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CLASS A, CLASS B AND CLASS C SHARES OF
AIM BASIC VALUE FUND
AIM SMALL CAP GROWTH FUND
(SERIES PORTFOLIOS OF AIM GROWTH SERIES)
Supplement dated October 6, 1999
To the Statement of Additional Information dated May 3, 1999
as supplemented September 13, 1999
This supplement supersedes and replaces in its entirety the
supplement dated September 13, 1999.
The following paragraph replaces in its entirety the paragraph
appearing under the heading "INVESTMENT STRATEGIES AND RISKS-INVESTMENT IN
OTHER INVESTMENT COMPANIES" on page 6 of the Statement of Additional
Information:
"The Portfolios may invest in other investment companies to the
extent permitted by the 1940 Act, rules and regulations thereunder, and
any applicable exemptive orders granted by the SEC. To the extent that a
Portfolio invests in such investment companies, the prices paid by the
Portfolio and the proceeds to the Portfolio upon sale of the shares may
reflect premiums above or discounts to the net asset value of the assets
owned by such investment companies. Under an exemptive order granted by
the SEC, each Portfolio is permitted to, and intends to, invest its cash
(and cash collateral received in connection with the lending of portfolio
securities) in shares of money market investment companies advised by AIM
or its affiliates ("Affiliated Money Market Funds"), provided that those
investments do not exceed 25% of the total assets of such Portfolio. In
general, a purchase of investment company securities may result in the
duplication of fees and expenses. With respect to a Portfolio's purchase
of shares of Affiliated Money Market Funds, the Portfolio will indirectly
pay the advisory fees and other operating expenses of the Affiliated Money
Market Funds."
The following replaces in its entirety the section "DEPOSITARY RECEIPTS" on
page 6 of the Statement of Additional Information:
"FOREIGN SECURITIES
To the extent consistent with their respective investment
objectives, each of the Portfolios may invest up to 25% of its total assets
in foreign securities. For purposes of computing such limitation American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and
other securities representing underlying securities of foreign issuers are
treated as foreign securities. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by a United States bank or
trust company which evidence ownership of underlying securities issued by a
foreign corporation. EDRs are receipts issued in Europe which evidence a
similar ownership arrangement. Generally, ADRs, in registered form, are
designed for use in the United States securities markets, and EDRs, in
bearer form, are designed for use in European securities markets. ADRs and
EDRs may be listed on stock exchanges, or traded in OTC markets in the
United States or Europe, as the case may be. ADRs, like other securities
traded in the United States, will be subject to negotiated commission
rates.
To the extent a Portfolio invests in securities denominated in
foreign currencies, each Portfolio bears the risk of changes in the
exchange rates between U.S. currency and the foreign currency, as well as
the availability and status of foreign securities markets. These securities
will be marketable equity securities (including common and preferred stock,
depositary receipts for stock and fixed income or equity securities
exchangeable for or convertible into stock) of foreign companies which
generally are listed on a recognized foreign securities exchange or traded
in a foreign over-the-counter market. Each of the Portfolios may also
invest in foreign securities listed on recognized U.S. securities exchanges
or traded in the U.S. over-the-counter market. Such foreign securities may
be issued by foreign companies located in developing countries in various
regions of the world. A "developing country" is a
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country in the initial stages of its industrial cycle. As compared to
investment in the securities markets of developed countries, investment in
the securities markets of developing countries involves exposure to
markets that may have substantially less trading volume and greater price
volatility, economic structures that are less diverse and mature, and
political systems that may be less stable.
Investments by a Portfolio in foreign securities, whether
denominated in U.S. currencies or foreign currencies, may entail all of the
risks set forth below. Investments by a Portfolio in ADRs, EDRs or similar
securities also may entail some or all of the risks as set forth below.
Currency Risk. The value of each Portfolio's foreign investments
will be affected by changes in currency exchange rates. The U.S. dollar
value of a foreign security decreases when the value of the U.S. dollar
rises against the foreign currency in which the security is denominated and
increases when the value of the U.S. dollar falls against such currency.
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 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
Portfolio.
Political and Economic Risk. The economies of many of the countries
in which the Portfolios may invest are not as developed as the United
States economy and may be subject to significantly different forces.
Political or social instability, expropriation or confiscatory taxation,
and limitations on the removal of funds or other assets could also
adversely affect the value of each Portfolio's investments.
Regulatory Risk. Foreign companies are not registered with the SEC
and are generally not subject to the regulatory controls imposed on United
States issuers and, as a consequence, there is generally less publicly
available information about foreign securities than is available about
domestic securities. Foreign companies are not subject to uniform
accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to domestic companies. Income
from foreign securities owned by the Portfolios may be reduced by a
withholding tax at the source, which tax would reduce dividend income
payable to the Portfolios' shareholders.
Market Risk. The securities markets in many of the countries in
which the Portfolios invest will have substantially less trading volume
than the major United States markets. As a result, the securities of some
foreign companies may be less liquid and experience more price volatility
than comparable domestic securities. Increased custodian costs as well as
administrative costs (such as the need to use foreign custodians) may be
associated with the maintenance of assets in foreign jurisdictions. There
is generally less government regulation and supervision of foreign stock
exchanges, brokers and issuers which may make it difficult to enforce
contractual obligations. In addition, transaction costs in foreign
securities markets are likely to be higher, since brokerage commission
rates in foreign countries are likely to be higher than in the United
States."
The following replaces in its entirety the first paragraph under the heading
"BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS" on page 8 of
the Statement of Additional Information:
"Each Portfolio's borrowings will not exceed 33 1/3% of its total
assets, i.e., each Portfolio's total assets will equal at least 300% of the
amount of outstanding borrowings. If market fluctuations in the value of a
Portfolio's holdings or other factors cause the ratio of the Portfolio's
total assets to outstanding borrowings to fall below 300%, within three
days (excluding Sundays and holidays) of such event the Portfolio may be
required to sell portfolio securities to restore the 300% asset coverage,
even though from an investment standpoint such sales might be
disadvantageous. Each Portfolio also may borrow up to 5% of its
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total assets for temporary or emergency purposes other than to meet
redemptions. Each Portfolio may not make additional investments if
borrowings exceed 5% of its total assets. A Portfolio may borrow in
connection with meeting requests for the redemption of a Portfolio's
shares. Any borrowing by a Portfolio may cause greater fluctuation in the
value of its shares than would be the case if the Portfolio did not
borrow."
The following replaces in its entirety the information appearing
under the heading "INVESTMENT POLICIES-TEMPORARY DEFENSIVE STRATEGIES" on
page 9 of the Statement of Additional Information.
"In anticipation of or in response to adverse market conditions, for
cash management purposes, or for defensive purposes, each of the
Portfolios may temporarily hold all or a portion of its assets in cash
(U.S. dollars, foreign currencies or multinational currency units), money
market instruments, or high-quality debt securities. Each of the
Portfolios may also invest up to 25% of its total assets in Affiliated
Money Market Funds for these purposes. To the extent a Portfolio employs a
temporary defensive strategy, it will not be invested so as to achieve
directly its investment objectives.
Money market instruments in which the Portfolios may invest include
the following: government securities; high grade commercial paper; bank
certificates of deposit; bankers' acceptances; and repurchase agreements
related to any of the foregoing. High grade commercial paper refers to
commercial paper rated P-1 by Moody's or A-1 by S&P, at the time of
investment or, if unrated, deemed by AIM to be of comparable quality."
The following new section is added after the seventh paragraph
appearing under the heading "EXECUTION OF PORTFOLIO TRANSACTIONS" on page 20 of
the Statement of Additional Information:
"ALLOCATION OF INITIAL PUBLIC OFFERING ("IPO") SECURITIES TRANSACTIONS
From time to time, certain of the mutual funds managed by AIM or
A I M Capital Management, Inc. (collectively, the "AIM Funds") may become
interested in participating in security distributions that are available
in an IPO, and occasions may arise when purchases of such securities by
one AIM Fund may also be considered for purchase by one or more other AIM
Funds. In such cases, it shall be AIM's practice to specifically combine
or otherwise bunch indications of interest for IPO securities for all AIM
Funds participating in purchase transactions for that security, and to
allocate such transactions in accordance with the following procedures:
AIM will determine the eligibility of each AIM Fund that seeks to
participate in a particular IPO by reviewing a number of factors,
including suitability of the investment with the AIM Fund's investment
objective, policies and strategies, the liquidity of the AIM Fund if such
investment is purchased, and whether the portfolio manager intends to hold
the security as a long-term investment. The allocation of limited supply
securities issued in IPOs will be made to eligible AIM Funds in a manner
designed to be fair and equitable for the eligible AIM Funds, and so that
there is equal allocation of IPOs over the longer term. Where multiple
funds are eligible, rotational participation may occur, based on the
extent to which an AIM Fund has participated in previous IPOs as well as
the size of the AIM Fund. Each eligible AIM Fund with an asset level of
less than $500 million, will be placed in one of three tiers, depending
upon its asset level. The AIM Funds in the tier containing funds with the
smallest asset levels will participate first, each receiving a 40 basis
point allocation (rounded to the nearest share round lot that approximates
40 basis points) (the "Allocation"), based on that AIM Fund's net assets.
This process continues until all of the AIM Funds in the three tiers
receive their Allocations, or until the shares are all allocated. Should
securities remain after this process, eligible AIM Funds will receive
their Allocations on a straight pro rata basis. For the tier of AIM Funds
not receiving a full Allocation, the Allocation may be made only to
certain AIM Funds so that each may receive close to or exactly 40 basis
points.
Any AIM Funds with substantially identical investment objectives and
policies will participate in syndicates in amounts that are substantially
proportionate to each other. In these cases, the net assets of the largest
AIM Fund will be used to determine in which tier, as described in the
paragraph above, such group of AIM Funds will be placed. The price per
share of securities purchased in such syndicate transactions will be the
same for each AIM Fund."
The following new paragraph is added after the fifth paragraph
appearing under the heading "INVESTMENT RESULTS-PERFORMANCE INFORMATION" on
page 46 of the Statement of Additional Information:
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"Each of the Portfolios may participate in the IPO market, and a
significant portion of those Portfolios' returns may be attributable to
their investment in IPOs, which have a magnified impact due to the
Portfolios' small asset bases. There is no guarantee that as the
Portfolios' assets grow, they will continue to invest to the same degree
in IPOs or that they will experience substantially similar performance."
The following replaces in its entirety the table appearing under the
heading "MANAGEMENT-TRUSTEES AND EXECUTIVE OFFICERS" on page 21 of the
Statement of Additional Information:
<TABLE>
<CAPTION>
- ------------------------- ---------------------------- ------------------------------------------------------------------------
POSITIONS HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST THE PAST 5 YEARS
"NAME, ADDRESS AND AGE REGISTRANT
- ------------------------- ---------------------------- ------------------------------------------------------------------------
<S> <C> <C>
*ROBERT H. GRAHAM (52) Trustee, Chairman of the Director, President and Chief Executive Officer, A I M Management
Board and President Group Inc.; Director and President, A I M Advisors, Inc.; Director and
Senior Vice President, A I M Capital Management, Inc., A I M
Distributors, Inc., A I M Fund Services, Inc. and Fund Management
Company; and Director, AMVESCAP PLC.
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C. DEREK ANDERSON (58) Trustee President, Plantagenet Capital Management, LLC (an investment
220 Sansome Street partnership); Chief Executive Officer, Plantagenet Holdings, Ltd.(an
Suite 400 investment banking firm); Director, Anderson Capital Management, Inc.
San Francisco, CA 94104 since 1988; Director, Premium Wear, Inc. (formerly Munsingwear, Inc.)
(a casual apparel company); and Director, 'R' Homes, Inc. and various
other privately owned companies.
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FRANK S. BAYLEY (60) Trustee Partner, law firm of Baker & McKenzie; Trustee, The Bradley Funds; and
Two Embarcadero Center Director and Chairman, C. D. Stimson Company (a private investment
Suite 2400 company) and Stimson Marina, Inc. (a subsidiary of C.D. Stimson Co.).
San Francisco, CA 94111
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RUTH H. QUIGLEY (64) Trustee Private investor; and President, Quigley Friedlander & Co., Inc. (a
1055 California Street financial advisory services firm) from 1984 to 1986.
San Francisco, CA 94108
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MELVILLE B. COX (55) Vice President Vice President and Chief Compliance Officer, A I M Advisors, Inc.,
A I M Capital Management, Inc., A I M Distributors, Inc., A I M Fund
Services, Inc. and Fund Management Company.
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GARY T. CRUM (52) Vice President Director and President, A I M Capital Management, Inc.; Director and
Executive Vice President, A I M Management Group Inc. and A I M
Advisors, Inc.; and Director, A I M Distributors, Inc. and AMVESCAP
PLC.
- ------------------------- ---------------------------- ------------------------------------------------------------------------
</TABLE>
- --------
* A trustee who is an "interested person" of the Trust and AIM as
defined in the 1940 Act.
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<TABLE>
<CAPTION>
- ------------------------- ---------------------------- ------------------------------------------------------------------------
POSITIONS HELD WITH PRINCIPAL OCCUPATION DURING AT LEAST THE PAST 5 YEARS
NAME, ADDRESS AND AGE REGISTRANT
- ------------------------- ---------------------------- ------------------------------------------------------------------------
<S> <C> <C>
CAROL F. RELIHAN (44) Vice President Director, Senior Vice President, General Counsel and Secretary, A I M
Advisors, Inc.; Senior Vice President, General Counsel and Secretary,
A I M Management Group Inc.; Director, Vice President and General
Counsel, Fund Management Company; Vice President and General Counsel,
A I M Fund Services, Inc.; and Vice President, A I M Capital
Management, Inc. and A I M Distributors, Inc.
- ------------------------- ---------------------------- ------------------------------------------------------------------------
SAMUEL D. SIRKO (40) Vice President and Assistant General Counsel and Assistant Secretary of A I M
Secretary Management Group, Inc., A I M Capital Management, Inc., A I M
Distributors, Inc., A I M Fund Services, Inc., and Fund Management
Company; and Vice President, Assistant General Counsel and
Assistant Secretary of A I M Advisors, Inc.
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DANA R. SUTTON (40) Vice President and Vice President and Fund Controller, A I M Advisors, Inc.; and
Treasurer Assistant Vice President and Assistant Treasurer, Fund Management
Company."
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</TABLE>
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