fuel Gas Co.-Series D,
Medium Term Notes, 6.30%,
05/27/08 8,600,000 7,830,386
---------------------------------------------------------------
Nova Gas Transmission Ltd.
(Canada), Yankee Deb., 8.50%,
12/15/12 5,015,000 5,217,054
---------------------------------------------------------------
PanEnergy Corp., Notes, 7.88%,
08/15/04 1,500,000 1,505,505
---------------------------------------------------------------
Sonat Inc., Unsec. Notes, 7.63%,
07/15/11 2,000,000 1,967,120
---------------------------------------------------------------
43,973,114
---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.15%
NRG Energy, Inc., Sr. Unsec.
Notes, 7.50%, 06/01/09 5,000,000 4,603,500
---------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-0.14%
ONEOK, Inc., Unsec. Notes,
7.75%, 08/15/06 3,100,000 3,068,969
---------------------------------------------------------------
Talisman Energy Inc. (Canada),
Yankee Deb., 7.13%, 06/01/07 1,500,000 1,441,425
---------------------------------------------------------------
4,510,394
---------------------------------------------------------------
OIL & GAS (REFINING &
MARKETING)-0.22%
Quaker State Corp., Notes,
6.63%, 10/15/05 2,840,000 2,660,938
---------------------------------------------------------------
Tosco Corp., Unsec. Deb., 7.80%,
01/01/27 4,450,000 4,194,837
---------------------------------------------------------------
6,855,775
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
POWER PRODUCERS
(INDEPENDENT)-0.70%
AES Corp.,
Sr. Notes, 8.00%, 12/31/08 $ 1,000,000 $ 917,500
---------------------------------------------------------------
Sr. Unsec. Sub. Notes, 8.38%,
08/15/07 3,000,000 2,797,500
---------------------------------------------------------------
Sr. Unsec. Sub. Notes, 10.25%,
07/15/06 1,800,000 1,836,000
---------------------------------------------------------------
CE Generation LLC, Sr. Sec.
Notes, 7.42%, 12/15/18
(Acquired 02/24/99-08/19/99;
Cost $7,913,190)(a) 7,800,000 7,187,926
---------------------------------------------------------------
Hydro-Quebec,
Series B (Canada), Gtd. Medium
Term Notes, 8.62%, 12/15/11 4,750,000 5,127,245
---------------------------------------------------------------
Series IO (Canada), Gtd.
Yankee Bond, 8.05%, 07/07/24 1,300,000 1,364,246
---------------------------------------------------------------
Kincaid Generation LLC, Sec.
Bonds, 7.33%, 06/15/20
(Acquired 04/30/98; Cost
$3,508,645)(a) 3,500,000 3,095,355
---------------------------------------------------------------
22,325,772
---------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.62%
News America Holdings, Inc.,
Putable Notes, 8.45%, 08/01/34 3,125,000 3,173,688
---------------------------------------------------------------
Sr. Gtd. Deb., 9.25%, 02/01/13 10,150,000 11,062,485
---------------------------------------------------------------
Sr. Unsec. Gtd. Putable Bonds,
7.43%, 10/01/26 5,450,000 5,353,045
---------------------------------------------------------------
19,589,218
---------------------------------------------------------------
RAILROADS-0.50%
CSX Corp.,
Deb., 9.00%, 08/15/06 6,750,000 7,146,225
---------------------------------------------------------------
Sr. Unsec. Putable Deb.,
6.95%, 05/01/27 3,530,000 3,507,020
---------------------------------------------------------------
Norfolk Southern Corp., Notes,
7.05%, 05/01/37 5,500,000 5,391,265
---------------------------------------------------------------
16,044,510
---------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUSTS-0.27%
Health Care REIT, Inc., Sr.
Unsec. Notes, 7.63%, 03/15/08 1,150,000 952,189
---------------------------------------------------------------
Spieker Properties, Inc., Unsec.
Deb., 7.35%, 12/01/17 8,800,000 7,767,848
---------------------------------------------------------------
8,720,037
---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.16%
Great Atlantic & Pacific Tea
Co., Inc. (Canada), Yankee
Gtd. Notes, 7.78%, 11/01/00(c) 5,000,000 5,048,200
---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.25%
AnnTaylor Stores Corp., Conv.
Unsec. Gtd. Sub. Bonds, 0.55%,
06/18/19 (Acquired
11/04/99-11/17/99; Cost
$9,000,250)(a) 14,600,000 7,829,250
---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.69%
Dime Capital Trust I-Series A,
Gtd. Bonds, 9.33%, 05/06/27 5,400,000 5,091,768
---------------------------------------------------------------
Sovereign Bancorp, Inc., Medium
Term Sub. Notes, 8.00%,
03/15/03 5,330,000 5,090,203
---------------------------------------------------------------
</TABLE>
FS-4
<PAGE> 76
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
SAVINGS & LOAN COMPANIES-(CONTINUED)
St. Paul Bancorp, Inc., Sr.
Unsec. Notes, 7.13%, 02/15/04 $ 5,500,000 $ 5,361,070
---------------------------------------------------------------
Washington Mutual, Inc.,
Gtd. Bonds, 8.38%, 06/01/27 4,285,000 4,094,403
---------------------------------------------------------------
Notes, 7.50%, 08/15/06 2,215,000 2,204,523
---------------------------------------------------------------
21,841,967
---------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.24%
Lamar Advertising Co., Conv.
Unsec. Notes, 5.25%, 09/15/06 5,300,000 7,751,250
---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.47%
Laidlaw Inc. (Canada),
Putable Yankee Deb., 6.72%,
10/01/27 3,000,000 2,552,100
---------------------------------------------------------------
Unsec. Yankee Deb., 6.70%,
05/01/08 8,100,000 6,894,477
---------------------------------------------------------------
Unsec. Yankee Notes, 7.65%,
05/15/06 5,965,000 5,541,783
---------------------------------------------------------------
14,988,360
---------------------------------------------------------------
SHIPPING-0.08%
Hutchison Delta Finance
Ltd.-Series REGS (Cayman
Islands), Conv. Unsec. Notes,
7.00%, 11/25/01 2,250,000 2,610,000
---------------------------------------------------------------
SOVEREIGN DEBT-0.76%
Province of Manitoba (Canada),
Yankee Unsec. Deb., 5.50%,
10/01/08 2,000,000 1,794,160
---------------------------------------------------------------
Series AZ, Putable Yankee
Deb., 7.75%, 07/17/16 5,850,000 5,990,108
---------------------------------------------------------------
Province of Newfoundland
(Canada), Unsec. Yankee Deb.,
9.00%, 06/01/19 2,500,000 2,804,975
---------------------------------------------------------------
Province of Quebec-Series A
(Canada), Medium Term Putable
Yankee Notes,
5.74%, 03/02/26 4,430,000 4,392,877
---------------------------------------------------------------
6.29%, 03/06/26 9,300,000 9,144,132
---------------------------------------------------------------
24,126,252
---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-1.02%
AT&T Corp., Deb., 8.63%,
12/01/31 12,700,000 13,017,373
---------------------------------------------------------------
MCI Communications Corp.,
Sr. Unsec. Notes, 6.50%,
04/15/10 7,900,000 7,373,544
---------------------------------------------------------------
Sr. Unsec. Putable Deb.,
7.13%, 06/15/27 10,150,000 10,198,720
---------------------------------------------------------------
Sprint Corp., Putable Deb.,
9.00%, 10/15/19 1,800,000 1,994,346
---------------------------------------------------------------
32,583,983
---------------------------------------------------------------
TELEPHONE-1.17%
AT&T Corp.-Liberty Media Group,
Bonds, 7.88%, 07/15/09
(Acquired 06/30/99; Cost
$2,833,014)(a) 2,850,000 2,841,778
---------------------------------------------------------------
Cable & Wireless Communications
PLC (United Kingdom), Yankee
Notes, 6.75%, 12/01/08 3,400,000 3,349,578
---------------------------------------------------------------
Electric Lightwave, Inc. Notes,
6.05%, 05/15/04 (Acquired
04/21/99; Cost $9,792,846)(a) 9,800,000 9,247,378
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TELEPHONE-(CONTINUED)
GTE Corp., Unsec. Deb., 6.84%,
04/15/18 $ 5,500,000 $ 5,040,860
---------------------------------------------------------------
NTL Inc., Conv. Sub. Notes,
5.75%, 12/15/09 (Acquired
12/17/99; Cost $9,000,000)(a) 9,000,000 9,720,000
---------------------------------------------------------------
SBC Communications, Inc., Deb.,
7.38%, 07/15/43 7,930,000 7,133,352
---------------------------------------------------------------
37,332,946
---------------------------------------------------------------
WASTE MANAGEMENT-0.34%
Browning-Ferris Industries,
Inc., Deb., 7.40%, 09/15/35 4,170,000 3,023,250
---------------------------------------------------------------
Waste Management, Inc.,
Sr. Unsec. Notes, 7.13%,
12/15/17 1,020,000 799,292
---------------------------------------------------------------
Unsec. Putable Notes, 7.10%,
08/01/26 7,500,000 6,955,650
---------------------------------------------------------------
10,778,192
---------------------------------------------------------------
Total U.S. Dollar
Denominated Bonds & Notes
(Cost $804,332,607) 803,333,944
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-45.04%
AUTOMOBILES-0.31%
Ford Motor Co. 185,000 9,885,937
---------------------------------------------------------------
BANKS (MONEY CENTER)-0.49%
Chase Manhattan Corp. (The) 200,000 15,537,500
---------------------------------------------------------------
BIOTECHNOLOGY-0.66%
Biogen, Inc.(d) 155,000 13,097,500
---------------------------------------------------------------
Genzyme Corp.(d) 175,000 7,875,000
---------------------------------------------------------------
20,972,500
---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO
& CABLE)-2.80%
CBS Corp.(d) 361,400 23,107,012
---------------------------------------------------------------
Hispanic Broadcasting Corp.(d) 193,000 17,798,219
---------------------------------------------------------------
Infinity Broadcasting
Corp.-Class A(d) 474,250 17,161,922
---------------------------------------------------------------
Univision Communications,
Inc.-Class A(d) 305,000 31,167,187
---------------------------------------------------------------
89,234,340
---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-3.36%
ANTEC Corp.(d) 260,600 9,511,900
---------------------------------------------------------------
JDS Uniphase Corp.(d) 58,000 9,356,125
---------------------------------------------------------------
Lucent Technologies Inc. 517,000 38,678,062
---------------------------------------------------------------
Motorola, Inc. 100,000 14,725,000
---------------------------------------------------------------
Sycamore Networks, Inc.(d) 47,000 14,476,000
---------------------------------------------------------------
Tellabs, Inc.(d) 190,000 12,195,625
---------------------------------------------------------------
Williams Communications Group,
Inc.(d) 275,700 7,978,069
---------------------------------------------------------------
106,920,781
---------------------------------------------------------------
COMPUTERS (HARDWARE)-1.64%
Dell Computer Corp.(d) 135,000 6,885,000
---------------------------------------------------------------
International Business Machines
Corp.(e) 133,000 14,364,000
---------------------------------------------------------------
</TABLE>
FS-5
<PAGE> 77
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (HARDWARE)-(CONTINUED)
Sun Microsystems, Inc.(d) 398,000 $ 30,820,125
---------------------------------------------------------------
52,069,125
---------------------------------------------------------------
COMPUTERS (NETWORKING)-1.46%
Cisco Systems, Inc.(d) 340,000 36,422,500
---------------------------------------------------------------
Foundry Networks, Inc.(d) 33,000 9,955,687
---------------------------------------------------------------
46,378,187
---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-1.16%
EMC Corp.(d) 309,000 33,758,250
---------------------------------------------------------------
Immersion Corp.(d) 85,400 3,277,225
---------------------------------------------------------------
37,035,475
---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-5.63%
America Online, Inc.(d)(e) 442,000 33,343,375
---------------------------------------------------------------
Concord Communications, Inc.(d) 81,100 3,598,812
---------------------------------------------------------------
eSPEED, Inc.-Class A(d) 128,700 4,576,894
---------------------------------------------------------------
FreeMarkets, Inc.(d) 94,700 32,322,293
---------------------------------------------------------------
InfoSpace.com, Inc.(d) 184,800 39,547,200
---------------------------------------------------------------
ISS Group, Inc.(d) 220,000 15,647,500
---------------------------------------------------------------
Microsoft Corp.(d) 200,000 23,350,000
---------------------------------------------------------------
Telemate.Net Software, Inc.(d) 282,700 4,593,875
---------------------------------------------------------------
USWeb Corp.(d) 500,000 22,218,750
---------------------------------------------------------------
179,198,699
---------------------------------------------------------------
CONSUMER FINANCE-0.21%
SLM Holding Corp. 155,000 6,548,750
---------------------------------------------------------------
ELECTRIC COMPANIES-0.09%
Plug Power, Inc.(d) 100,000 2,825,000
---------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.67%
Conexant Systems, Inc.(d) 30,300 2,011,162
---------------------------------------------------------------
General Electric Co. 125,000 19,343,750
---------------------------------------------------------------
21,354,912
---------------------------------------------------------------
ELECTRONICS (COMPONENT
DISTRIBUTORS)-0.00%
Sensormatic Electronics Corp.
(Acquired 06/30/98; Cost
$59,993)(a) 4,392 76,585
---------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.29%
General Motors Corp.-Class
H(d)(e) 95,000 9,120,000
---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-2.05%
Analog Devices, Inc.(d) 196,000 18,228,000
---------------------------------------------------------------
Intel Corp. 233,500 19,219,969
---------------------------------------------------------------
Microchip Technology, Inc.(d) 136,000 9,307,500
---------------------------------------------------------------
SDL, Inc.(d) 85,200 18,573,600
---------------------------------------------------------------
65,329,069
---------------------------------------------------------------
ENTERTAINMENT-0.33%
Time Warner Inc. 144,200 10,445,488
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
EQUIPMENT (SEMICONDUCTOR)-0.50%
Applied Materials, Inc.(d) 125,000 $ 15,835,938
---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.82%
American Express Co. 75,000 12,468,750
---------------------------------------------------------------
Citigroup Inc. 242,998 13,501,576
---------------------------------------------------------------
Fannie Mae 175,000 10,926,563
---------------------------------------------------------------
Freddie Mac 238,000 11,200,875
---------------------------------------------------------------
MGIC Investment Corp. 163,000 9,810,563
---------------------------------------------------------------
57,908,327
---------------------------------------------------------------
FOODS-0.21%
Keebler Foods Co.(d) 234,000 6,581,250
---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-1.27%
American Home Products Corp. 196,000 7,729,750
---------------------------------------------------------------
Bristol-Myers Squibb Co. 135,000 8,665,313
---------------------------------------------------------------
Johnson & Johnson 100,000 9,312,500
---------------------------------------------------------------
Warner-Lambert Co. 178,000 14,584,875
---------------------------------------------------------------
40,292,438
---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-0.30%
Forest Laboratories, Inc.(d) 156,000 9,584,250
---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-1.09%
Lilly (Eli) & Co. 141,000 9,376,500
---------------------------------------------------------------
Merck & Co., Inc. 122,000 8,181,625
---------------------------------------------------------------
Pfizer Inc. 331,000 10,736,813
---------------------------------------------------------------
Schering-Plough Corp. 152,000 6,412,500
---------------------------------------------------------------
34,707,438
---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.76%
Baxter International, Inc. 150,400 9,447,000
---------------------------------------------------------------
Guidant Corp.(d) 280,000 13,160,000
---------------------------------------------------------------
Medtronic, Inc. 490,000 17,854,375
---------------------------------------------------------------
VISX, Inc.(d) 300,000 15,525,000
---------------------------------------------------------------
55,986,375
---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.21%
MAXIMUS, Inc.(d) 200,000 6,787,500
---------------------------------------------------------------
HOUSEHOLD FURNISHING & APPLIANCES-0.27%
Ethan Allen Interiors, Inc. 270,000 8,656,875
---------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.38%
Procter & Gamble, Co. (The) 110,000 12,051,875
---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.46%
AXA Financial, Inc. 314,000 10,636,750
---------------------------------------------------------------
Nationwide Financial Services,
Inc.-Class A 140,000 3,911,250
---------------------------------------------------------------
14,548,000
---------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.87%
American International Group,
Inc. 175,000 18,921,875
---------------------------------------------------------------
</TABLE>
FS-6
<PAGE> 78
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (MULTI-LINE)-(CONTINUED)
CIGNA Corp. 110,000 $ 8,861,875
---------------------------------------------------------------
27,783,750
---------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-0.21%
Travelers Property Casualty
Corp.-Class A 195,000 6,678,750
---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-1.29%
Goldman Sachs Group, Inc. (The) 52,300 4,926,006
---------------------------------------------------------------
Merrill Lynch & Co., Inc. 176,000 14,696,000
---------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 150,000 21,412,500
---------------------------------------------------------------
41,034,506
---------------------------------------------------------------
INVESTMENT MANAGEMENT-0.13%
Federated Investors, Inc.-Class B 206,400 4,140,900
---------------------------------------------------------------
LODGING-HOTELS-0.76%
Carnival Corp. 230,000 10,996,875
---------------------------------------------------------------
Royal Caribbean Cruises Ltd. 270,400 13,334,100
---------------------------------------------------------------
24,330,975
---------------------------------------------------------------
MANUFACTURING
(DIVERSIFIED)-0.35%
Tyco International Ltd. 284,000 11,040,500
---------------------------------------------------------------
NATURAL GAS-0.65%
Enron Corp. 295,000 13,090,625
---------------------------------------------------------------
Williams Companies, Inc. (The) 251,000 7,671,188
---------------------------------------------------------------
20,761,813
---------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-0.23%
Apache Corp. 200,000 7,387,500
---------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-0.23%
Conoco Inc.-Class B 300,000 7,462,500
---------------------------------------------------------------
OIL (INTERNATIONAL
INTEGRATED)-0.25%
Exxon Mobil Corp. 100,644 8,108,132
---------------------------------------------------------------
PERSONAL CARE-0.14%
Steiner Leisure Ltd.(d) 275,000 4,589,063
---------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-0.50%
AES Corp.(d) 215,000 16,071,250
---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.56%
Home Depot, Inc. (The) 262,500 17,997,656
---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.25%
Safeway Inc.(d) 228,000 8,108,250
---------------------------------------------------------------
RETAIL (GENERAL
MERCHANDISE)-0.50%
Dayton Hudson Corp. 215,100 15,796,406
---------------------------------------------------------------
RETAIL (SPECIALTY)-0.83%
Amazon.com, Inc.(d) 95,000 7,231,875
---------------------------------------------------------------
Bed Bath & Beyond, Inc.(d) 290,000 10,077,500
---------------------------------------------------------------
Linens 'n Things, Inc.(d) 305,200 9,041,550
---------------------------------------------------------------
26,350,925
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (ADVERTISING/MARKETING)-0.94%
Omnicom Group, Inc. 130,000 $ 13,000,000
---------------------------------------------------------------
Young & Rubicam Inc. 241,000 17,050,750
---------------------------------------------------------------
30,050,750
---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.93%
National Information Consortium,
Inc.(d) 278,000 8,896,000
---------------------------------------------------------------
Official Payments Corp.(d) 186,300 9,687,600
---------------------------------------------------------------
Quanta Services, Inc.(d) 392,000 11,074,000
---------------------------------------------------------------
29,657,600
---------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.25%
DST Systems, Inc.(d) 106,000 8,089,125
---------------------------------------------------------------
TELECOMMUNICATIONS-0.49%
Broadwing Inc.(d) 419,520 15,469,800
---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.72%
Infonet Services Corp.-Class
B(d) 370,000 9,712,500
---------------------------------------------------------------
Western Wireless Corp.-Class
A(d) 196,300 13,103,025
---------------------------------------------------------------
22,815,525
---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-1.56%
AT&T Corp. 216,450 10,984,838
---------------------------------------------------------------
Global TeleSystems Group,
Inc.(d) 475,450 16,462,456
---------------------------------------------------------------
MCI WorldCom, Inc.(d) 420,000 22,286,250
---------------------------------------------------------------
49,733,544
---------------------------------------------------------------
TELEPHONE-2.98%
Bell Atlantic Corp. 158,000 9,726,875
---------------------------------------------------------------
McLeodUSA, Inc.-Class A(d) 290,000 17,073,750
---------------------------------------------------------------
NEXTLINK Communications,
Inc.-Class A(d) 224,800 18,672,450
---------------------------------------------------------------
Qwest Communications
International, Inc.(d) 665,000 28,595,000
---------------------------------------------------------------
SBC Communications, Inc. 204,000 9,945,000
---------------------------------------------------------------
Time Warner Telecom, Inc.(d) 218,500 10,911,344
---------------------------------------------------------------
94,924,419
---------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$765,923,442) 1,434,256,253
---------------------------------------------------------------
DOMESTIC PREFERRED STOCKS-2.43%
COMPUTERS (SOFTWARE & SERVICES)-0.45%
PSINet, Inc.-Series C, $3.375
Conv. Pfd. 100,000 5,837,500
---------------------------------------------------------------
Verio Inc.-$3.375 Conv. Pfd.
(Acquired 07/15/99-10/01/99;
Cost $7,092,498)(a) 150,000 8,475,000
---------------------------------------------------------------
14,312,500
---------------------------------------------------------------
ELECTRIC COMPANIES-0.28%
Calpine Capital Trust-$2.875
Conv. Pfd. 139,000 8,982,875
---------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-0.22%
Kerr-McGee Corp.-5.50% Pfd. DECS 209,800 6,818,500
---------------------------------------------------------------
</TABLE>
FS-7
<PAGE> 79
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
PERSONAL CARE-0.16%
Estee Lauder Cos. Inc.-$3.805
Conv. Pfd. 60,000 $ 5,193,750
---------------------------------------------------------------
TELECOMMUNICATIONS-0.13%
Broadwing Inc.-Series B, $3.375
Conv. Pfd. 70,000 4,147,500
---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.71%
WinStar Communications,
Inc.-Series F, $72.50 Conv.
Pfd. 16,950 22,585,875
---------------------------------------------------------------
TELEPHONE-0.27%
NEXTLINK Communications,
Inc.-$3.25 Conv. Pfd. 24,200 4,643,375
---------------------------------------------------------------
NEXTLINK Communications,
Inc.-$3.25 Conv. Pfd.
(Acquired 03/26/98-06/02/98;
Cost $975,188)(a) 20,800 3,991,000
---------------------------------------------------------------
8,634,375
---------------------------------------------------------------
WATER UTILITIES-0.21%
AES Trust III-$3.375 Conv. Pfd. 108,600 6,692,475
---------------------------------------------------------------
Total Domestic Preferred
Stocks (Cost $63,730,828) 77,367,850
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT(f)
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS &
NOTES-3.50%
AUSTRALIA-0.22%
New South Wales Treasury
Corp.-Series 4 (Sovereign
Debt), Gtd. Notes, 7.00%,
04/01/04 AUD 4,300,000 2,838,785
---------------------------------------------------------------
State Bank New South
Wales-Series E (Banks-Major
Regional), Sr. Unsec. Gtd.
Medium Term Notes, 8.63%,
08/20/01 AUD 6,125,000 4,155,283
---------------------------------------------------------------
6,994,068
---------------------------------------------------------------
CANADA-0.71%
AT&T Canada Inc. (Telephone),
Sr. Unsec. Notes, 7.15%,
09/23/04 CAD 1,700,000 1,163,734
---------------------------------------------------------------
Bell Mobility Cellular, Inc.
(Telecommunications-Cellular/Wireless),
Deb., 6.55%, 06/02/08 CAD 2,500,000 1,659,721
---------------------------------------------------------------
Canadian Oil Debco Inc. (Oil &
Gas- Exploration &
Production), Deb., 11.00%,
10/31/00 CAD 2,500,000 1,790,601
---------------------------------------------------------------
Clearnet Communications Inc.
(Telecommunications-Cellular/Wireless),
Sr. Unsec. Disc. Notes,
10.75%, 02/15/09(c) CAD 5,000,000 2,026,606
---------------------------------------------------------------
Export Development Corp.
(Sovereign Debt), Sr. Unsub.
Notes, 6.50%, 12/21/04 NZD 6,000,000 2,970,914
---------------------------------------------------------------
Poco Petroleums Ltd. (Oil & Gas-
Exploration & Production),
Unsec. Deb., 6.60%,
09/11/07 CAD 5,400,000 3,540,923
---------------------------------------------------------------
Province of British Columbia
(Sovereign Debt), Notes,
7.50%, 12/31/03 GBP 950,000 1,553,548
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(f) VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Province of Ontario (Sovereign
Debt),
Notes, 6.38%, 06/10/04 GBP 950,000 $ 1,498,329
---------------------------------------------------------------
Unsec. Unsub. Notes, 6.25%,
12/03/08 NZD 3,750,000 1,711,057
---------------------------------------------------------------
Province of Quebec (Sovereign
Debt), Unsec. Notes, 5.13%,
01/04/09 DEM 1,600,000 770,578
---------------------------------------------------------------
Teleglobe Canada Inc.
(Telephone), Unsec. Deb.,
8.35%, 06/20/03 CAD 1,000,000 709,423
---------------------------------------------------------------
TransCanada Pipelines-Series Q
(Natural Gas), Deb., 10.63%,
10/20/09 CAD 1,500,000 1,282,478
---------------------------------------------------------------
Westcoast Energy Inc.-Series V
(Natural Gas), Unsec. Deb.,
6.45%, 12/18/06 CAD 3,000,000 2,037,497
---------------------------------------------------------------
22,715,409
---------------------------------------------------------------
DENMARK-0.21%
Kingdom of Denmark (Sovereign
Debt), Bonds, 5.00%,
08/15/05 DKK 51,000,000 6,806,533
---------------------------------------------------------------
GERMANY-0.25%
Bundesrepublik Deutschland
(Sovereign Debt), Series 92
Bonds, 7.25%, 10/21/02 EUR 2,790,000 3,004,448
---------------------------------------------------------------
Landesbank Baden-Wuerttemberg
(Banks- Major Regional), Sr.
Unsec. Unsub. Medium Term
Notes, 6.25%, 12/15/04 AUD 5,700,000 3,572,998
---------------------------------------------------------------
Treuhandanstalt (Sovereign
Debt), Gtd. Notes, 6.00%,
11/12/03 EUR 1,140,000 1,195,434
---------------------------------------------------------------
7,772,880
---------------------------------------------------------------
GREECE-0.24%
Hellenic Republic (Sovereign
Debt), Bonds, 6.60%,
01/15/04 GRD 2,500,000,000 7,669,388
---------------------------------------------------------------
NETHERLANDS-0.48%
Dresdner Finance B.V.-Series 11
(Banks- Major Regional),
Floating Rate Gtd. Notes,
3.53%, 07/30/03 EUR 7,250,000 7,281,476
---------------------------------------------------------------
Hypovereins Finance N.V.-Series
E (Banks- Major Regional),
Gtd. Medium Term Notes, 6.00%,
03/12/07 DEM 2,900,000 1,496,248
---------------------------------------------------------------
Mannesmann Finance B.V.
(Machinery- Diversified), Gtd.
Unsec. Unsub. Notes, 4.75%,
05/27/09 EUR 1,300,000 1,153,665
---------------------------------------------------------------
SPT Telecom A.S.
(Telecommunications- Long
Distance), Gtd. Unsec. Unsub.
Notes, 5.13%, 05/07/03 DEM 4,600,000 2,346,111
---------------------------------------------------------------
Tecnost International Finance
N.V.-Series E (Telephone),
Medium Term Gtd. Notes, 6.13%,
07/30/09 EUR 3,210,000 3,111,084
---------------------------------------------------------------
15,388,584
---------------------------------------------------------------
NEW ZEALAND-0.22%
International Bank for
Reconstruction & Development
(Banks-Money Center), Unsec.
Notes, 5.50%, 04/15/04 NZD 8,500,000 4,113,246
---------------------------------------------------------------
</TABLE>
FS-8
<PAGE> 80
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(f) VALUE
<S> <C> <C>
NEW ZEALAND-(CONTINUED)
New Zealand Government
(Sovereign Debt)
Series 302 Bonds, 10.00%,
03/15/02 NZD 2,650,000 $ 1,478,054
---------------------------------------------------------------
Series 404 Bonds, 8.00%,
04/15/04 NZD 2,650,000 1,430,651
---------------------------------------------------------------
7,021,951
---------------------------------------------------------------
SWEDEN-0.26%
Stadshypotek A.B.-Series 1562
(Banks- Regional), Bonds,
3.50%, 09/15/04 SEK 43,000,000 4,544,805
---------------------------------------------------------------
Swedish Government-Series 1035
(Sovereign Debt), Bonds,
6.00%, 02/09/05 SEK 30,000,000 3,609,571
---------------------------------------------------------------
8,154,376
---------------------------------------------------------------
UNITED KINGDOM-0.79%
Lloyds Bank PLC-Series E
(Banks-Major Regional), Medium
Term Sub. Notes, 5.25%,
07/14/08 DEM 6,800,000 3,325,110
---------------------------------------------------------------
Merrill Lynch & Co., Inc.-Series
E (Investment
Banking/Brokerage), Sr. Unsec.
Unsub. Medium Term Notes,
7.38%, 12/17/07 GBP 6,650,000 10,887,514
---------------------------------------------------------------
National Power PLC (Electric
Companies), Sr. Unsec. Unsub.
Bonds, 8.00%, 02/21/07 AUD 3,100,000 2,012,382
---------------------------------------------------------------
National Westminster Bank
PLC-Series E (Banks-Money
Center), Unsec. Unsub. Medium
Term Bonds, 5.13%, 06/30/11EUR 2,500,000 2,255,470
---------------------------------------------------------------
Sutton Bridge Financial
Ltd.-Series REGS (Power
Producers-Independent), Gtd.
Eurobonds, 8.63%, 06/30/22
(Acquired 05/29/97; Cost
$4,890,565)(a) GBP 3,000,000 5,090,868
---------------------------------------------------------------
Union Bank Switzerland London,
(Banks- Major Regional),
Unsec. Sub. Notes, 7.38%,
11/26/04 GBP 1,000,000 1,637,219
---------------------------------------------------------------
25,208,563
---------------------------------------------------------------
UNITED STATES OF AMERICA-0.12%
General Electric Capital
Corp.-Series E
(Financial-Diversified), Sr.
Unsec. Unsub. Medium Term
Notes, 6.00%, 07/27/01 GBP 2,400,000 3,814,070
---------------------------------------------------------------
Total Non-U.S. Dollar
Denominated
Non-Convertible Bonds &
Notes (Cost $117,303,454) 111,545,822
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
FOREIGN STOCKS-5.46%
BERMUDA-0.88%
Global Crossing Ltd.
(Telecommunications- Long
Distance)(d) 559,252 27,962,600
---------------------------------------------------------------
CANADA-0.37%
AT&T Canada, Inc. (Telephone)(d) 291,000 11,712,750
---------------------------------------------------------------
FINLAND-2.03%
Nokia Oyj-ADR (Communications
Equipment) 220,000 41,800,000
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINLAND-(CONTINUED)
Sonera Oyj
(Telecommunications-Cellular/
Wireless) 333,900 $ 22,868,451
---------------------------------------------------------------
64,668,451
---------------------------------------------------------------
FRANCE-0.41%
AXA (Insurance-Multi-Line) 36,800 5,125,971
---------------------------------------------------------------
AXA-ADR (Insurance-Multi-Line) 110,000 7,810,000
---------------------------------------------------------------
12,935,971
---------------------------------------------------------------
GERMANY-0.36%
Mannesmann A.G.
(Machinery-Diversified) 47,823 11,527,482
---------------------------------------------------------------
ISRAEL-0.19%
Partner Communications Co.
Ltd.-ADR
(Telecommunications-Cellular/
Wireless)(d) 228,300 5,907,263
---------------------------------------------------------------
NETHERLANDS-0.38%
Libertel N.V.
(Telecommunications-Cellular/
Wireless)(d) 467,200 12,225,549
---------------------------------------------------------------
SOUTH KOREA-0.34%
Korea Telecom Corp.-ADR
(Telephone) 143,596 10,733,801
---------------------------------------------------------------
SPAIN-0.50%
Telefonica S.A. (Telephone)(d) 495,000 12,355,180
---------------------------------------------------------------
Terra Networks, S.A.
(Computers-Software &
Services)(d) 68,100 3,718,254
---------------------------------------------------------------
16,073,434
---------------------------------------------------------------
Total Foreign Stocks (Cost
$72,168,443) 173,747,301
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY SECURITIES-7.14%
U.S. TREASURY BONDS-0.71%
9.375%, 02/15/06 $ 20,000,000 22,820,200
---------------------------------------------------------------
U.S. TREASURY NOTES-6.43%
7.25%, 08/15/04 35,000,000 36,099,000
---------------------------------------------------------------
5.875%, 11/15/04 2,000,000 1,960,620
---------------------------------------------------------------
6.50%, 08/15/05 to 10/15/06 121,000,000(g) 120,776,810
---------------------------------------------------------------
6.875%, 05/15/06 34,500,000(g) 35,088,225
---------------------------------------------------------------
6.625%, 05/15/07 7,000,000(g) 7,027,230
---------------------------------------------------------------
5.63%, 05/15/08 4,000,000 3,763,160
---------------------------------------------------------------
204,715,045
---------------------------------------------------------------
Total U.S. Treasury
Securities (Cost
$231,414,173) 227,535,245
---------------------------------------------------------------
U.S. GOVERNMENT AGENCY
SECURITIES-2.14%
FEDERAL HOME LOAN MORTGAGE CORP.
("FHLMC")-0.42%
Pass through ctfs.
6.50%, 12/01/28 13,995,426 13,199,366
---------------------------------------------------------------
</TABLE>
FS-9
<PAGE> 81
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE
ASSOCIATION ("FNMA")-1.16%
Pass through ctfs.
7.00%, 05/01/28 $ 20,690,733 $ 19,998,836
---------------------------------------------------------------
6.50%, 11/01/28 to 12/01/28 18,009,410 16,968,105
---------------------------------------------------------------
36,966,941
---------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION ("GNMA")-0.56%
Pass through ctfs.
6.50%, 09/15/28 to 03/15/29 19,065,864 17,898,080
---------------------------------------------------------------
Total U.S. Government Agency
Securities (Cost
$72,041,945) 68,064,387
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION
CONTRACTS PRICE DATE
<S> <C> <C> <C> <C>
OPTIONS
PURCHASED-0.01%
ELECTRONICS
(DEFENSE)-0.01%
General Motors
Corp.-Class H (Cost
$465,975) 95,000 $ 90 Jan-00 195,938
--------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS-7.50%
STIC Liquid Assets Portfolio(h) $119,363,406 $ 119,363,406
---------------------------------------------------------------
STIC Prime Portfolio(h) 119,363,406 119,363,406
---------------------------------------------------------------
Total Money Market Funds
(Cost $238,726,812) 238,726,812
---------------------------------------------------------------
TOTAL INVESTMENTS-98.45% (Cost
$2,366,107,679) 3,134,773,552
---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-1.55% 49,376,620
---------------------------------------------------------------
NET ASSETS-100.00% $3,184,150,172
===============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
AUD - Australian Dollar
CAD - Canadian Dollars
Conv. - Convertible
Ctfs. - Certificates
Deb. - Debentures
DECS - Dividend Enhanced Convertible Stock
DEM - German Deutsche Mark
DKK - Danish Krone
Disc. - Discounted
EUR - Euro
GBP - British Pound Sterling
GRD - Greek Drachma
Gtd. - Guaranteed
NZD - New Zealand Dollar
Pfd. - Preferred
REIT - Real Estate Investment Trust
Sec. - Secured
SEK - Swedish Krona
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
Notes to Schedule of Investments:
(a) 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 12/31/99 represented 3.20% of the Fund's net assets.
(b) Discounted bond at purchase. Interest rate shown represents the coupon rate
at which the bond will accrue at a specified future date.
(c) Represents a security sold under Rule 144A, which is exempt from
registration and may be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended.
(d) Non-income producing security.
(e) A portion of this security is subject to call options written. See Note 7.
(f) Foreign denominated security. Par value and coupon are denominated in
currency indicated.
(g) A portion of this principal was pledged as collateral to cover margin
requirements for open future contracts. See Note 8.
(h) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-10
<PAGE> 82
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$2,366,107,679) $3,134,773,552
---------------------------------------------------------
Receivables for:
Investments sold 18,914,453
---------------------------------------------------------
Foreign currency contracts closed 24,825
---------------------------------------------------------
Fund shares sold 25,083,485
---------------------------------------------------------
Interest and dividends 22,904,366
---------------------------------------------------------
Variation margin 276,250
---------------------------------------------------------
Foreign currency contracts 655,642
---------------------------------------------------------
Investment for deferred compensation plan 42,523
---------------------------------------------------------
Other assets 40,344
---------------------------------------------------------
Total assets 3,202,715,440
---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 4,357,824
---------------------------------------------------------
Fund shares reacquired 8,656,785
---------------------------------------------------------
Options written (premiums $1,494,360) 1,167,812
---------------------------------------------------------
Deferred compensation plan 42,523
---------------------------------------------------------
Accrued advisory fees 1,343,610
---------------------------------------------------------
Accrued distribution fees 2,543,619
---------------------------------------------------------
Accrued transfer agent fees 249,013
---------------------------------------------------------
Accrued operating expenses 204,082
---------------------------------------------------------
Total liabilities 18,565,268
---------------------------------------------------------
Net assets applicable to shares
outstanding $3,184,150,172
=========================================================
NET ASSETS:
Class A $1,800,349,970
=========================================================
Class B $1,183,215,180
=========================================================
Class C $ 200,585,022
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 55,074,835
=========================================================
Class B 36,282,468
=========================================================
Class C 6,144,390
=========================================================
Class A:
Net asset value and redemption price
per share $ 32.69
---------------------------------------------------------
Offering price per share:
(Net asset value of $32.69 / 95.25%) $ 34.32
=========================================================
Class B:
Net asset value and offering price per
share $ 32.61
=========================================================
Class C:
Net asset value and offering price per
share $ 32.65
=========================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 85,768,860
---------------------------------------------------------
Dividends (net of $91,426 foreign
withholding tax) 13,436,438
---------------------------------------------------------
Total investment income 99,205,298
---------------------------------------------------------
EXPENSES:
Advisory fees 13,624,208
---------------------------------------------------------
Administrative services fees 158,046
---------------------------------------------------------
Custodian fees 240,252
---------------------------------------------------------
Distribution fees-Class A 3,755,133
---------------------------------------------------------
Distribution fees-Class B 10,013,693
---------------------------------------------------------
Distribution fees-Class C 1,464,190
---------------------------------------------------------
Trustees' fees 22,015
---------------------------------------------------------
Transfer agent fees-Class A 2,032,670
---------------------------------------------------------
Transfer agent fees-Class B 2,032,007
---------------------------------------------------------
Transfer agent fees-Class C 297,956
---------------------------------------------------------
Other 550,475
---------------------------------------------------------
Total expenses 34,190,645
---------------------------------------------------------
Less: Expenses paid indirectly (75,967)
---------------------------------------------------------
Net expenses 34,114,678
---------------------------------------------------------
Net investment income 65,090,620
---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FOREIGN CURRENCY CONTRACTS,
FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 436,666
---------------------------------------------------------
Foreign currencies (154,053)
---------------------------------------------------------
Foreign currency contracts 534,910
---------------------------------------------------------
Futures contracts 45,119,738
---------------------------------------------------------
Option contracts written 908,045
---------------------------------------------------------
46,845,306
---------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 384,287,115
---------------------------------------------------------
Foreign currencies 5,416
---------------------------------------------------------
Foreign currency contracts 396,014
---------------------------------------------------------
Futures contracts (10,141,023)
---------------------------------------------------------
Option contracts written 391,074
---------------------------------------------------------
374,938,596
---------------------------------------------------------
Net gain from investment securities,
foreign currencies, foreign currency
contracts, futures and option contracts 421,783,902
---------------------------------------------------------
Net increase in net assets resulting from
operations $486,874,522
=========================================================
</TABLE>
FS-11
<PAGE> 83
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 65,090,620 $ 42,651,746
---------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, foreign currency contracts, futures
and option contracts 46,845,306 (34,961,701)
---------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies, foreign currency
contracts, futures and option contracts 374,938,596 202,514,022
---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 486,874,522 210,204,067
---------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (42,749,278) (25,009,619)
---------------------------------------------------------------------------------------------
Class B (20,909,084) (12,164,517)
---------------------------------------------------------------------------------------------
Class C (3,188,689) (1,261,081)
---------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A -- (2,990,460)
---------------------------------------------------------------------------------------------
Class B -- (2,026,544)
---------------------------------------------------------------------------------------------
Class C -- (260,076)
---------------------------------------------------------------------------------------------
Share transactions-net:
Class A 243,729,476 537,064,636
---------------------------------------------------------------------------------------------
Class B 132,034,584 344,386,485
---------------------------------------------------------------------------------------------
Class C 61,800,642 99,082,872
---------------------------------------------------------------------------------------------
Net increase in net assets 857,592,173 1,147,025,763
---------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 2,326,557,999 1,179,532,236
---------------------------------------------------------------------------------------------
End of period $3,184,150,172 $2,326,557,999
=============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $2,395,161,389 $1,957,596,687
---------------------------------------------------------------------------------------------
Undistributed net investment income 404,927 5,095,292
---------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies, foreign currency
contracts, futures and option contracts 14,952,655 (34,826,585)
---------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, foreign currency contracts, futures and
option contracts 773,631,201 398,692,605
---------------------------------------------------------------------------------------------
$3,184,150,172 $2,326,557,999
=============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-12
<PAGE> 84
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Balanced Fund (the "Fund") is a series portfolio of AIM Funds Group (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 nine separate portfolios, each
having an unlimited number of shares of beneficial interest. The Fund currently
offers three different classes of shares: Class A shares, Class B shares and
Class C shares. Class A shares are sold with a front-end sales charge. Class B
shares and Class C shares are sold with a contingent deferred sales charge.
Matters affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund. The Fund's investment objective
is to achieve as high a total return as possible, consistent with preservation
of capital, by investing in a broadly diversified portfolio of high-yielding
securities, including common stocks, preferred stocks, convertible securities
and bonds.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The following is a summary of the significant accounting policies
followed by the Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) are valued on the basis
of prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as yield, type of issue,
coupon rate and maturity date. Securities for which market prices are not
provided by any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. Securities for which market quotations are not
readily available or are questionable are valued at fair value as determined
in good faith by or under the supervision of the 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 trading of the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
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 is recorded as earned from settlement date and is recorded on
the accrual basis. Dividend income is recorded on the ex-dividend date. On
December 31, 1999, undistributed net investment income was decreased by
$2,933,934 and undistributed net realized gains increased by $2,933,934 as a
result of differing book/tax treatment of foreign currency transactions and
other reclassifications. Net assets of the Fund were unaffected by the
reclassifications.
C. Distributions -- Distributions from income are recorded on ex-dividend date,
and are declared and paid quarterly. Distributions from 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 of fund share 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. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions. The Fund does
not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from changes in market prices of securities held. Such
fluctuations
FS-13
<PAGE> 85
are included with the net realized and unrealized gain or loss from
investments.
F. Foreign Currency Contracts -- A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
Outstanding foreign currency contracts at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
CONTRACT TO
------------------------- UNREALIZED
SETTLEMENT DATE DELIVER RECEIVE VALUE APPRECIATION
--------------------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
01/24/00 SEK 68,000,000 $ 8,381,403 $ 8,004,163 $377,240
-----------------------------------------------------------------------------
02/28/00 EUR 10,000,000 10,385,000 10,110,458 274,542
-----------------------------------------------------------------------------
02/28/00 GBP 500,000 811,250 807,390 3,860
-----------------------------------------------------------------------------
78,500,000 $19,577,653 $18,922,011 $655,642
=============================================================================
</TABLE>
G. 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.
H. Covered Call Options -- The Fund may write call options, on a covered basis;
that is, the Fund will own the underlying security. Options written by the
Fund normally will have expiration dates between three and nine months from
the date written. The exercise price of a call option may be below, equal to,
or above the current market value of the underlying security at the time the
option is written. When the Fund writes a covered call option, an amount
equal to the premium received by the Fund is recorded as an asset and an
equivalent liability. The amount of the liability is subsequently
"marked-to-market" to reflect the current market value of the option written.
The current market value of a written option is the mean between the last bid
and asked prices on that day. If a written call option expires on the
stipulated expiration date, or if the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or a loss if the closing purchase
transaction exceeds the premium received when the option was written) without
regard to any unrealized gain or loss on the underlying security, and the
liability related to such option is extinguished. If a written option is
exercised, the Fund realizes a gain or a loss from the sale of the underlying
security and the proceeds of the sale are increased by the premium originally
received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
I. Put Options -- The Fund may purchase put options. By purchasing a put
option, the Fund obtains the right (but not the obligation) to sell the
option's underlying instrument at a fixed strike price. In return for this
right, the Fund pays an option premium. The option's underlying instrument
may be a security or a futures contract. Put options may be used by the Fund
to hedge securities it owns by locking in a minimum price at which the Fund
can sell. If security prices fall, the put option could be exercised to
offset all or a portion of the Fund's resulting losses. At the same time,
because the maximum the Fund has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Fund to
profit from an increase in the value of the securities hedged.
J. Bond Premiums -- It is the policy of the Fund not to amortize market premiums
on bonds for financial reporting purposes.
K. Expenses -- Distribution expenses and transfer agency expenses directly
attributable to a class of shares are charged to that class' operations. All
other expenses which are attributable to more than one class are allocated
among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of
the first $150 million of the Fund's average daily net assets, plus 0.50% of the
Fund's average daily net assets in excess of $150 million.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to
FS-14
<PAGE> 86
the Fund. For the year ended December 31, 1999, AIM was paid $158,046 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 December 31, 1999, AFS was
paid $1,916,453 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
0.25% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and C shares. Of these amounts, the Fund may
pay a service fee of 0.25% of the average daily net assets of the Class A, Class
B or Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. The Plans also
impose a cap on the total sales charges, including asset-based sales charges
that may be paid by the respective classes. For the year ended December 31,
1999, the Class A, Class B and Class C shares paid AIM Distributors $3,755,133,
$10,013,693 and $1,464,190, respectively, as compensation under the Plans.
AIM Distributors received commissions of $823,856 from sales of the Class A
shares of the Fund during the year ended December 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1999,
AIM Distributors received $150,341 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 December 31, 1999, the Fund paid legal fees of $7,985
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $29,183 and $46,784, respectively, under expense offset arrangements.
The effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $75,967 during the year ended December 31, 1999.
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) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1999 was
$2,017,133,351 and $1,619,226,894, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of December 31, 1999 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $826,568,954
---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (58,369,796)
---------------------------------------------------------
Net unrealized appreciation of investment
securities $768,199,158
=========================================================
Cost of investments for tax purposes is
$2,366,574,394.
</TABLE>
FS-15
<PAGE> 87
NOTE 7-CALL OPTION CONTRACTS
Transactions in call options written during the year ended December 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ----------
<S> <C> <C>
Beginning of year 500 $ 797,973
------------------------------------------------------------------------------------
Written 6,745 4,420,253
------------------------------------------------------------------------------------
Closed (3,755) (3,723,866)
------------------------------------------------------------------------------------
End of year 3,490 $1,494,360
====================================================================================
</TABLE>
Open call option contracts written at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS MARKET APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
------------------------------------------------------ -------- ------- --------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
America Online Inc. Jan-00 $ 88 2,210 $ 851,927 $ 414,374 $ 437,553
---------------------------------------------------------------------------------------------------------------------------------
General Motors Corp. - Class H Jan-00 100 950 412,761 279,063 133,698
---------------------------------------------------------------------------------------------------------------------------------
International Business Machines Corp. Jan-00 95 330 229,672 474,375 (244,703)
---------------------------------------------------------------------------------------------------------------------------------
3,490 $1,494,360 $1,167,812 $ 326,548
=================================================================================================================================
</TABLE>
NOTE 8-FUTURES CONTRACTS
On December 31, 1999, $7,619,000 principal amount of U.S. Treasury obligations
was pledged as collateral to cover margin requirements for open futures
contracts. Open futures contracts were as follows:
<TABLE>
<CAPTION>
VALUE OF
NO. OF MONTH/ OPEN FUTURES UNREALIZED
CONTRACT CONTRACTS COMMITMENT CONTRACTS APPRECIATION
------------------------------------------------------------ --------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
S&P 500 Index 325 Mar-00/Buy $120,591,250 $3,977,452
------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 9-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 24,207,279 $ 705,353,097 29,663,763 $ 789,886,049
-----------------------------------------------------------------------------------------------------------------------
Class B 9,923,280 287,877,047 15,995,669 427,423,474
-----------------------------------------------------------------------------------------------------------------------
Class C 3,295,250 96,614,771 4,375,455 117,461,185
-----------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 1,334,538 39,562,999 872,547 23,134,563
-----------------------------------------------------------------------------------------------------------------------
Class B 652,505 19,306,388 492,389 13,073,889
-----------------------------------------------------------------------------------------------------------------------
Class C 92,159 2,744,998 54,578 1,446,813
-----------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (17,165,067) (501,186,620) (10,355,432) (275,955,976)
-----------------------------------------------------------------------------------------------------------------------
Class B (6,020,681) (175,148,851) (3,657,104) (96,110,878)
-----------------------------------------------------------------------------------------------------------------------
Class C (1,289,864) (37,559,127) (747,879) (19,825,126)
-----------------------------------------------------------------------------------------------------------------------
15,029,399 $ 437,564,702 36,693,986 $ 980,533,993
=======================================================================================================================
</TABLE>
FS-16
<PAGE> 88
NOTE 10-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and a share of
Class B outstanding during each of the years in the five-year period ended
December 31, 1999, and for a share of Class C outstanding during each of the
years in the two-year period ended December 31, 1999 and the period August 4,
1997 (date sales commenced) through December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------
1999(a) 1998(a) 1997 1996 1995
---------- ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 28.23 $ 25.78 $ 21.84 $ 19.22 $ 14.62
------------------------------------------------------------ ---------- ---------- -------- -------- -------
Income from investment operations:
Net investment income 0.82 0.71 0.60 0.66 0.49
------------------------------------------------------------ ---------- ---------- -------- -------- -------
Net gains on securities (both realized and unrealized) 4.46 2.45 4.66 2.99 4.57
------------------------------------------------------------ ---------- ---------- -------- -------- -------
Total from investment operations 5.28 3.16 5.26 3.65 5.06
------------------------------------------------------------ ---------- ---------- -------- -------- -------
Less distributions:
Dividends from net investment income (0.82) (0.65) (0.55) (0.55) (0.46)
------------------------------------------------------------ ---------- ---------- -------- -------- -------
Distributions from net realized gains -- (0.06) (0.77) (0.48) --
------------------------------------------------------------ ---------- ---------- -------- -------- -------
Total distributions (0.82) (0.71) (1.32) (1.03) (0.46)
------------------------------------------------------------ ---------- ---------- -------- -------- -------
Net asset value, end of period $ 32.69 $ 28.23 $ 25.78 $ 21.84 $ 19.22
============================================================ ========== ========== ======== ======== =======
Total return(b) 19.04% 12.46% 24.41% 19.25% 34.97%
============================================================ ========== ========== ======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,800,350 $1,318,230 $683,633 $334,189 $92,241
============================================================ ========== ========== ======== ======== =======
Ratio of expenses to average net assets 0.94%(c) 0.95% 0.98% 1.15% 1.43%(d)
============================================================ ========== ========== ======== ======== =======
Ratio of net investment income to average net assets 2.81%(c) 2.81% 2.48% 2.97% 2.81%(e)
============================================================ ========== ========== ======== ======== =======
Portfolio turnover rate 65% 43% 66% 72% 77%
============================================================ ========== ========== ======== ======== =======
</TABLE>
<TABLE>
<S> <C>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) Ratios are based on average net assets of $1,502,053,346.
(d) After fee waivers and/or expense reimbursements. The ratio
of expenses to average net assets prior to fee waivers
and/or expense reimbursements was 1.46% for 1995.
(e) After fee waivers and/or expense reimbursements. The ratio
of net investment income to average net assets prior to fee
waivers and/or expense reimbursements was 2.78% for 1995.
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------------------ ------------------------------
1999(a) 1998(a) 1997 1996 1995 1999(a) 1998(a) 1997
---------- -------- -------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 28.18 $ 25.75 $ 21.83 $ 19.22 $ 14.62 $ 28.21 $ 25.76 $ 25.55
---------------------------------------- ---------- -------- -------- -------- ------- -------- -------- -------
Income from investment operations:
Net investment income 0.58 0.42 0.38 0.48 0.31 0.58 0.42 0.16
---------------------------------------- ---------- -------- -------- -------- ------- -------- -------- -------
Net gains on securities (both realized
and unrealized) 4.45 2.51 4.68 2.99 4.61 4.46 2.53 1.01
---------------------------------------- ---------- -------- -------- -------- ------- -------- -------- -------
Total from investment operations 5.03 2.93 5.06 3.47 4.92 5.04 2.95 1.17
---------------------------------------- ---------- -------- -------- -------- ------- -------- -------- -------
Less distributions:
Dividends from net investment income (0.60) (0.44) (0.37) (0.38) (0.32) (0.60) (0.44) (0.19)
---------------------------------------- ---------- -------- -------- -------- ------- -------- -------- -------
Distributions from net realized gains -- (0.06) (0.77) (0.48) -- -- (0.06) (0.77)
---------------------------------------- ---------- -------- -------- -------- ------- -------- -------- -------
Total distributions (0.60) (0.50) (1.14) (0.86) (0.32) (0.60) (0.50) (0.96)
---------------------------------------- ---------- -------- -------- -------- ------- -------- -------- -------
Net asset value, end of period $ 32.61 $ 28.18 $ 25.75 $ 21.83 $ 19.22 $ 32.65 $ 28.21 $ 25.76
======================================== ========== ======== ======== ======== ======= ======== ======== =======
Total return(b) 18.08% 11.53% 23.42% 18.28% 33.93% 18.09% 11.60% 4.67%
======================================== ========== ======== ======== ======== ======= ======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,183,215 $894,165 $486,506 $237,082 $72,634 $200,585 $114,163 $ 9,394
======================================== ========== ======== ======== ======== ======= ======== ======== =======
Ratio of expenses to average net assets 1.75%(c) 1.76% 1.79% 1.97% 2.21%(d) 1.75%(c) 1.73% 1.78%(f)
======================================== ========== ======== ======== ======== ======= ======== ======== =======
Ratio of net investment income to
average net assets 2.00%(c) 2.00% 1.67% 2.15% 2.03%(e) 2.00%(c) 2.03% 1.68%(f)
======================================== ========== ======== ======== ======== ======= ======== ======== =======
Portfolio turnover rate 65% 43% 66% 72% 77% 65% 43% 66%
======================================== ========== ======== ======== ======== ======= ======== ======== =======
</TABLE>
<TABLE>
<S> <C>
(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 $1,001,369,340 and
$146,419,005 for Class B and Class C, respectively.
(d) After fee waivers and/or expense reimbursements. The ratio
of expenses to average net assets prior to fee waivers
and/or expense reimbursements was 2.23% for 1995.
(e) After fee waivers and/or expense reimbursements. The ratio
of net investment income to average net assets prior to fee
waivers and/or expense reimbursements was 2.01% for 1995.
(f) Annualized.
</TABLE>
FS-17
<PAGE> 89
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Global Utilities Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Global Utilities Fund (a portfolio of
AIM Funds Group), including the schedule of investments,
as of December 31, 1999, the related statement of
operations for the year then ended, the statement of
changes in net assets for each of the years in the
two-year period then ended and the financial highlights
for each of the years in the five-year period then ended.
These financial statements and financial highlights are
the responsibility of the Fund's management. Our
responsibility is to express an opinion on these
financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1999, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Global
Utilities Fund as of December 31, 1999, the results of
its operations for the year then ended, the changes in
its net assets for each of the years in the two-year
period then ended and the financial highlights for each
of the years in the five-year period then ended, in
conformity with generally accepted accounting principles.
KPMG LLP
February 4, 2000
Houston, Texas
FS-18
<PAGE> 90
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-53.50%
BROADCASTING (TELEVISION, RADIO & CABLE)-3.30%
UnitedGlobalCom Inc.-Class A(a) 90,000 $ 6,356,250
--------------------------------------------------------------
Univision Communications,
Inc.-Class A(a) 63,000 6,437,812
--------------------------------------------------------------
12,794,062
--------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-6.28%
Aether Systems, Inc.(a) 38,100 2,728,912
--------------------------------------------------------------
ANTEC Corp.(a) 45,000 1,642,500
--------------------------------------------------------------
Copper Mountain Networks, Inc.(a) 29,700 1,447,875
--------------------------------------------------------------
Covad Communications Group, Inc.(a) 14,100 788,719
--------------------------------------------------------------
JDS Uniphase Corp.(a) 7,000 1,129,187
--------------------------------------------------------------
Juniper Networks, Inc.(a) 8,100 2,754,000
--------------------------------------------------------------
Lucent Technologies Inc. 102,200 7,645,837
--------------------------------------------------------------
Sycamore Networks, Inc.(a) 5,400 1,663,200
--------------------------------------------------------------
Tellabs, Inc.(a) 45,000 2,888,437
--------------------------------------------------------------
Williams Communications Group,
Inc.(a) 57,800 1,672,587
--------------------------------------------------------------
24,361,254
--------------------------------------------------------------
COMPUTERS (NETWORKING)-5.11%
Cisco Systems, Inc.(a) 25,400 2,720,975
--------------------------------------------------------------
Foundry Networks, Inc.(a) 11,600 3,499,575
--------------------------------------------------------------
Redback Networks, Inc.(a) 72,800 12,922,000
--------------------------------------------------------------
Rhythms NetConnections, Inc.(a) 22,000 682,000
--------------------------------------------------------------
19,824,550
--------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-0.36%
GRIC Communications, Inc.(a) 54,900 1,393,087
--------------------------------------------------------------
ELECTRIC COMPANIES-7.20%
Allegheny Energy, Inc. 82,100 2,211,569
--------------------------------------------------------------
DQE, Inc. 76,500 2,648,813
--------------------------------------------------------------
Edison International 143,800 3,765,762
--------------------------------------------------------------
Energy East Corp. 112,000 2,331,000
--------------------------------------------------------------
FirstEnergy Corp. 50,000 1,134,375
--------------------------------------------------------------
FPL Group, Inc. 55,500 2,376,094
--------------------------------------------------------------
IPALCO Enterprises, Inc. 42,000 716,625
--------------------------------------------------------------
NiSource, Inc. 101,000 1,805,375
--------------------------------------------------------------
NSTAR 29,531 1,196,005
--------------------------------------------------------------
Pinnacle West Capital Corp. 85,500 2,613,094
--------------------------------------------------------------
Southern Co. (The) 114,400 2,688,400
--------------------------------------------------------------
Teco Energy, Inc. 115,000 2,134,688
--------------------------------------------------------------
Texas Utilities Co. 64,800 2,304,450
--------------------------------------------------------------
27,926,250
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRICAL EQUIPMENT-0.09%
Conexant Systems, Inc.(a) 5,400 $ 358,425
--------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-0.72%
SDL, Inc.(a) 12,900 2,812,200
--------------------------------------------------------------
ENTERTAINMENT-0.40%
Time Warner Inc. 21,200 1,535,675
--------------------------------------------------------------
NATURAL GAS-2.85%
Enron Corp. 75,000 3,328,125
--------------------------------------------------------------
Public Service Co. of North
Carolina, Inc. 40,000 1,292,500
--------------------------------------------------------------
Williams Companies, Inc. (The) 209,900 6,415,069
--------------------------------------------------------------
11,035,694
--------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-1.32%
AES Corp.(a) 40,000 2,990,000
--------------------------------------------------------------
MidAmerican Energy Holdings Co.(a) 63,200 2,129,050
--------------------------------------------------------------
5,119,050
--------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS-0.43%
Alexandria Real Estate Equities,
Inc. 52,500 1,670,156
--------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-1.81%
Convergys Corp.(a) 160,000 4,920,000
--------------------------------------------------------------
Quanta Services, Inc.(a) 74,000 2,090,500
--------------------------------------------------------------
7,010,500
--------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-0.74%
Clarent Corp.(a) 36,900 2,868,975
--------------------------------------------------------------
TELECOMMUNICATIONS-2.99%
Broadwing Inc.(a) 314,344 11,591,435
--------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-4.20%
Infonet Services Corp.-Class B(a) 65,200 1,711,500
--------------------------------------------------------------
Phone.com, Inc.(a) 51,400 5,959,188
--------------------------------------------------------------
TeleCorp PCS, Inc.(a) 56,300 2,139,400
--------------------------------------------------------------
Tritel, Inc.(a) 82,700 2,620,556
--------------------------------------------------------------
Triton PCS Holdings, Inc.-Class A(a) 40,800 1,856,400
--------------------------------------------------------------
Western Wireless Corp.-Class A(a) 30,200 2,015,850
--------------------------------------------------------------
16,302,894
--------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-3.59%
AT&T Corp. 58,350 2,961,263
--------------------------------------------------------------
Global TeleSystems Group, Inc.(a) 38,200 1,322,675
--------------------------------------------------------------
MCI WorldCom, Inc.(a) 181,389 9,624,954
--------------------------------------------------------------
13,908,892
--------------------------------------------------------------
</TABLE>
FS-19
<PAGE> 91
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELEPHONE-12.11%
Bell Atlantic Corp. 49,000 $ 3,016,563
--------------------------------------------------------------
BellSouth Corp. 41,800 1,956,763
--------------------------------------------------------------
CenturyTel, Inc. 118,800 5,628,150
--------------------------------------------------------------
GTE Corp. 31,600 2,229,775
--------------------------------------------------------------
McLeodUSA Inc.-Class A(a) 80,000 4,710,000
--------------------------------------------------------------
NEXTLINK Communications, Inc.-Class
A(a) 43,400 3,604,913
--------------------------------------------------------------
Qwest Communications International,
Inc.(a) 150,000 6,450,000
--------------------------------------------------------------
SBC Communications, Inc. 308,893 15,058,534
--------------------------------------------------------------
Time Warner Telecom, Inc.(a) 86,300 4,309,606
--------------------------------------------------------------
46,964,304
--------------------------------------------------------------
Total Domestic Common Stocks
(Cost $83,442,776) 207,477,403
--------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-28.16%
ARGENTINA-0.44%
El Sitio, Inc. (Computers-Software
& Services)(a) 46,000 1,690,500
--------------------------------------------------------------
AUSTRALIA-0.34%
Telstra Corp. Ltd. (Telephone) 195,000 1,060,792
--------------------------------------------------------------
Telstra Corp. Ltd.-Installment
Receipts (Telephone)(a) 72,000 254,023
--------------------------------------------------------------
1,314,815
--------------------------------------------------------------
AUSTRIA-0.45%
Oesterreichische
Elektrizitactswirtschafts A.G.-
Class A (Electric Companies) 12,500 1,754,997
--------------------------------------------------------------
BELGIUM-0.40%
Electrabel S.A. (Electric
Companies) 4,700 1,537,352
--------------------------------------------------------------
BERMUDA-0.91%
Global Crossing Ltd.
(Telecommunications-Long
Distance)(a) 70,523 3,526,150
--------------------------------------------------------------
CANADA-1.47%
AT&T Canada, Inc. (Telephone)(a) 74,600 3,002,650
--------------------------------------------------------------
BCT.Telus Communications, Inc.
(Telephone) 55,382 1,348,768
--------------------------------------------------------------
BCT.Telus Communications,
Inc.-Class A (Telephone) 18,460 445,736
--------------------------------------------------------------
Westcoast Energy, Inc. (Natural
Gas) 57,400 921,988
--------------------------------------------------------------
5,719,142
--------------------------------------------------------------
DENMARK-0.63%
Tele Danmark A.S.-ADR (Telephone) 65,000 2,453,750
--------------------------------------------------------------
FINLAND-3.24%
Nokia Oyj-ADR (Communications
Equipment) 46,400 8,816,000
--------------------------------------------------------------
Sonera Group Oyj
(Telecommunications-
Cellular/Wireless) 54,900 3,760,042
--------------------------------------------------------------
12,576,042
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FRANCE-2.20%
France Telecom S.A.-ADR
(Telecommunications) 39,000 $ 5,206,500
--------------------------------------------------------------
Suez Lyonnaise des Eaux S.A.
(Manufacturing- Diversified) 10,900 1,745,376
--------------------------------------------------------------
Vivendi (Manufacturing-Diversified) 17,600 1,588,017
--------------------------------------------------------------
8,539,893
--------------------------------------------------------------
GERMANY-1.35%
Mannesmann A.G.
(Machinery-Diversified) 11,391 2,745,766
--------------------------------------------------------------
RWE A.G. (Electric Companies) 28,100 1,100,140
--------------------------------------------------------------
Viag A.G.
(Manufacturing-Diversified) 75,400 1,381,131
--------------------------------------------------------------
5,227,037
--------------------------------------------------------------
GREECE-0.09%
Panafon Hellenic Telecom S.A.-GDR
(Telecommunications-Cellular/Wireless)
(Acquired 11/20/98; Cost
$244,080)(b) 27,000 348,300
--------------------------------------------------------------
HUNGARY-0.40%
Magyar Tavkozlesi Rt-ADR
(Telecommunications-Long
Distance) 42,700 1,537,200
--------------------------------------------------------------
IRELAND-1.68%
eircom PLC (Telecommunications-Long
Distance) 1,499,100 6,532,971
--------------------------------------------------------------
ISRAEL-0.63%
Partner Communications Co. Ltd.-ADR
(Telecommunications-Cellular/
Wireless)(a) 94,000 2,432,250
--------------------------------------------------------------
ITALY-2.83%
ACEA S.p.A. (Water Utilities)(a) 388,800 5,400,047
--------------------------------------------------------------
AEM S.p.A. (Electric Companies) 645,000 2,583,658
--------------------------------------------------------------
Enel S.p.A. (Electric Companies)(a) 293,100 1,227,161
--------------------------------------------------------------
Societa Nordelettrica S.p.A.
(Electric Companies) 570,000 1,749,713
--------------------------------------------------------------
10,960,579
--------------------------------------------------------------
JAPAN-1.00%
Nippon Telegraph & Telephone Corp.
(Telephone) 125 2,141,983
--------------------------------------------------------------
Nippon Telegraph & Telephone
Corp.-ADR (Telephone) 20,000 1,722,500
--------------------------------------------------------------
3,864,483
--------------------------------------------------------------
MEXICO-0.20%
Nuevo Grupo Iusacell A.A. de
C.V.-ADR
(Telecommunications-Cellular/
Wireless)(a) 51,600 770,775
--------------------------------------------------------------
NETHERLANDS-3.09%
KPNQWest N.V.
(Telecommunications-Long
Distance)(a) 65,700 4,370,781
--------------------------------------------------------------
Libertel N.V.
(Telecommunications-Cellular/
Wireless)(a) 79,000 2,067,248
--------------------------------------------------------------
</TABLE>
FS-20
<PAGE> 92
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NETHERLANDS-(CONTINUED)
Versatel Telecom International N.V.
(Telecommunications-Long
Distance)(a) 158,000 $ 5,565,669
--------------------------------------------------------------
12,003,698
--------------------------------------------------------------
SOUTH KOREA-0.86%
Korea Telecom Corp.-ADR (Telephone) 44,800 3,348,800
--------------------------------------------------------------
SPAIN-3.20%
Autopistas Concesionaria Espanola
S.A. (Services-Commercial &
Consumer) 80,850 785,235
--------------------------------------------------------------
Endesa S.A. (Electric Companies) 75,000 1,487,785
--------------------------------------------------------------
Telefonica S.A. (Telephone)(a) 255,738 6,383,210
--------------------------------------------------------------
Terra Networks, S.A.
(Computers-Software &
Services)(a) 68,500 3,740,094
--------------------------------------------------------------
12,396,324
--------------------------------------------------------------
UNITED KINGDOM-2.75%
COLT Telecom Group PLC
(Communications Equipment)(a) 19,000 972,227
--------------------------------------------------------------
Kelda Group PLC (Water Utilities) 270,407 1,528,192
--------------------------------------------------------------
National Grid Group PLC (Electric
Companies) 131,526 1,000,286
--------------------------------------------------------------
PowerGen PLC (Electric Companies) 136,949 984,035
--------------------------------------------------------------
PowerGen PLC-ADR (Electric
Companies) 47,800 1,511,675
--------------------------------------------------------------
Scottish Power PLC (Electric
Companies) 223,850 1,695,203
--------------------------------------------------------------
Thus PLC (Telecommunications-Long
Distance)(a) 218,500 1,379,495
--------------------------------------------------------------
United Utilities PLC (Water
Utilities) 151,936 1,578,705
--------------------------------------------------------------
10,649,818
--------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$58,428,005) 109,184,876
--------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED
STOCKS-4.34%
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.36%
MediaOne Group, Inc., $3.04 Conv.
Pfd. 29,200 1,401,600
--------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-0.90%
PSINet, Inc.-Series C, $3.375 Conv.
Pfd. 60,000 3,502,500
--------------------------------------------------------------
ELECTRIC COMPANIES-0.77%
Calpine Capital Trust, $2.875 Conv.
Pfd. 46,100 2,979,212
--------------------------------------------------------------
NATURAL GAS-0.97%
El Paso Energy Cap Trust, Inc.,
$2.375 Conv. Pfd. 74,500 3,752,938
--------------------------------------------------------------
TELECOMMUNICATIONS-0.12%
Broadwing Inc.-Series B, $3.375
Conv. Pfd. 8,000 474,000
--------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.89%
WinStar Communications, Inc.-Series
F, $72.50 Conv. Pfd. 2,600 3,464,500
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELEPHONE-0.33%
NEXTLINK Communications, Inc.
$3.25 Conv. Pfd. 3,000 $ 575,625
--------------------------------------------------------------
$3.25 Conv. Pfd. (Acquired
03/26/98; Cost $180,000)(b) 3,600 690,750
--------------------------------------------------------------
1,266,375
--------------------------------------------------------------
Total Domestic Convertible
Preferred Stocks (Cost
$14,819,973) 16,841,125
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. DOLLAR DENOMINATED BONDS &
NOTES-5.98%
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.24%
Comcast Corp., Sr. Sub. Deb.,
9.50%, 01/15/08 $ 900,000 925,875
--------------------------------------------------------------
COMPUTERS (HARDWARE)-0.93%
Candescent Technology Corp., Sr.
Conv. Sub. Deb., 7.00%, 05/01/03
(Acquired 04/17/98-11/30/98; Cost
$4,509,350)(b) 4,605,000 3,591,900
--------------------------------------------------------------
ELECTRIC COMPANIES-1.96%
El Paso Electric Co.-Series E, Sec.
First Mortgage Bonds, 9.40%,
05/01/11 1,900,000 2,012,917
--------------------------------------------------------------
Indiana Michigan Power Co.-Series
F, Sec. Lease Obligation Bonds,
9.82%, 12/07/22 3,020,696 3,342,340
--------------------------------------------------------------
Western Resources, Inc., Sr. Unsec.
Notes,
6.25%, 08/15/03 1,500,000 1,418,250
--------------------------------------------------------------
7.13%, 08/01/09 900,000 814,338
--------------------------------------------------------------
7,587,845
--------------------------------------------------------------
NATURAL GAS-0.32%
Dynegy Inc., Sr. Unsec. Deb.,
7.13%, 05/15/18 1,400,000 1,247,288
--------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-0.62%
AES Corp.,
Sr. Notes, 8.00%, 12/31/08 1,500,000 1,376,250
--------------------------------------------------------------
Sr. Unsec. Sub. Notes, 10.25%,
07/15/06 1,000,000 1,020,000
--------------------------------------------------------------
2,396,250
--------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-1.04%
AT&T Corp., Sr. Notes, 7.75%,
03/01/07 1,850,000 1,889,109
--------------------------------------------------------------
Global TeleSystems Group, Inc.,
Conv. Notes, 8.75%, 06/30/00 620,000 2,152,175
--------------------------------------------------------------
4,041,284
--------------------------------------------------------------
TELEPHONE-0.87%
NTL Inc., Conv. Sub. Notes, 5.75%,
12/15/09 (Acquired 12/17/99; Cost
$1,800,000)(b) 1,800,000 1,944,000
--------------------------------------------------------------
SBC Communications, Inc., Deb.,
7.38%, 07/15/43 1,600,000 1,439,264
--------------------------------------------------------------
3,383,264
--------------------------------------------------------------
Total U.S. Dollar Denominated
Bonds & Notes (Cost
$24,349,922) 23,173,706
--------------------------------------------------------------
</TABLE>
FS-21
<PAGE> 93
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED BONDS &
NOTES-3.36%
CANADA-1.14%
Clearnet Communications Inc.
(Telecommunications-Cellular/Wireless),
Sr. Unsec. Disc. Notes, 10.75%,
02/15/09(d) CAD 3,000,000 $ 1,215,963
--------------------------------------------------------------
Teleglobe Canada Inc. (Telephone),
Unsec. Deb., 8.35%, 06/20/03 CAD 2,400,000 1,702,615
--------------------------------------------------------------
TransCanada Pipelines-Series Q
(Natural Gas), Deb., 10.63%,
10/20/09 CAD 1,750,000 1,496,224
--------------------------------------------------------------
4,414,802
--------------------------------------------------------------
FRANCE-0.42%
France Telecom (Telephone), Conv.
Bonds, 2.00%, 01/01/04 FRF 6,455,040 1,641,494
--------------------------------------------------------------
UNITED KINGDOM-1.80%
COLT Telecom Group PLC
(Communications Equipment), Conv.
Bonds, 2.00%,
12/16/06 (Acquired 12/09/99;
Cost $1,513,645)(b) EUR 1,475,000 1,597,708
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
National Grid Co. PLC (Electric
Companies), Conv. Bonds, 4.25%,
02/17/08 (Acquired 02/05/98; Cost
$4,574,700)(b) GBP 2,760,000 $ 5,375,740
--------------------------------------------------------------
6,973,448
--------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Bonds & Notes
(Cost $11,848,786) 13,029,744
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS-4.66%
STIC Liquid Assets Portfolio(e) 9,033,715 9,033,715
--------------------------------------------------------------
STIC Prime Portfolio(e) 9,033,715 9,033,715
--------------------------------------------------------------
Total Money Market Funds (Cost
$18,067,430) 18,067,430
--------------------------------------------------------------
TOTAL INVESTMENTS-100.00%
(Cost $210,956,892) 387,774,284
--------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(0.00%) (8,910)
--------------------------------------------------------------
NET ASSETS-100.00% $387,765,374
==============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
CAD - Canadian Dollars
Conv. - Convertible
Deb. - Debentures
Disc. - Discounted
EUR - Euro
FRF - French Franc
GBP - British Pound Sterling
GDR - Global Depositary Receipt
Pfd. - Preferred
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
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 12/31/99 was $13,548,398 which
represented 3.49% of the Fund's net assets.
(c) Foreign denominated security. Par value and coupon are denominated in
currency indicated.
(d) Step bond issued at discount. The interest rate represents the coupon rate
at which the bond will accrue at a specified future date.
(e) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-22
<PAGE> 94
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$210,956,892) $387,774,284
---------------------------------------------------------
Foreign currencies, at value (cost $5,703) 5,723
---------------------------------------------------------
Receivables for:
Fund shares sold 634,820
---------------------------------------------------------
Dividends and interest 950,990
---------------------------------------------------------
Investment for deferred compensation plan 33,815
---------------------------------------------------------
Other assets 15,540
---------------------------------------------------------
Total assets 389,415,172
---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 472,480
---------------------------------------------------------
Fund shares reacquired 536,539
---------------------------------------------------------
Deferred compensation 33,815
---------------------------------------------------------
Accrued advisory fees 175,431
---------------------------------------------------------
Accrued administrative services fees 7,144
---------------------------------------------------------
Accrued distribution fees 307,833
---------------------------------------------------------
Accrued transfer agent fees 40,453
---------------------------------------------------------
Accrued operating expenses 76,103
---------------------------------------------------------
Total liabilities 1,649,798
---------------------------------------------------------
Net assets applicable to shares outstanding $387,765,374
=========================================================
NET ASSETS:
Class A $238,431,599
=========================================================
Class B $142,632,134
=========================================================
Class C $ 6,701,641
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 9,141,304
=========================================================
Class B 5,478,806
=========================================================
Class C 257,525
=========================================================
Class A:
Net asset value and redemption price per
share $ 26.08
---------------------------------------------------------
Offering price per share:
(Net asset value of $26.08 / 94.50%) $ 27.60
=========================================================
Class B:
Net asset value and offering price per
share $ 26.03
=========================================================
Class C:
Net asset value and offering price per
share $ 26.02
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $161,589 foreign
withholding tax) $ 4,612,201
---------------------------------------------------------
Interest 4,338,134
---------------------------------------------------------
Total investment income 8,950,335
---------------------------------------------------------
EXPENSES:
Advisory fees 1,802,726
---------------------------------------------------------
Administrative services fees 88,999
---------------------------------------------------------
Custodian fees 112,375
---------------------------------------------------------
Trustees' fees 7,164
---------------------------------------------------------
Distribution fees -- Class A 500,106
---------------------------------------------------------
Distribution fees -- Class B 1,165,993
---------------------------------------------------------
Distribution fees -- Class C 39,036
---------------------------------------------------------
Transfer agent fees -- Class A 308,147
---------------------------------------------------------
Transfer agent fees -- Class B 179,611
---------------------------------------------------------
Transfer agent fees -- Class C 6,013
---------------------------------------------------------
Other 207,892
---------------------------------------------------------
Total expenses 4,418,062
---------------------------------------------------------
Less: Expenses paid indirectly (4,581)
---------------------------------------------------------
Net expenses 4,413,481
---------------------------------------------------------
Net investment income 4,536,854
---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain (loss) from:
Investment securities 30,857,872
---------------------------------------------------------
Foreign currencies (285,335)
---------------------------------------------------------
30,572,537
---------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 64,067,017
---------------------------------------------------------
Foreign currencies (3,469)
---------------------------------------------------------
64,063,548
---------------------------------------------------------
Net gain from investment securities and
foreign currencies 94,636,085
---------------------------------------------------------
Net increase in net assets resulting from
operations $99,172,939
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-23
<PAGE> 95
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 4,536,854 $ 6,163,727
--------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies and option contracts 30,572,537 11,466,949
--------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies and option contracts 64,063,548 25,167,621
--------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 99,172,939 42,798,297
--------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A (3,130,474) (4,323,452)
--------------------------------------------------------------------------------------------
Class B (980,604) (1,627,090)
--------------------------------------------------------------------------------------------
Class C (28,383) (23,697)
--------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (13,462,484) (7,225,608)
--------------------------------------------------------------------------------------------
Class B (8,054,908) (4,089,137)
--------------------------------------------------------------------------------------------
Class C (355,717) (109,604)
--------------------------------------------------------------------------------------------
Share transactions-net:
Class A (3,558,143) 865,940
--------------------------------------------------------------------------------------------
Class B 3,957,825 8,749,835
--------------------------------------------------------------------------------------------
Class C 2,679,799 1,643,746
--------------------------------------------------------------------------------------------
Net increase in net assets 76,239,850 36,659,230
--------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 311,525,524 274,866,294
--------------------------------------------------------------------------------------------
End of period $387,765,374 $311,525,524
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $203,276,266 $198,796,429
--------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (41,312) (68,800)
--------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies and option contracts 7,715,300 46,323
--------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and option contracts 176,815,120 112,751,572
--------------------------------------------------------------------------------------------
$387,765,374 $311,525,524
============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-24
<PAGE> 96
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Utilities Fund (the "Fund") is a series portfolio of AIM Funds Group
(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 nine separate portfolios,
each having an unlimited number of shares of beneficial interest. The Fund
currently offers three different classes of shares: Class A shares, Class B
shares and Class C shares. Class A shares are sold with a front-end sales
charge. Class B shares and Class C shares are sold with a contingent deferred
sales charge. Matters affecting each portfolio or class will be voted on
exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objectives are to achieve a high level of current income
and secondarily, growth of capital, by investing primarily in the common and
preferred stocks of public utility companies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) are valued on the basis
of prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as yield, type of issue,
coupon rate and maturity date. Securities for which market prices are not
provided by any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. Securities for which market quotations are not
readily available or are questionable are valued at fair value as determined
in good faith by or under the supervision of the 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 trading of the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
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 is recorded as earned from settlement date and is recorded
on the accrual basis. Dividend income is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was decreased by
$369,905, undistributed net realized gains decreased by $1,030,451 and
paid-in capital increased by $1,400,356 as a result of differing book/tax
treatment of foreign currency transactions, equalization credits and other
reclassifications. Net assets of the Fund were unaffected by the
reclassifications.
C. Distributions -- Distributions from income are recorded on ex-dividend date,
and are declared and paid quarterly. Distributions from 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 of
fund share 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. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions. The Fund does
not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from
FS-25
<PAGE> 97
changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from investments.
F. Foreign Currency Contracts -- A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
G. Bond Premiums -- It is the policy of the Fund not to amortize market premiums
on bonds for financial reporting purposes.
H. Expenses -- Distribution expenses and transfer agency expenses directly
attributable to a class of shares are charged to that class' operations. All
other expenses which are attributable to more than one class are allocated
among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.60% on
the first $200 million of the Fund's average daily net assets, plus 0.50% on the
next $300 million of the Fund's average daily net assets, plus 0.40% on the next
$500 million of the Fund's average daily net assets, plus 0.30% on the Fund's
average daily net assets in excess of $1 billion.
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 December 31, 1999, AIM was
paid $88,999 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 December 31, 1999, AFS was
paid $339,533 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 0.25% of the Fund's average daily net assets of Class A shares and 1.00% of
the average daily net assets of Class B and C shares. Of these amounts, the Fund
may pay a service fee of 0.25% of the average daily net assets of the Class A,
Class B or Class C shares to selected dealers and financial institutions who
furnish continuing personal shareholder services to their customers who purchase
and own the appropriate class of shares of the Fund. Any amounts not paid as a
service fee under the Plans would constitute an asset-based sales charge. The
Plans also impose a cap on the total sales charges, including asset-based sales
charges that may be paid by the respective classes. For the year ended December
31, 1999, the Class A, Class B and Class C shares paid AIM Distributors
$500,106, $1,165,993 and $39,036, respectively, as compensation under the Plans.
AIM Distributors received commissions of $56,996 from sales of the Class A
shares of the Fund during the year ended December 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1999,
AIM Distributors received $67,367 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 December 31, 1999, the Fund paid legal fees of $4,002
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $3,537 and $1,044, respectively, under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $4,581 during the year ended December 31, 1999.
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) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
FS-26
<PAGE> 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 December 31, 1999 was
$111,927,760 and $138,238,897, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of December 31, 1999 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $182,332,667
--------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (5,515,275)
--------------------------------------------------------------------------
Net unrealized appreciation of investment securities $176,817,392
==========================================================================
Investments have the same cost for tax and financial
statement purposes.
</TABLE>
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 1,548,711 $ 34,438,387 2,025,020 $ 40,729,263
-------------------------------------------------------------------------------------------------------------------
Class B 884,404 19,574,340 1,124,804 22,635,167
-------------------------------------------------------------------------------------------------------------------
Class C 183,463 4,121,099 196,103 3,960,554
-------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 636,523 15,200,629 520,447 10,555,882
-------------------------------------------------------------------------------------------------------------------
Class B 332,374 7,978,341 246,404 4,994,635
-------------------------------------------------------------------------------------------------------------------
Class C 14,370 346,523 5,787 117,358
-------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (2,406,262) (53,197,159) (2,500,981) (50,419,205)
-------------------------------------------------------------------------------------------------------------------
Class B (1,070,971) (23,594,856) (935,494) (18,879,967)
-------------------------------------------------------------------------------------------------------------------
Class C (83,100) (1,787,823) (120,588) (2,434,166)
-------------------------------------------------------------------------------------------------------------------
39,512 $ 3,079,481 561,502 $ 11,259,521
===================================================================================================================
</TABLE>
FS-27
<PAGE> 99
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and a share of
Class B outstanding during each of the years in the five-year period ended
December 31, 1999, and for a share of Class C outstanding during each of the
years in the two-year period ended December 31, 1999 and the period August 4,
1997 (date sales commenced) through December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.01 $ 19.26 $ 16.01 $ 14.59 $ 11.85
--------------------------------------------------------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.38 0.48 0.47 0.55 0.55
--------------------------------------------------------- -------- -------- -------- -------- --------
Net gains on securities (both realized and unrealized) 6.60 2.53 3.26 1.43 2.71
--------------------------------------------------------- -------- -------- -------- -------- --------
Total from investment operations 6.98 3.01 3.73 1.98 3.26
--------------------------------------------------------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.35) (0.46) (0.47) (0.56) (0.52)
--------------------------------------------------------- -------- -------- -------- -------- --------
Distributions from net realized gains (1.56) (0.80) (0.01) -- --
--------------------------------------------------------- -------- -------- -------- -------- --------
Total distributions (1.91) (1.26) (0.48) (0.56) (0.52)
--------------------------------------------------------- -------- -------- -------- -------- --------
Net asset value, end of period $ 26.08 $ 21.01 $ 19.26 $ 16.01 $ 14.59
========================================================= ======== ======== ======== ======== ========
Total return(a) 34.15% 16.01% 23.70% 13.88% 28.07%
========================================================= ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $238,432 $196,665 $179,456 $164,001 $170,624
========================================================= ======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.10%(b) 1.06% 1.13% 1.17% 1.21%
========================================================= ======== ======== ======== ======== ========
Ratio of net investment income to average net assets 1.69%(b) 2.39% 2.79% 3.62% 4.20%
========================================================= ======== ======== ======== ======== ========
Portfolio turnover rate 37% 38% 26% 48% 88%
========================================================= ======== ======== ======== ======== ========
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $200,042,322.
<TABLE>
<CAPTION>
Class B Class C
------------------------------------------------- -------------------------
1999 1998 1997 1996 1995 1999(A) 1998 1997
-------- -------- ------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.98 $ 19.24 $ 16.01 $ 14.60 $ 11.84 $20.97 $19.24 $17.67
---------------------------------------------- -------- -------- ------- ------- ------- ------ ------ ------
Income from investment operations:
Net investment income 0.21 0.33 0.34 0.42 0.44 0.21 0.33 0.13
---------------------------------------------- -------- -------- ------- ------- ------- ------ ------ ------
Net gains on securities (both realized and
unrealized) 6.59 2.53 3.25 1.44 2.73 6.59 2.52 1.58
---------------------------------------------- -------- -------- ------- ------- ------- ------ ------ ------
Total from investment operations 6.80 2.86 3.59 1.86 3.17 6.80 2.85 1.71
---------------------------------------------- -------- -------- ------- ------- ------- ------ ------ ------
Less distributions:
Dividends from net investment income (0.19) (0.32) (0.35) (0.45) (0.41) (0.19) (0.32) (0.13)
---------------------------------------------- -------- -------- ------- ------- ------- ------ ------ ------
Distributions from net realized gains (1.56) (0.80) (0.01) -- -- (1.56) (0.80) (0.01)
---------------------------------------------- -------- -------- ------- ------- ------- ------ ------ ------
Total distributions (1.75) (1.12) (0.36) (0.45) (0.41) (1.75) (1.12) (0.14)
---------------------------------------------- -------- -------- ------- ------- ------- ------ ------ ------
Net asset value, end of period $ 26.03 $ 20.98 $ 19.24 $ 16.01 $ 14.60 $26.02 $20.97 $19.24
============================================== ======== ======== ======= ======= ======= ====== ====== ======
Total return(b) 33.16% 15.14% 22.74% 12.98% 27.16% 33.18% 15.09% 9.74%
============================================== ======== ======== ======= ======= ======= ====== ====== ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $142,632 $111,866 $94,227 $79,530 $70,693 $6,702 $2,994 $1,183
============================================== ======== ======== ======= ======= ======= ====== ====== ======
Ratio of expenses to average net assets 1.84%(c) 1.81% 1.91% 1.96% 1.97% 1.84%(c) 1.81% 1.90%(d)
============================================== ======== ======== ======= ======= ======= ====== ====== ======
Ratio of net investment income to average net
assets 0.95%(c) 1.64% 2.01% 2.83% 3.44% 0.95%(c) 1.64% 2.02%(d)
============================================== ======== ======== ======= ======= ======= ====== ====== ======
Portfolio turnover rate 37% 38% 26% 48% 88% 37% 38% 26%
============================================== ======== ======== ======= ======= ======= ====== ====== ======
</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 $116,599,341 and $3,903,633 for
Class B and Class C, respectively.
(d) Annualized.
FS-28
<PAGE> 100
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Select Growth Fund:
We have audited the accompanying statement of assets and
liabilities of the AIM Select Growth Fund (a portfolio of
AIM Funds Group), including the schedule of investments,
as of December 31, 1999, and the related statement of
operations for the year then ended, the statement of
changes in net assets for each of the years in the
two-year period then ended and the financial highlights
for each of the years in the five-year period then ended.
These financial statements and financial highlights are
the responsibility of the Fund's management. Our
responsibility is to express an opinion on these
financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatements.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statement. Our procedures included confirmation of
securities owned as of December 31, 1999, by
correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion
In our opinion, the financial statements and financial
highlights referred to above presently fairly, in all
material respects, the financial position of AIM Select
Growth Fund as of December 31, 1999, the results of its
operations for the year then ended, the changes in its
net assets for each of the years in the two-year period
then ended and the financial highlights for each of the
years in the five-year period then ended, in conformity
with generally accepted accounting principles.
KPMG LLP
February 4, 2000
Houston, Texas
FS-29
<PAGE> 101
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-93.93%
BROADCASTING (TELEVISION, RADIO &
CABLE)-2.91%
AMFM Inc.(a) 76,000 $ 5,947,000
---------------------------------------------------------------
CBS Corp.(a) 122,400 7,825,950
---------------------------------------------------------------
Clear Channel Communications, Inc.(a) 197,956 17,667,573
---------------------------------------------------------------
31,440,523
---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-7.19%
Comverse Technology, Inc.(a) 214,950 31,114,012
---------------------------------------------------------------
Finisar Corp.(a) 16,400 1,473,950
---------------------------------------------------------------
Juniper Networks, Inc.(a) 21,600 7,344,000
---------------------------------------------------------------
Lucent Technologies Inc. 160,800 12,029,850
---------------------------------------------------------------
Nokia Oyj A.B.-ADR (Finland) 123,600 23,484,000
---------------------------------------------------------------
Sycamore Networks, Inc.(a) 7,000 2,156,000
---------------------------------------------------------------
77,601,812
---------------------------------------------------------------
COMPUTERS (HARDWARE)-3.67%
Dell Computer Corp.(a) 179,000 9,129,000
---------------------------------------------------------------
National Instruments Corp.(a) 165,000 6,311,250
---------------------------------------------------------------
Sun Microsystems, Inc.(a) 312,000 24,160,500
---------------------------------------------------------------
39,600,750
---------------------------------------------------------------
COMPUTERS (NETWORKING)-1.43%
Cisco Systems, Inc.(a) 144,000 15,426,000
---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-3.54%
EMC Corp.(a) 274,000 29,934,500
---------------------------------------------------------------
QLogic Corp.(a) 51,500 8,233,562
---------------------------------------------------------------
38,168,062
---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-16.10%
America Online, Inc.(a) 92,000 6,940,250
---------------------------------------------------------------
AppNet, Inc.(a) 190,700 8,343,125
---------------------------------------------------------------
Citrix Systems, Inc.(a) 123,300 15,165,900
---------------------------------------------------------------
Electronic Arts Inc.(a) 96,700 8,122,800
---------------------------------------------------------------
InfoSpace.com, Inc.(a) 165,000 35,310,000
---------------------------------------------------------------
ISS Group, Inc.(a) 16,400 1,166,450
---------------------------------------------------------------
Lycos, Inc.(a) 90,000 7,160,625
---------------------------------------------------------------
Marimba, Inc.(a) 17,000 783,062
---------------------------------------------------------------
Microsoft Corp.(a) 279,600 32,643,300
---------------------------------------------------------------
Oracle Corp.(a) 216,000 24,205,500
---------------------------------------------------------------
Siebel Systems, Inc.(a) 74,000 6,216,000
---------------------------------------------------------------
USWeb Corp.(a) 261,000 11,598,187
---------------------------------------------------------------
VERITAS Software Corp.(a) 112,500 16,101,562
---------------------------------------------------------------
173,756,761
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
CONSUMER FINANCE-1.16% SHARES VALUE
<S> <C> <C>
Capital One Financial Corp. 93,000 $ 4,481,437
---------------------------------------------------------------
Providian Financial Corp. 88,050 8,018,053
---------------------------------------------------------------
12,499,490
---------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-0.54%
McKesson HBOC, Inc. 260,000 5,866,250
---------------------------------------------------------------
ELECTRIC COMPANIES-1.05%
Niagara Mohawk Holdings Inc.(a) 214,300 2,986,806
---------------------------------------------------------------
Northeast Utilities 218,600 4,494,963
---------------------------------------------------------------
Texas Utilities Co. 107,000 3,805,187
---------------------------------------------------------------
11,286,956
---------------------------------------------------------------
ELECTRICAL EQUIPMENT-4.57%
American Power Conversion Corp.(a) 318,000 8,387,250
---------------------------------------------------------------
DII Group, Inc.(a) 111,000 7,877,531
---------------------------------------------------------------
Koninklijke (Royal) Phillips
Electronics N.V.-ADR
(Netherlands) 111,136 15,003,360
---------------------------------------------------------------
Sanmina Corp.(a) 87,200 8,709,100
---------------------------------------------------------------
Solectron Corp.(a) 98,000 9,322,250
---------------------------------------------------------------
49,299,491
---------------------------------------------------------------
ELECTRONICS
(INSTRUMENTATION)-1.32%
Tektronix, Inc. 256,000 9,952,000
---------------------------------------------------------------
Waters Corp.(a) 82,000 4,346,000
---------------------------------------------------------------
14,298,000
---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-7.50%
Altera Corp.(a) 280,800 13,917,150
---------------------------------------------------------------
Celestica Inc. (Canada)(a) 190,000 10,545,000
---------------------------------------------------------------
Linear Technology Corp. 88,800 6,354,750
---------------------------------------------------------------
Maxim Integrated Products, Inc.(a) 140,000 6,606,250
---------------------------------------------------------------
PMC-Sierra, Inc.(a) 271,600 43,540,875
---------------------------------------------------------------
80,964,025
---------------------------------------------------------------
ENTERTAINMENT-0.83%
SFX Entertainment, Inc.-Class A(a) 246,300 8,912,981
---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-1.34%
Teradyne, Inc.(a) 220,000 14,520,000
---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-4.29%
American Express Co. 40,100 6,666,625
---------------------------------------------------------------
Citigroup Inc. 255,375 14,189,273
---------------------------------------------------------------
Fannie Mae 81,500 5,088,656
---------------------------------------------------------------
Freddie Mac 241,020 11,343,004
---------------------------------------------------------------
MGIC Investment Corp. 149,300 8,985,994
---------------------------------------------------------------
46,273,552
---------------------------------------------------------------
</TABLE>
FS-30
<PAGE> 102
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOODS-0.35%
Keebler Foods Co.(a) 135,000 $ 3,796,875
---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-1.37%
Warner-Lambert Co. 180,000 14,748,750
---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-1.06%
Forest Laboratories, Inc.(a) 105,200 6,463,225
---------------------------------------------------------------
Medicis Pharmaceutical
Corp.-Class A(a) 117,000 4,979,813
---------------------------------------------------------------
11,443,038
---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-0.72%
Pfizer Inc. 241,200 7,823,925
---------------------------------------------------------------
HEALTH CARE (HOSPITAL
MANAGEMENT)-0.63%
Health Management Associates,
Inc.- Class A(a) 510,000 6,821,250
---------------------------------------------------------------
HEALTH CARE (LONG TERM CARE)-0.40%
Manor Care, Inc.(a) 270,700 4,331,200
---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.99%
Express Scripts, Inc.-Class A(a) 34,600 2,214,400
---------------------------------------------------------------
United Healthcare Corp. 159,100 8,452,188
---------------------------------------------------------------
10,666,588
---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.86%
Beckman Coulter, Inc. 68,500 3,484,938
---------------------------------------------------------------
Biomet, Inc. 120,600 4,824,000
---------------------------------------------------------------
Guidant Corp.(a) 173,100 8,135,700
---------------------------------------------------------------
Sybron International Corp.(a) 149,000 3,678,438
---------------------------------------------------------------
20,123,076
---------------------------------------------------------------
HEALTH CARE (SPECIALIZED
SERVICES)-0.20%
Capital Senior Living Corp.(a) 425,000 2,151,563
---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.43%
UnumProvident Corp. 145,000 4,649,063
---------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-0.73%
Radian Group Inc. 57,000 2,721,750
---------------------------------------------------------------
XL Capital Ltd.-Class A 100,000 5,187,500
---------------------------------------------------------------
7,909,250
---------------------------------------------------------------
INVESTMENT MANAGEMENT-2.08%
Affiliated Managers Group, Inc.(a) 54,300 2,195,756
---------------------------------------------------------------
Knight/Trimark Group, Inc.-Class A(a) 440,000 20,240,000
---------------------------------------------------------------
22,435,756
---------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.47%
Mattel, Inc. 383,800 5,037,375
---------------------------------------------------------------
LODGING-HOTELS-0.41%
Carnival Corp. 91,700 $ 4,384,406
---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-1.34%
Tyco International Ltd. 372,640 14,486,380
---------------------------------------------------------------
NATURAL GAS-0.46%
Enron Corp. 112,000 4,970,000
---------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-2.05%
Cooper Cameron Corp.(a) 120,000 5,872,500
---------------------------------------------------------------
Diamond Offshore Drilling, Inc. 125,000 3,820,313
---------------------------------------------------------------
ENSCO International Inc. 344,600 7,882,725
---------------------------------------------------------------
Schlumberger Ltd. 73,400 4,128,750
---------------------------------------------------------------
Transocean Sedco Forex Inc. 14,240 479,697
---------------------------------------------------------------
22,183,985
---------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-0.42%
Atlantic Richfield Co. 52,900 4,575,850
---------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.51%
International Paper Co. 96,700 5,457,506
---------------------------------------------------------------
RAILROADS-0.71%
Kansas City Southern Industries, Inc. 103,000 7,686,375
---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-1.20%
Home Depot, Inc. (The) 106,800 7,322,475
---------------------------------------------------------------
Lowe's Cos., Inc. 93,600 5,592,600
---------------------------------------------------------------
12,915,075
---------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-1.11%
CDW Computer Centers, Inc.(a) 152,100 11,958,863
---------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.41%
Saks Inc.(a) 284,500 4,427,531
---------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.38%
Dollar Tree Stores, Inc.(a) 84,025 4,069,961
---------------------------------------------------------------
RETAIL (FOOD CHAINS)-1.40%
Albertson's, Inc. 172,000 5,547,000
---------------------------------------------------------------
Kroger Co. (The)(a) 229,800 4,337,475
---------------------------------------------------------------
Safeway Inc.(a) 146,000 5,192,125
---------------------------------------------------------------
15,076,600
---------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-1.80%
Costco Wholesale Corp.(a) 76,000 6,935,000
---------------------------------------------------------------
Dayton Hudson Corp. 170,000 12,484,375
---------------------------------------------------------------
19,419,375
---------------------------------------------------------------
RETAIL (SPECIALTY)-0.29%
Linens 'n Things, Inc.(a) 105,000 3,110,625
---------------------------------------------------------------
</TABLE>
FS-31
<PAGE> 103
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY-APPAREL)-2.08%
Men's Wearhouse, Inc. (The)(a) 596,000 $ 17,507,500
---------------------------------------------------------------
Too Inc.(a) 290,000 5,002,500
---------------------------------------------------------------
22,510,000
---------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-0.78%
Media Metrix, Inc.(a) 33,000 1,179,750
---------------------------------------------------------------
Snyder Communications, Inc.(a) 74,000 1,424,500
---------------------------------------------------------------
Young & Rubicam Inc. 82,600 5,843,950
---------------------------------------------------------------
8,448,200
---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-2.04%
Convergys Corp.(a) 98,000 3,013,500
---------------------------------------------------------------
Iron Mountain Inc.(a) 161,000 6,329,313
---------------------------------------------------------------
Quanta Services, Inc.(a) 295,000 8,333,750
---------------------------------------------------------------
Regis Corp. 230,000 4,341,250
---------------------------------------------------------------
22,017,813
---------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-1.23%
Brocade Communications Systems,Inc.(a) 29,000 5,133,000
---------------------------------------------------------------
Critical Path, Inc.(a) 32,000 3,020,000
---------------------------------------------------------------
Insight Enterprises, Inc.(a) 126,000 5,118,750
---------------------------------------------------------------
13,271,750
---------------------------------------------------------------
SERVICES (DATA PROCESSING)-2.68%
Affiliated Computer Services,
Inc.-Class A(a) 22,600 1,039,600
---------------------------------------------------------------
Concord EFS, Inc.(a) 174,825 4,501,744
---------------------------------------------------------------
CSG Systems International, Inc.(a) 180,000 7,177,500
---------------------------------------------------------------
DST Systems, Inc.(a) 58,100 4,433,756
---------------------------------------------------------------
Fiserv, Inc.(a) 85,275 3,267,098
---------------------------------------------------------------
NOVA Corp.(a) 102,232 3,226,698
---------------------------------------------------------------
Paychex, Inc. 133,500 $ 5,340,000
---------------------------------------------------------------
28,986,396
---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-3.47%
Global Crossing Ltd. (Bermuda)(a) 98,842 4,942,100
---------------------------------------------------------------
MCI WorldCom, Inc.(a) 491,945 26,103,805
---------------------------------------------------------------
Viatel, Inc.(a) 120,000 6,435,000
---------------------------------------------------------------
37,480,905
---------------------------------------------------------------
WASTE MANAGEMENT-0.43%
Waste Management, Inc. 271,600 4,668,125
---------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$482,564,675) 1,013,958,083
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. DOLLAR DENOMINATED
CONVERTIBLE NOTES-0.45%
COMPUTERS (PERIPHERALS)-0.45%
EMC Corp., Conv. Sub. Notes,
3.25%, 03/15/02 (Cost $677,145) $ 500,000 4,828,750
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS-5.69%
STIC Liquid Assets Portfolio(b) 30,735,705 30,735,705
---------------------------------------------------------------
STIC Prime Portfolio(b) 30,735,705 30,735,705
---------------------------------------------------------------
Total Money Market Funds
(Cost $61,471,410) 61,471,410
---------------------------------------------------------------
TOTAL INVESTMENTS-100.07% (Cost
$544,713,230) 1,080,258,243
---------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(0.07%) (799,909)
---------------------------------------------------------------
NET ASSETS-100.00% $1,079,458,334
===============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Sub. - Subordinated
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) This money market fund has the same investment advisor as the fund.
See Notes to Financial Statements.
FS-32
<PAGE> 104
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$544,713,230) $1,080,258,243
----------------------------------------------------------
Receivables for:
Fund shares sold 2,382,050
----------------------------------------------------------
Dividends and interest 477,981
----------------------------------------------------------
Investment for deferred compensation plan 71,413
----------------------------------------------------------
Other assets 31,284
----------------------------------------------------------
Total assets 1,083,220,971
----------------------------------------------------------
LIABILITIES:
Payables for:
Fund shares reacquired 1,950,932
----------------------------------------------------------
Deferred compensation plan 71,413
----------------------------------------------------------
Accrued advisory fees 560,995
----------------------------------------------------------
Accrued administrative services fees 11,504
----------------------------------------------------------
Accrued distribution fees 945,546
----------------------------------------------------------
Accrued transfer agent fees 125,614
----------------------------------------------------------
Accrued operating expenses 96,633
----------------------------------------------------------
Total liabilities 3,762,637
----------------------------------------------------------
Net assets applicable to shares
outstanding $1,079,458,334
==========================================================
NET ASSETS:
Class A $ 461,628,075
==========================================================
Class B $ 592,554,822
==========================================================
Class C $ 25,275,437
==========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 17,601,889
==========================================================
Class B 24,115,512
==========================================================
Class C 1,029,659
==========================================================
Class A:
Net asset value and redemption price per
share $ 26.23
----------------------------------------------------------
Offering price per share:
(Net asset value of $26.23 divided
by 94.50%) $ 27.76
==========================================================
Class B:
Net asset value and offering price per
share $ 24.57
==========================================================
Class C:
Net asset value and offering price per
share $ 24.55
==========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $40,337 foreign
withholding tax) $ 3,941,209
---------------------------------------------------------
Interest 2,584,817
---------------------------------------------------------
Total investment income 6,526,026
---------------------------------------------------------
EXPENSES:
Advisory fees 5,507,389
---------------------------------------------------------
Administrative services fees 110,205
---------------------------------------------------------
Custodian fees 79,919
---------------------------------------------------------
Transfer agent fees-Class A 444,403
---------------------------------------------------------
Transfer agent fees-Class B 871,807
---------------------------------------------------------
Transfer agent fees-Class C 25,522
---------------------------------------------------------
Trustees' fees 13,787
---------------------------------------------------------
Distribution fees-Class A 896,196
---------------------------------------------------------
Distribution fees-Class B 4,672,685
---------------------------------------------------------
Distribution fees-Class C 134,325
---------------------------------------------------------
Other 281,205
---------------------------------------------------------
Total expenses 13,037,443
---------------------------------------------------------
Less: Expenses paid indirectly (11,204)
---------------------------------------------------------
Net expenses 13,026,239
---------------------------------------------------------
Net investment income (loss) (6,500,213)
---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND FUTURES CONTRACTS:
Net realized gain from:
Investment securities 45,120,492
---------------------------------------------------------
Foreign currencies 84
---------------------------------------------------------
Futures contracts 1,493,262
---------------------------------------------------------
46,613,838
---------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 269,570,221
---------------------------------------------------------
Foreign currencies (153)
---------------------------------------------------------
Futures contracts (1,127,100)
---------------------------------------------------------
268,442,968
---------------------------------------------------------
Net gain from investment securities,
foreign currencies and futures
contracts 315,056,806
---------------------------------------------------------
Net increase in net assets resulting from
operations $308,556,593
=========================================================
</TABLE>
See Notes to Financial Statements.
FS-33
<PAGE> 105
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
-------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (6,500,213) $ (4,533,684)
---------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, future and option contracts 46,613,838 17,616,351
---------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies and future contracts 268,442,968 148,755,001
---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 308,556,593 161,837,668
---------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAINS:
Class A (17,929,351) (8,360,767)
---------------------------------------------------------------------------------------------
Class B (24,484,976) (11,756,791)
---------------------------------------------------------------------------------------------
Class C (997,756) (234,011)
---------------------------------------------------------------------------------------------
SHARE TRANSACTIONS-NET:
Class A 25,912,665 (7,618,676)
---------------------------------------------------------------------------------------------
Class B 19,950,492 (6,948,989)
---------------------------------------------------------------------------------------------
Class C 11,803,897 6,185,419
---------------------------------------------------------------------------------------------
Net increase in net assets 322,811,564 133,103,853
---------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 756,646,770 623,542,917
---------------------------------------------------------------------------------------------
End of period $1,079,458,334 $756,646,770
=============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $ 548,170,108 $494,529,257
---------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (88,818) (71,168)
---------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, future and option contracts (4,167,969) (4,913,364)
---------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and future contracts 535,545,013 267,102,045
---------------------------------------------------------------------------------------------
$1,079,458,334 $756,646,770
=============================================================================================
</TABLE>
See Notes to Financial Statements.
FS-34
<PAGE> 106
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Select Growth Fund (the "Fund") is a series portfolio of AIM Funds Group
(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 nine separate portfolios,
each having an unlimited number of shares of beneficial interest. The Fund
currently offers three different classes of shares: Class A shares, Class B
shares and Class C shares. Class A shares are sold with a front-end sales
charge. Class B shares and Class C shares are sold with a contingent deferred
sales charge. Matters affecting each portfolio or class will be voted on
exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is to achieve long-term growth of capital by
investing primarily in the common stocks of established medium to large size
companies with prospects for above average, long term earnings growth.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are valued
on the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive reliance
on quoted prices, and may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market prices are
not provided by any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in the
case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the 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 trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
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 is recorded as earned from settlement date and is recorded
on the accrual basis. Dividend income is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was increased by
$6,482,563, undistributed net realized gains decreased by $2,456,360 and
paid-in capital decreased by $4,026,203 as a result of differing book/tax
treatment of 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 of fund share 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. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions. The
Fund does not separately account for that portion of the results of
operations resulting from changes in foreign exchange rates on investments
and the fluctuations arising from changes in market prices of securities
held. Such
FS-35
<PAGE> 107
fluctuations are included with the net realized and unrealized gain or loss
from investments.
F. Foreign Currency Contracts -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
G. 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.
H. Expenses -- Distribution expenses and transfer agency expenses directly
attributable to a class of shares are charged to that class' operations. All
other expenses which are attributable to more than one class are allocated
among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.80% of
the first $150 million of the Fund's average daily net assets, plus 0.625% of
the Fund's average daily net assets in excess of $150 million.
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 December 31, 1999, AIM was
paid $110,205 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 December 31, 1999, AFS was
paid $776,902 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
0.25% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and C shares. Of these amounts, the Fund may
pay a service fee of 0.25% of the average daily net assets of the Class A, Class
B or Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. The Plans also
impose a cap on the total sales charges, including asset-based sales charges
that may be paid by the respective classes. For the year ended December 31,
1999, the Class A, Class B and Class C shares paid AIM Distributors $896,196,
$4,672,685 and $134,325, respectively, as compensation under the Plans.
AIM Distributors received commissions of $176,131 from sales of the Class A
shares of the Fund during the year ended December 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1999,
AIM Distributors received $75,951 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 December 31, 1999, the Fund paid legal fees of $4,890
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $9,190 and $2,014, respectively, under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $11,204 during the year ended December 31, 1999.
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) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may
FS-36
<PAGE> 108
borrow on a first come, first served basis. During the year ended December 31,
1999, the Fund did not borrow under the line of credit agreement. The funds
which are party to the line of credit are charged a commitment fee of 0.09% on
the unused balance of the committed line. Prior to May 28, 1999, the commitment
fee rate was 0.05%. The commitment fee is allocated among the funds based on
their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1999 was
$250,121,433 and $239,081,137, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of December 31, 1999 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $553,509,579
--------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (18,117,424)
--------------------------------------------------------------------------
Net unrealized appreciation of investment securities $535,392,155
==========================================================================
</TABLE>
Cost of investments for tax purposes is $544,866,088.
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 8,174,582 $ 169,122,203 31,005,519 $ 526,456,274
----------------------------------------------------------------------------------------------------------------------
Class B 5,441,024 110,096,224 5,430,217 86,111,821
----------------------------------------------------------------------------------------------------------------------
Class C 820,566 16,761,504 569,912 9,220,769
----------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 702,598 17,072,219 444,090 7,953,651
----------------------------------------------------------------------------------------------------------------------
Class B 996,161 22,682,713 649,261 11,017,972
----------------------------------------------------------------------------------------------------------------------
Class C 41,870 952,496 13,022 220,846
----------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (7,818,939) (160,281,757) (31,896,692) (542,028,601)
----------------------------------------------------------------------------------------------------------------------
Class B (5,672,316) (112,828,445) (6,508,718) (104,078,782)
----------------------------------------------------------------------------------------------------------------------
Class C (296,926) (5,910,103) (198,182) (3,256,196)
----------------------------------------------------------------------------------------------------------------------
2,388,620 $ 57,667,054 (491,571) $ (8,382,246)
======================================================================================================================
</TABLE>
FS-37
<PAGE> 109
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and a share of
Class B outstanding during each of the years in the five-year period ended
December 31, 1999, and for a share of Class C outstanding during each of the
years in the two-year period ended December 31, 1999 and the period August 4,
1997 (date sales commenced) through December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------
1999 1998 1997(a) 1996 1995(a)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.35 $ 15.67 $ 14.78 $ 13.05 $ 10.32
------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss) (0.06) (0.04) 0.01 0.07 0.02
------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 8.00 4.24 2.82 2.34 3.50
------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations 7.94 4.20 2.83 2.41 3.52
------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income -- -- (0.01) -- --
------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains (1.06) (0.52) (1.93) (0.68) (0.79)
------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (1.06) (0.52) (1.94) (0.68) (0.79)
------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 26.23 $ 19.35 $ 15.67 $ 14.78 $ 13.05
============================================================ ======== ======== ======== ======== ========
Total return(b) 41.48% 27.09% 19.54% 18.61% 34.31%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $461,628 $320,143 $266,168 $227,882 $168,217
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.09%(c) 1.11% 1.13% 1.18% 1.28%
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income (loss) to average net assets (0.31)%(c) (0.22)% 0.04% 0.46% 0.20%
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 31% 68% 110% 97% 87%
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) Ratios are based on average net assets of $358,478,474.
<TABLE>
<CAPTION>
CLASS B CLASS C
-------------------------------------------------------- --------------------------------
1999(a) 1998 1997(a) 1996 1995(a) 1999(a) 1998(a) 1997(a)
-------- -------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 18.33 $ 14.98 $ 14.32 $ 12.77 $ 10.21 $ 18.32 $ 14.98 $ 17.65
--------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income (loss) (0.23) (0.17) (0.13) (0.05) (0.08) (0.23) (0.17) (0.04)
--------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities
(both realized and unrealized) 7.53 4.04 2.72 2.28 3.43 7.52 4.03 (0.70)
--------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations 7.30 3.87 2.59 2.23 3.35 7.29 3.86 (0.74)
--------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Distributions from net realized
gains (1.06) (0.52) (1.93) (0.68) (0.79) (1.06) (0.52) (1.93)
--------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Total distributions (1.06) (0.52) (1.93) (0.68) (0.79) (1.06) (0.52) (1.93)
--------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 24.57 $ 18.33 $ 14.98 $ 14.32 $ 12.77 $ 24.55 $ 18.32 $ 14.98
================================= ======== ======== ======== ======== ======== ======== ======== ========
Total return(b) 40.29% 26.13% 18.50% 17.60% 33.00% 40.26% 26.07% (3.86)%
================================= ======== ======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $592,555 $428,002 $356,186 $280,807 $138,034 $ 25,275 $ 8,501 $ 1,189
================================= ======== ======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets 1.90%(c) 1.93% 1.99% 2.03% 2.13% 1.90%(c) 1.93% 1.95%(d)
================================= ======== ======== ======== ======== ======== ======== ======== ========
Ratio of net investment income
(loss) to average net assets (1.12)%(c) (1.04)% (0.82)% (0.39)% (0.65)% (1.12)%(c) (1.04)% (0.77)%(d)
================================= ======== ======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 31% 68% 110% 97% 87% 31% 68% 110%
================================= ======== ======== ======== ======== ======== ======== ======== ========
</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 $467,268,589 and $13,432,524 for
Class B and Class C, respectively.
(d) Annualized.
FS-38
<PAGE> 110
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
AIM Value Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Value Fund (a portfolio of AIM Funds
Group), including the schedule of investments, as of
December 31, 1999, and the related statement of
operations for the year then ended, and the statement of
changes in net assets for each of the years in the
two-year period then ended and the financial highlights
for each of the years in the five-year period then ended.
These financial statements and financial highlights are
the responsibility of the Fund's management. Our
responsibility is to express an opinion on these
financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1999, by
correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Value
Fund as of December 31, 1999, the results of its
operations for the year then ended, the changes in net
assets for each of the years in the two-year period then
ended and the financial highlights for each of the years
in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG LLP
February 4, 2000
Houston, Texas
FS-39
<PAGE> 111
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-90.13%
BANKS (MONEY CENTER)-1.21%
Chase Manhattan Corp. (The) 4,350,000 $ 337,940,625
----------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO
& CABLE)-8.83%
Comcast Corp.-Class A 26,600,000 1,336,650,000
----------------------------------------------------------------
Cox Communications, Inc.-Class
A(a) 18,075,600 930,893,400
----------------------------------------------------------------
MediaOne Group, Inc. 2,500,000 192,031,250
----------------------------------------------------------------
2,459,574,650
----------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-10.06%
Comverse Technology, Inc.(a) 725,000 104,943,750
----------------------------------------------------------------
Lucent Technologies Inc. 1,800,000 134,662,500
----------------------------------------------------------------
Motorola, Inc. 3,200,000 471,200,000
----------------------------------------------------------------
Nokia Oyj-ADR (Finland) 11,000,000 2,090,000,000
----------------------------------------------------------------
2,800,806,250
----------------------------------------------------------------
COMPUTERS (HARDWARE)-9.05%
Apple Computer, Inc.(a) 8,000,000 822,500,000
----------------------------------------------------------------
Gateway Inc.(a) 11,361,100 818,709,269
----------------------------------------------------------------
International Business Machines
Corp. 4,257,400 459,799,200
----------------------------------------------------------------
Sun Microsystems, Inc.(a) 5,400,000 418,162,500
----------------------------------------------------------------
2,519,170,969
----------------------------------------------------------------
COMPUTERS (PERIPHERALS)-2.44%
EMC Corp.(a) 987,400 107,873,450
----------------------------------------------------------------
Lexmark International Group,
Inc.- Class A(a) 6,300,000 570,150,000
----------------------------------------------------------------
678,023,450
----------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-6.15%
At Home Corp.-Series A(a) 12,000,000 514,500,000
----------------------------------------------------------------
BMC Software, Inc.(a) 2,200,000 175,862,500
----------------------------------------------------------------
Citrix Systems, Inc.(a) 656,000 80,688,000
----------------------------------------------------------------
Microsoft Corp.(a) 4,200,000 490,350,000
----------------------------------------------------------------
Unisys Corp.(a) 14,108,100 450,577,444
----------------------------------------------------------------
1,711,977,944
----------------------------------------------------------------
CONSUMER FINANCE-0.20%
Providian Financial Corp. 600,000 54,637,500
----------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.48%
Solectron Corp.(a) 1,400,000 133,175,000
----------------------------------------------------------------
ELECTRONICS
(INSTRUMENTATION)-0.09%
Waters Corp.(a) 500,000 26,500,000
----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS
(SEMICONDUCTORS)-1.47%
Analog Devices, Inc.(a) 1,600,000 $ 148,800,000
----------------------------------------------------------------
Texas Instruments Inc. 2,700,000 261,562,500
----------------------------------------------------------------
410,362,500
----------------------------------------------------------------
ENTERTAINMENT-3.12%
Time Warner Inc. 12,000,000 869,250,000
----------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-2.89%
Applied Materials, Inc.(a) 5,000,000 633,437,500
----------------------------------------------------------------
Teradyne, Inc.(a) 2,584,100 170,550,600
----------------------------------------------------------------
803,988,100
----------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-3.62%
American Express Co. 1,638,800 272,450,500
----------------------------------------------------------------
Associates First Capital
Corp.-Class A 10,600,000 290,837,500
----------------------------------------------------------------
Citigroup Inc. 6,500,000 361,156,250
----------------------------------------------------------------
Freddie Mac 1,800,000 84,712,500
----------------------------------------------------------------
1,009,156,750
----------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-1.62%
Bristol-Myers Squibb Co. 6,000,000 385,125,000
----------------------------------------------------------------
Warner-Lambert Co. 800,000 65,550,000
----------------------------------------------------------------
450,675,000
----------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-1.82%
Pharmacia & Upjohn, Inc. 11,266,600 506,997,000
----------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-2.55%
Guidant Corp. 15,100,000 709,700,000
----------------------------------------------------------------
HOUSEHOLD PRODUCTS
(NON-DURABLES)-1.39%
Colgate-Palmolive Co. 3,925,500 255,157,500
----------------------------------------------------------------
Kimberly-Clark Corp. 2,000,000 130,500,000
----------------------------------------------------------------
385,657,500
----------------------------------------------------------------
INSURANCE (MULTI-LINE)-3.66%
American International Group,
Inc. 8,100,000 875,812,500
----------------------------------------------------------------
Hartford Financial Services
Group, Inc. (The) 3,000,000 142,125,000
----------------------------------------------------------------
1,017,937,500
----------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-2.46%
Morgan Stanley Dean Witter &
Co. 4,801,500 685,414,125
----------------------------------------------------------------
LODGING-HOTELS-1.48%
Carnival Corp. 8,600,000 411,187,500
----------------------------------------------------------------
</TABLE>
FS-40
<PAGE> 112
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MANUFACTURING
(DIVERSIFIED)-2.69%
Tyco International Ltd. 19,241,100 $ 747,997,762
----------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.79%
Weyerhaeuser Co. 3,076,300 220,916,794
----------------------------------------------------------------
RESTAURANTS-0.38%
McDonald's Corp. 2,600,000 104,812,500
----------------------------------------------------------------
RETAIL (BUILDING
SUPPLIES)-0.79%
Lowe's Cos., Inc. 3,700,000 221,075,000
----------------------------------------------------------------
RETAIL (COMPUTERS &
ELECTRONICS)-1.84%
Best Buy Co., Inc.(a) 10,190,300 511,425,681
----------------------------------------------------------------
RETAIL (FOOD CHAINS)-1.90%
Kroger Co. (The)(a) 18,232,200 344,132,775
----------------------------------------------------------------
Safeway Inc.(a) 5,200,000 184,925,000
----------------------------------------------------------------
529,057,775
----------------------------------------------------------------
RETAIL (GENERAL
MERCHANDISE)-6.71%
Costco Wholesale Corp.(a) 5,650,000 515,562,500
----------------------------------------------------------------
Dayton Hudson Corp. 18,428,100 1,353,313,594
----------------------------------------------------------------
1,868,876,094
----------------------------------------------------------------
SERVICES (ADVERTISING/
MARKETING)-1.80%
Omnicom Group, Inc. 5,000,000 500,000,000
----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (DATA
PROCESSING)-1.88%
First Data Corp. 10,600,000 $ 522,712,500
----------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-4.82%
Nextel Communications,
Inc.-Class A(a) 13,000,000 1,340,625,000
----------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-1.94%
MCI WorldCom, Inc.(a) 10,200,000 541,237,500
----------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$15,946,920,824) 25,090,868,969
----------------------------------------------------------------
MONEY MARKET FUNDS-9.74%
STIC Liquid Assets Portfolio(b) 1,356,024,528 1,356,024,528
----------------------------------------------------------------
STIC Prime Portfolio(b) 1,356,024,528 1,356,024,528
----------------------------------------------------------------
Total Money Market Funds
(Cost $2,712,049,056) 2,712,049,056
----------------------------------------------------------------
TOTAL INVESTMENTS-99.87% (Cost
$18,658,969,880) 27,802,918,025
----------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.13% 36,100,295
----------------------------------------------------------------
NET ASSETS-100.00% $27,839,018,320
================================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
FS-41
<PAGE> 113
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$18,658,969,880) $27,802,918,025
----------------------------------------------------------
Receivables for:
Fund shares sold 84,271,237
----------------------------------------------------------
Dividends and interest 16,004,305
----------------------------------------------------------
Foreign currency contracts 68,948,977
----------------------------------------------------------
Investment for deferred compensation plan 206,592
----------------------------------------------------------
Other assets 308,310
----------------------------------------------------------
Total assets 27,972,657,446
----------------------------------------------------------
LIABILITIES:
Payables for:
Fund shares reacquired 90,605,579
----------------------------------------------------------
Deferred compensation plan 206,592
----------------------------------------------------------
Accrued advisory fees 13,810,980
----------------------------------------------------------
Accrued distribution fees 24,487,687
----------------------------------------------------------
Accrued transfer agent fees 2,563,943
----------------------------------------------------------
Accrued trustees' fees 15,000
----------------------------------------------------------
Accrued operating expenses 1,949,345
----------------------------------------------------------
Total liabilities 133,639,126
----------------------------------------------------------
Net assets applicable to shares
outstanding $27,839,018,320
==========================================================
NET ASSETS:
Class A $12,640,072,795
==========================================================
Class B $14,338,086,751
==========================================================
Class C $ 860,858,774
==========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 258,850,990
==========================================================
Class B 303,769,322
==========================================================
Class C 18,231,480
==========================================================
Class A:
Net asset value and redemption price
per share $ 48.83
----------------------------------------------------------
Offering price per share:
(Net asset value of $48.83 divided by
94.50%) $ 51.67
==========================================================
Class B:
Net asset value and offering price per
share $ 47.20
==========================================================
Class C:
Net asset value and offering price per
share $ 47.22
==========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $1,003,035 foreign
withholding tax) $ 131,189,187
----------------------------------------------------------
Interest 74,202,959
----------------------------------------------------------
Total investment income 205,392,146
----------------------------------------------------------
EXPENSES:
Advisory fees 141,196,457
----------------------------------------------------------
Administrative services fees 631,457
----------------------------------------------------------
Custodian fees 1,130,367
----------------------------------------------------------
Distribution fees -- Class A 26,140,479
----------------------------------------------------------
Distribution fees -- Class B 116,152,779
----------------------------------------------------------
Distribution fees -- Class C 4,781,281
----------------------------------------------------------
Trustees' fees 122,469
----------------------------------------------------------
Transfer agent fees -- Class A 12,324,007
----------------------------------------------------------
Transfer agent fees -- Class B 19,092,344
----------------------------------------------------------
Transfer agent fees -- Class C 785,923
----------------------------------------------------------
Other 4,391,436
----------------------------------------------------------
Total expenses 326,748,999
----------------------------------------------------------
Less: Expenses paid indirectly (274,174)
----------------------------------------------------------
Fees waived by advisor (5,137,356)
----------------------------------------------------------
Net expenses 321,337,469
----------------------------------------------------------
Net investment income (loss) (115,945,323)
----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FOREIGN CURRENCY CONTRACTS
AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 2,503,452,928
----------------------------------------------------------
Foreign currencies (312,317)
----------------------------------------------------------
Foreign currency contracts 51,130,896
----------------------------------------------------------
Option contracts written 26,312,201
----------------------------------------------------------
2,580,583,708
----------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 3,495,072,669
----------------------------------------------------------
Foreign currencies (2,929)
----------------------------------------------------------
Foreign currency contracts 64,405,814
----------------------------------------------------------
Option contracts written (112,630)
----------------------------------------------------------
3,559,362,924
----------------------------------------------------------
Net gain from investment securities,
foreign currencies, foreign currency
contracts and option contracts 6,139,946,632
----------------------------------------------------------
Net increase in net assets resulting from
operations $6,024,001,309
==========================================================
</TABLE>
See Notes to Financial Statements.
FS-42
<PAGE> 114
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (115,945,323) $ (24,044,585)
--------------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, foreign currency contracts, futures and
option contracts 2,580,583,708 1,197,383,660
--------------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies, foreign currency
contracts, futures and option contracts 3,559,362,924 3,328,905,060
--------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 6,024,001,309 4,502,244,135
--------------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A -- (18,008,475)
--------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (788,853,278) (539,610,813)
--------------------------------------------------------------------------------------------------
Class B (918,638,257) (602,045,865)
--------------------------------------------------------------------------------------------------
Class C (52,550,069) (12,727,398)
--------------------------------------------------------------------------------------------------
Share transactions-net:
Class A 1,781,344,407 439,374,153
--------------------------------------------------------------------------------------------------
Class B 2,515,709,918 1,179,878,726
--------------------------------------------------------------------------------------------------
Class C 562,747,820 156,203,496
--------------------------------------------------------------------------------------------------
Net increase in net assets 9,123,761,850 5,105,307,959
--------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 18,715,256,470 13,609,948,511
--------------------------------------------------------------------------------------------------
End of period $27,839,018,320 $18,715,256,470
==================================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $17,884,938,370 $12,965,142,636
--------------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (577,334) (391,429)
--------------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign
currencies, foreign currency contracts, futures and
option contracts 741,760,162 96,971,065
--------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, foreign currency contracts, futures and
option contracts 9,212,897,122 5,653,534,198
--------------------------------------------------------------------------------------------------
$27,839,018,320 $18,715,256,470
==================================================================================================
</TABLE>
See Notes to Financial Statements.
FS-43
<PAGE> 115
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Value Fund (the "Fund") is a series portfolio of AIM Funds Group (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 nine separate portfolios, each
having an unlimited number of shares of beneficial interest. The Fund currently
offers three different classes of shares: Class A shares, Class B shares and
Class C shares. Class A shares are sold with a front-end sales charge. Class B
shares and Class C shares are sold with a contingent deferred sales charge.
Matters affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund. The Fund's investment objective
is to achieve long-term growth of capital by investing primarily in equity
securities judged by the Fund's investment advisor to be undervalued relative to
the investment advisor's appraisal of the current or projected earnings of the
companies issuing the securities, or relative to current market values of assets
owned by the companies issuing the securities or relative to the equity markets
generally. Income is a secondary objective.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) are valued on the basis
of prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as yield, type of issue,
coupon rate and maturity date. Securities for which market prices are not
provided by any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. Securities for which market quotations are not
readily available or are questionable are valued at fair value as determined
in good faith by or under the supervision of the 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 trading of the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
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 is recorded as earned from settlement date and is recorded on
the accrual basis. Dividend income is recorded on the ex-dividend date. On
December 31, 1999, undistributed net investment income was increased by
$115,759,418, undistributed net realized gains decreased by $175,753,007 and
paid-in capital increased by $59,993,589 as a result of differing book/tax
treatment of foreign currency transactions, 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 of fund share 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. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such
FS-44
<PAGE> 116
transactions. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
F. Foreign Currency Contracts -- A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
Outstanding foreign currency contracts at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
CONTRACT TO
SETTLEMENT ------------------------------ UNREALIZED
DATE CURRENCY DELIVER RECEIVE VALUE APPRECIATION
--------------------- -------- ------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
01/20/00 EUR 690,000,000 $ 730,747,420 $ 695,508,498 $35,238,922
--------------------- -------- ------------- -------------- -------------- ------------
01/21/00 EUR 237,000,000 251,193,790 238,910,220 12,283,570
--------------------- -------- ------------- -------------- -------------- ------------
01/24/00 EUR 404,000,000 428,775,645 407,349,160 21,426,485
--------------------- -------- ------------- -------------- -------------- ------------
1,331,000,000 $1,410,716,855 $1,341,767,878 $68,948,977
===================== ======== ============= ============== ============== ============
</TABLE>
G. Covered Call Options -- The Fund may write call options, on a covered basis;
that is, the Fund will own the underlying security. Options written by the
Fund normally will have expiration dates between three and nine months from
the date written. The exercise price of a call option may be below, equal to,
or above the current market value of the underlying security at the time the
option is written. When the Fund writes a covered call option, an amount
equal to the premium received by the Fund is recorded as an asset and an
equivalent liability. The amount of the liability is subsequently
"marked-to-market" to reflect the current market value of the option written.
The current market value of a written option is the mean between the last bid
and asked prices on that day. If a written call option expires on the
stipulated expiration date, or if the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or a loss if the closing purchase
transaction exceeds the premium received when the option was written) without
regard to any unrealized gain or loss on the underlying security, and the
liability related to such option is extinguished. If a written option is
exercised, the Fund realizes a gain or a loss from the sale of the underlying
security and the proceeds of the sale are increased by the premium originally
received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
H. Expenses -- Distribution expenses and transfer agency expenses directly
attributable to a class of shares are charged to that class' operations. All
other expenses which are attributable to more than one class are allocated
among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.80% of
the first $150 million of the Fund's average daily net assets, plus 0.625% of
the Fund's average daily net assets in excess of $150 million. AIM has
contractually agreed to waive a portion of its advisory fees paid by the Fund to
AIM to the extent necessary to reduce the fees paid by the Fund at net asset
levels higher than those currently incorporated in the present advisory fee
schedule. Under the contractual waiver, AIM will receive a fee calculated at the
annual rate of 0.80% of the first $150 million of the Fund's average daily net
assets, plus 0.625% of the Fund's average daily net assets in excess of $150
million to and including $2 billion, plus 0.60% of the Fund's average daily net
assets in excess of $2 billion. The waiver is contractual and may not be
terminated without approval of the Board of Trustees. During the year ended
December 31, 1999, AIM waived fees of $5,137,356.
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 December 31, 1999, AIM was
paid $631,457 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 December 31, 1999, AFS was
paid $20,339,409 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
0.25% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and C shares.
FS-45
<PAGE> 117
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 year ended December 31, 1999, the Class A, Class B and Class C
shares paid AIM Distributors $26,140,479, $116,152,779 and $4,781,281,
respectively, as compensation under the Plans.
AIM Distributors received commissions of $7,218,373 from sales of the Class A
shares of the Fund during the year ended December 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1999,
AIM Distributors received $1,053,955 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 December 31, 1999, the Fund paid legal fees of $48,355
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $246,830 and $27,344, respectively, under expense offset arrangements.
The effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $274,174 during the year ended December 31, 1999.
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) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1999 was
$15,678,784,868 and $13,551,728,590, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of December 31, 1999 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $9,404,563,463
----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (341,731,444)
----------------------------------------------------------
Net unrealized appreciation of investment
securities $9,062,832,019
==========================================================
</TABLE>
Cost of investments for tax purposes is $18,740,086,006.
NOTE 7-CALL OPTION CONTRACTS
Transactions in call options written during the year ended December 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ------------
<S> <C> <C>
Beginning of period 2,995 $ 1,254,474
---------------------------- --------- ------------
Written 127,809 94,367,695
---------------------------- --------- ------------
Closed (17,839) (9,759,499)
---------------------------- --------- ------------
Exercised (60,465) (51,484,198)
---------------------------- --------- ------------
Expired (52,500) (34,378,472)
---------------------------- --------- ------------
End of period -- $ --
============================ ========= ============
</TABLE>
FS-46
<PAGE> 118
NOTE 8-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 65,309,195 $ 2,905,872,208 61,939,114 $ 2,232,305,973
---------------------------------------------------------------------------------------------------------------------------
Class B 67,138,813 2,915,628,481 44,964,399 1,587,327,551
---------------------------------------------------------------------------------------------------------------------------
Class C 13,738,072 600,569,156 4,634,085 164,861,278
---------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 16,150,747 754,887,097 13,921,013 529,914,065
---------------------------------------------------------------------------------------------------------------------------
Class B 19,043,747 860,577,418 15,274,620 567,695,520
---------------------------------------------------------------------------------------------------------------------------
Class C 1,098,977 49,675,082 327,964 12,197,171
---------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (42,137,878) (1,879,414,898) (64,405,244) (2,322,845,885)
---------------------------------------------------------------------------------------------------------------------------
Class B (29,076,106) (1,260,495,981) (27,805,340) (975,144,345)
---------------------------------------------------------------------------------------------------------------------------
Class C (2,008,443) (87,496,418) (590,550) (20,854,953)
---------------------------------------------------------------------------------------------------------------------------
109,257,124 $ 4,859,802,145 48,260,061 $ 1,775,456,375
===========================================================================================================================
</TABLE>
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and a share of
Class B outstanding during each of the years in the five-year period ended
December 31, 1999 and for a share of Class C outstanding during each of the
years in the two-year period ended December 31, 1999 and the period August 4,
1997 (date sales commenced) through December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------
1999 1998 1997 1996(a) 1995
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 40.19 $ 32.42 $ 29.15 $ 26.81 $ 21.14
----------------------------------------------------- ----------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) (0.04) 0.09 0.17 0.43 0.14
----------------------------------------------------- ----------- ---------- ---------- ---------- ----------
Net gains on securities (both realized and
unrealized) 11.93 10.38 6.78 3.42 7.21
----------------------------------------------------- ----------- ---------- ---------- ---------- ----------
Total from investment operations 11.89 10.47 6.95 3.85 7.35
----------------------------------------------------- ----------- ---------- ---------- ---------- ----------
Less distributions:
Dividends from net investment income -- (0.09) (0.04) (0.41) (0.09)
----------------------------------------------------- ----------- ---------- ---------- ---------- ----------
Distributions from net realized gains (3.25) (2.61) (3.64) (1.10) (1.59)
----------------------------------------------------- ----------- ---------- ---------- ---------- ----------
Total distributions (3.25) (2.70) (3.68) (1.51) (1.68)
----------------------------------------------------- ----------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 48.83 $ 40.19 $ 32.42 $ 29.15 $ 26.81
===================================================== =========== ========== ========== ========== ==========
Total return(b) 29.95% 32.76% 23.95% 14.52% 34.85%
===================================================== =========== ========== ========== ========== ==========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $12,640,073 $8,823,094 $6,745,253 $5,100,061 $3,408,952
===================================================== =========== ========== ========== ========== ==========
Ratio of expenses to average net assets(c) 1.00%(d) 1.00% 1.04% 1.11% 1.12%
===================================================== =========== ========== ========== ========== ==========
Ratio of net investment income (loss) to average net
assets(e) (0.09)%(d) 0.26% 0.57% 1.65% 0.74%
===================================================== =========== ========== ========== ========== ==========
Portfolio turnover rate 66% 113% 137% 126% 151%
===================================================== =========== ========== ========== ========== ==========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.02%, 1.02%, 1.06%, 1.13% and 1.13% for 1999-1995, respectively.
(d) Ratios are based on average net assets of $10,456,191,563.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were (0.11)%, 0.24%, 0.55%, 1.63% and 0.73% for 1999-1995,
respectively.
FS-47
<PAGE> 119
NOTE 9-FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------------------------------------------------------- --------
1999(a) 1998 1997 1996(a) 1995 1999(a)
----------- ----------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 39.24 $ 31.89 $ 28.92 $ 26.65 $ 21.13 $ 39.26
------------------------------------------- ----------- ----------- ---------- ---------- ---------- --------
Income from investment operations:
Net investment income (loss) (0.39) (0.18) (0.07) 0.20 (0.01) (0.39)
------------------------------------------- ----------- ----------- ---------- ---------- ---------- --------
Net gains (losses) on securities (both
realized and unrealized) 11.60 10.14 6.68 3.38 7.12 11.60
------------------------------------------- ----------- ----------- ---------- ---------- ---------- --------
Total from investment operations 11.21 9.96 6.61 3.58 7.11 11.21
------------------------------------------- ----------- ----------- ---------- ---------- ---------- --------
Less distributions:
Dividends from net investment income -- -- -- (0.21) -- --
------------------------------------------- ----------- ----------- ---------- ---------- ---------- --------
Distributions from net realized gains (3.25) (2.61) (3.64) (1.10) (1.59) (3.25)
------------------------------------------- ----------- ----------- ---------- ---------- ---------- --------
Total distributions (3.25) (2.61) (3.64) (1.31) (1.59) (3.25)
------------------------------------------- ----------- ----------- ---------- ---------- ---------- --------
Net asset value, end of period $ 47.20 $ 39.24 $ 31.89 $ 28.92 $ 26.65 $ 47.22
=========================================== =========== =========== ========== ========== ========== ========
Total return(b) 28.94% 31.70% 22.96% 13.57% 33.73% 28.92%
=========================================== =========== =========== ========== ========== ========== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $14,338,087 $19,680,068 $6,831,796 $4,875,933 $2,860,531 $860,859
=========================================== =========== =========== ========== ========== ========== ========
Ratio of expenses to average net assets(c) 1.79%(d) 1.80% 1.85% 1.94% 1.94% 1.79%(d)
=========================================== =========== =========== ========== ========== ========== ========
Ratio of net investment income (loss) to
average net assets(e) (0.88)%(d) (0.54)% (0.24)% 0.82% (0.08)% (0.88)%(d)
=========================================== =========== =========== ========== ========== ========== ========
Portfolio turnover rate 66% 113% 137% 126% 151% 66%
=========================================== =========== =========== ========== ========== ========== ========
<CAPTION>
CLASS C
------------------------
1998(a) 1997
-------- ------------
<S> <C> <C>
Net asset value, beginning of period $ 31.90 $ 35.60
------------------------------------------- -------- -------
Income from investment operations:
Net investment income (loss) (0.19) (0.01)
------------------------------------------- -------- -------
Net gains (losses) on securities (both
realized and unrealized) 10.16 (0.05)
------------------------------------------- -------- -------
Total from investment operations 9.97 (0.06)
------------------------------------------- -------- -------
Less distributions:
Dividends from net investment income -- --
------------------------------------------- -------- -------
Distributions from net realized gains (2.61) (3.64)
------------------------------------------- -------- -------
Total distributions (2.61) (3.64)
------------------------------------------- -------- -------
Net asset value, end of period $ 39.26 $ 31.90
=========================================== ======== =======
Total return(b) 31.72% (0.08)%
=========================================== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $212,095 $32,900
=========================================== ======== =======
Ratio of expenses to average net assets(c) 1.80% 1.84%(f)
=========================================== ======== =======
Ratio of net investment income (loss) to
average net assets(e) (0.54)% (0.23)%(f)
=========================================== ======== =======
Portfolio turnover rate 113% 137%
=========================================== ======== =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.81%, 1.82%, 1.87%, 1.96% and 1.96% for 1999-1995 for Class B,
respectively, and 1.81%, 1.82% and 1.86% (annualized) for 1999-1997,
respectively, for Class C.
(d) Ratios are based on average net assets of $11,615,113,487 and $478,128,084
for Class B and Class C, respectively.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were (0.90)%, (0.56)%, (0.26)%, 0.81% and (0.09)% for
1999-1995, respectively, for Class B, and (0.90)%, (0.56)% and (0.25)%
(annualized) for 1999-1997, respectively, for Class C.
(f) Annualized.
FS-48
